article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Lending Enhancement Through Necessary Due Process Act''. SEC. 2. FINDINGS. The Congress hereby finds the following: (1) Excessive and groundless litigation against innocent directors and officers of failed financial institutions is adversely affecting the national economy by creating an environment where bankers are reluctant to make loans. (2) The efforts by Federal banking regulators to impose liability on bank officials for good faith business decisions is impeding our banking system by making it difficult for financial institutions to attract officers and directors. (3) Since 1989, Federal regulators have used enhanced powers to pursue not only culpable individuals but also countless innocent people who are targeted because of their financial condition. (4) Tactics used by regulators to induce settlements include the threat of attachment of assets and the use of taxpayer-funded outside fee counsel to file lawsuits, the costs of which often bankrupt individuals trying to clear their names. (5) Reform of the banking laws are needed to curtail regulatory abuse and to ensure that directors and officers have due process protections and the ability to make good faith lending decisions. SEC. 3. FACTORS AND STANDARDS FOR CERTAIN ENFORCEMENT PROCEEDINGS. Section 8(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818) is amended by adding at the end the following new paragraphs: ``(5) Affirmative defenses applicable with respect to certain administrative and judicial proceedings.--In the determination of whether any director, officer, or institution- affiliated party of an insured depository institution has committed any violation or breach of duty for purposes of this section or section 11(k), the following affirmative defenses shall be available to the director, officer, or institution- affiliated party in any civil action against the director, officer, or party before a Federal banking agency or a court of jurisdiction: ``(A) Business judgment.--A director, officer, or institution-affiliated party of an insured depository institution shall not be deemed to have committed any violation or breach of duty in the making of any business judgment (without regard to whether such business judgment is later determined to have been in error), if-- ``(i) in a case in which the director, officer, or institution-affiliated party had an interest in the subject of the business judgment, the director, officer, or party-- ``(I) disclosed that interest at or before the time the business judgment was made; or ``(II) abstained from any vote taken in connection with such business judgment or from otherwise participating in making the business judgment; ``(ii) at or before the time the business judgment was made, the director, officer, or institution-affiliated party made such inquiry about the subject of the business judgment as a reasonably prudent person would have made under the circumstances; ``(iii) after being put on reasonable notice of a need to act, the director, officer, or institution-affiliated party took such actions as a reasonably prudent person would have taken under the circumstances; and ``(iv) the director, officer, or institution-affiliated party acted in good faith. ``(B) Regulatory approval.--A director, officer, or institution-affiliated party of an insured depository institution shall not be deemed to have committed any violation or breach of duty if any examiner or other representative of an appropriate Federal banking agency or State bank supervisor, upon full and accurate disclosure of the relevant facts, approved the good faith practice, action, or omission which is alleged to be the violation or breach, whether or not such approval was communicated to the director, officer, or institution-affiliated party or any other person at such institution. ``(C) Unforeseeable economic conditions.--A director, officer, or institution-affiliated party of an insured depository institution shall not be deemed to have committed any violation or breach of duty if-- ``(i) unforeseeable economic conditions, which develop after the occurrence of the practice, action, or omission which is alleged to be a violation or breach, were the proximate cause of any loss experienced by the institution; and ``(ii) the director, officer, or institution-affiliated party acted in good faith. ``(6) Minimum standard for order of production of personal financial information.-- ``(A) In general.--Except as provided in subparagraph (B), a Federal banking agency, including the Resolution Trust Corporation in such corporation's capacity as conservator or receiver of an insured depository institution, may not seek to obtain, directly or indirectly, and no court (with respect to any request from any such agency or corporation) may order the production of, the personal financial records of any person for the agency unless the head of the agency or corporation (or the designee of the head of the agency or corporation), submits a written finding which is disclosed to such person and certified to an appropriate court of jurisdiction, and the court through a de novo finding determines, that the agency has reasonable cause to believe that-- ``(i) the person whose records are being sought has committed a violation for which a civil penalty may be imposed under paragraph (2) or has breached a duty owed to an insured depository institution; and ``(ii) the person's financial condition is undergoing or is likely, within 6 months of the date of the request for the production of financial records, to undergo a material change. ``(B) Exception.--Subparagraph (A) shall not apply with respect to a request for the production of financial records by an appropriate Federal banking agency of any person-- ``(i) in connection with an investigation of the person by the agency pursuant to section 7(j); or ``(ii) after an administrative or judicial determination, on a record after opportunity for agency hearing, that the person has committed a violation for which a civil penalty may be assessed under paragraph (2).''. SEC. 4. DUE PROCESS PROTECTIONS RELATING TO ATTACHMENT OF ASSETS. Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is amended-- (1) by striking subsection (i)(4)(B) and inserting the following new subparagraph: ``(B) Standard.-- ``(i) Showing.--Rule 65 of the Federal Rules of Civil Procedure shall apply with respect to any proceeding under subparagraph (A). ``(ii) State proceeding.--If, in the case of any proceeding in a State court, the court determines that rules of civil procedure available under the laws of such State provide substantially similar protections to such party's right to due process as Rule 65 of the Federal Rules of Civil Procedure, the relief sought under subparagraph (A) may be requested under the laws of such State.''; and (2) in subsection (b), by adding at the end the following new paragraph: ``(10) Standard for certain orders.--No authority under this subsection or subsection (c) to prohibit any institution- affiliated party from withdrawing, transferring, removing, dissipating, or disposing of any funds, assets, or other property may be exercised unless the agency meets the standards of Rule 65 of the Federal Rules of Civil Procedure.''. SEC. 5. DIRECTOR AND OFFICER LIABILITY. Section 11(k) of the Federal Deposit Insurance Act (12 U.S.C. 1821(k)) is amended by adding at the end the following new sentence: ``Notwithstanding the preceding sentence, a civil action for monetary damages for losses due to a disregard of a duty of care may not be brought against any director or officer of any insured depository institution by the Corporation in any capacity described in clause (1), (2), or (3) of the 1st sentence of this subsection under any provision of State law, unless the standard of disregard required to be demonstrated under such provision of law is as great or greater than the standard described in the 1st sentence.''.
summary: Lending Enhancement Through Necessary Due Process Act - Amends the Federal Deposit Insurance Act to make the following affirmative defenses available to a director, officer, or institution-affiliated party of an insured depository institution facing a civil action before a Federal banking agency or a court of jurisdiction: (1) business judgment; (2) regulatory approval; and (3) unforeseeable economic conditions. Sets forth a minimum standard for the order of production of personal financial information by a regulatory agency or court. Declares the Federal Rules of Civil Procedure relating to prejudgment attachment of assets applicable to Federal banking regulatory agencies. Prohibits the Federal Deposit Insurance Corporation from bringing a civil action under State law against an officer or director of an insured depository institution for monetary damages for losses due to a disregard of a duty of care unless the State standard for such duty is as great or greater than the Federal standard.