Legal Ease

Yes, a durable power of attorney that gives the attorney-in-fact the power to act with respect to banking and other financial institution transactions empowers the attorney-in-fact to enter a safe deposit box or vault and withdraw or add to the contents.  It also gives the attorney-in-fact the power to hire a safe deposit box.  Click here to go to IBAT's Compliance Forum for a more detailed answer, information on other attorney in fact powers, and to join a discussion of this topic in.

It is probably legal.  Let me explain why.  First of all, you are probably confusing APR with the "highest rate allowed by law."  In Texas, the highest rate allowed on most loans, with some exceptions, is 18% which is provided in the Finance Code, Credit Title.  APR which is defined by Reg Z is the cost of the loan to the borrower which is reflected as a percentage rate.  It is a combination of the interest costs plus other fees and charges in connection with the loan as compared to the principal of the loan.  There is no upper limit to an APR, however, it must be disclosed so the borrower understands what the true costs of the loan are.  So, for instance, a $1,500 loan at 18% interest and a filing fee for a UCC-1 financing statement might have an APR of 18.5% which is legal because there is no upper limit on APRs and the interest rate is only 18% which is also legal.  One of the exceptions from the 18% interest rate cap for loans made in Texas is the Finance Code 342.251 loan.

But there is more at work here than simply an APR that is considerably higher than Texas’ interest rate cap.  In fact, your customer’s loan probably does exceed Texas’ 18% interest rate cap. And it is completely legal.  The lender simply exported the higher rate from South Dakota, which has extremely liberal usury laws. 

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If the customer’s resolution filed with the bank requires two signatures and a check is processed on only one, that is an unauthorized item.  Bank is liable.

Solutions? One approach is to prepare an addendum to the deposit agreement that disclaims the responsibility of the bank to check for two signatures and for limitations on the memo line (e.g. “void after 90 days”).  This addendum should include an indemnity whereby the customer agrees to hold the bank harmless for any checks processed without two signatures (or contrary to the memo line instructions).

The second solution is to establish systems to monitor for two signatures and to assess a fee for that service.

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I have heard that at least one state allows a POD provision in a safe deposit box contract, but it isn’t Texas.  And if Texas did allow it, I can think of a number of problems that it would cause, but I won’t get into that.

In Texas, there isn’t a method that allows a renter to use a safe deposit box contract to gift the contents to someone, but there are ways to assure that certain persons can access and remove items from a safe deposit box after the death of the renter.  First, an owner of a safe deposit box could name a joint renter, and when one of the renters dies, the other would have the right to access the box and remove items, including items belonging to the deceased renter.  Alternatively, the renter could designate an additional person to have right of access to the box, and that additional person would still have a right to access the box and remove items after the death of the renter.

It is important to remember that just because a co-renter or designated additional person can remove items, does not mean that the items in the box belong to them. The deceased renter’s estate may have a valid claim for the removed items against the person who removed the item.  The good news is that the bank is not liable if the co-renter or person designated to have access removes things that aren’t legally his/hers.  (Remember that if the renter names a deputy, the deputy DOES NOT have the right to access or remove items after the death, bankruptcy, or incompetency of the renter or deputy.)