Wisconsin Administrative Code › Department of Financial Institutions › DFI-Bkg 1-78 - Department of Financial Institutions-Banking › Chapter DFI-Bkg 3 - Parity With National Banks › Section DFI-Bkg 3.05 - Leasing of personal property

Current through June 24, 2024
(1) GENERAL
				AUTHORITY.
(a) A bank may engage in lease
				financing transactions by complying with this subsection and either sub. (2)
				relating to leases on a net lease basis or sub. (3) relating to leases on a
				net, full-payout lease basis.
(b) A
				bank may enter into a lease financing transaction only if it can reasonably
				expect to realize a return of its full investment in the leased property, plus
				the estimated cost of financing the property over the term of the lease from
				all of the following:
1. Rentals.
2. Estimated tax benefits.
3. The estimated residual value of the
				property, at the expiration of the term of the lease.
(c) "Net lease" means a lease under which the
				bank will not, directly or indirectly, provide or be obligated to provide for
				any of the following:
1. The servicing, repair
				or maintenance of the leased property during the lease term.
2. The purchasing of parts and accessories
				for the leased property. However, improvements and additions to the leased
				property may be leased to the lessee upon its request in accordance with any
				applicable requirements for maximum estimated residual value.
3. The loan of replacement or substitute
				property while the leased property is being serviced.
4. The purchasing of insurance for the
				lessee, except where the lessee has failed in its contractual obligation to
				purchase or maintain the required insurance.
5. The renewal of any license or registration
				for the property unless such action by the bank is necessary to protect its
				interest as owner or financier of the property.
(d) If, in good faith, a bank determines that
				there has been an unanticipated change in conditions which threatens its
				financial position by significantly increasing its exposure to loss, the bank
				may do any of the following:
1. As the owner
				and lessor under a net lease or a net, full-payout lease, take reasonable and
				appropriate action to salvage or protect the value of the property or its
				interests arising under the lease.
2. As the assignee of a lessor's interest in
				a lease, become the owner and lessor of the leased property pursuant to its
				contractual right, or take any reasonable and appropriate action to salvage or
				protect the value of the property or its interest arising under the
				lease.
(e) The
				limitations contained in par. (c) do not prohibit a bank from doing any of the
				following:
1. Including any provisions in a
				lease, or from making any additional agreements, to protect its financial
				position or investment in the circumstances set forth in par. (d).
2. Arranging for any of the services listed
				in par. (c) to be provided by a third party to a lessee, at the expense of the
				lessee, with respect to property leased by the lessee.
(f) A bank may acquire specific property to
				be leased only after the bank has entered into one of the following:
1. A legally binding written agreement which
				indemnifies the bank against loss in connection with its acquisition of the
				property.
2. A legally binding
				written commitment to lease the property on terms which comply with the
				provisions of this subsection and either sub. (2) or (3).
(g) At the expiration of a lease, including
				any renewal or extensions with the same lessee, or in the event of a default on
				a lease agreement prior to the expiration of the lease term, all of the bank's
				interest in the property shall either be liquidated or re-leased in conformance
				with this subsection and either sub. (2) or (3), as soon as practicable, but in
				no event later than 2 years from the expiration of the lease. Property which
				the bank retains in anticipation of re-lease must be revalued at the lower of
				current fair market value or book value prior to any subsequent
				lease.
(h) On the return of leased
				property at the expiration of a conforming lease term, or on the default of a
				lessee, a short-term bridge or interim lease is permissible if it otherwise
				conforms with the net lease requirements of par. (c). Such leases need not
				comply with sub. (2) or (3) and may be used pending the sale of off-lease
				property, or its re-lease as a conforming long-term financing
				transaction.
(i) Where a bank
				enters into leases pursuant to both subs. (2) and (3), the bank must segregate
				the records it maintains with respect to each type of lease.
(j) Nothing in this section shall be
				construed to be in conflict with the duties, liabilities and standards imposed
				by the Consumer Leasing Act of 1976,
				15 USC
				1667 et. seq., or the Wisconsin Consumer Act,
				chs. 421 to 427, Stats.
(k) Leases
				permissible under this section are subject to the limitations on obligations
				under s. 221.0320, Stats.