Request By:
Mr. Todd S. Horstmeyer
Kincaid, Wilson, Schaeffer & Hembree
Attorneys at Law
Central Bank Building
Lexington, Kentucky 40507
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your client is a state bank, chartered under the laws of Kentucky and insured by the Federal Deposit Insurance Corporation. It is not a member of the Federal Reserve System. Your client has proposed a motor vehicle leasing plan whereby it would acquire the title to motor vehicles and then subsequently would lease such vehicles to its customers. Such vehicles would be used by the customers for commercial or mere consumer use. The bank would offer the customer either an open-end or a closed-end type of lease. Under both plans, the annual lease payment would be established to recover the actual cost or a portion thereof over the lease period, plus interest. Under the closed-end plan, the bank, at the end of the leasing period, would reacquire possession of the vehicle and would either re-lease the vehicle or sell it. In either case, the responsibility for disposing of the vehicle would remain with the bank. Under an open-end plan, when the lease period expires, the customer would have the option of purchasing the vehicle or being responsible for a final balloon payment, which would reflect the gain or loss on the sale of the vehicle.
Question No. 1:
"Does the purchase of motor vehicles [required to be registered under KRS Chapter 186], upon the request of a bank customer and for the purpose of leasing that vehicle to the bank customer, qualify as an investment in personal property authorized by KRS 287.103(1)?"
It is our opinion that the answer is "no". KRS 287.103 does not amend KRS 287.105 so as to permit such leasing. Thus the prohibition against a bank's leasing motor vehicles [required to be registered under KRS Chapter 186] is still the law, as stated in KRS 287.105. Amendment by implication is not favored, and we can find no clear intent to amend.
Fiscal Court of Jefferson Co. v. City of Anchorage, Ky., 393 S.W.2d 608 (1965).
Question No. 2:
"Assuming that our client may acquire motor vehicles required to be registered under KRS Chapter 186, as outlined in Question No. 1, what statutory authority authorizes the lease of those vehicles to the bank customers:
(a) KRS 287.103(1)?
(b) KRS 287.105?
(c) any other Kentucky statute?"
Since the answer to question 1 is negative, the answer to this question is that there is no statutory authority for banks' leasing motor vehicles [required to be registered under KRS Chapter 186].
Question No. 3:
"Does KRS 287.105 or 74 OAG 16 have any effect, either directly or by analogy, to a bank and trust company's leasing of motor vehicles [required to be registered under KRS Chapter 186]?"
Neither KRS 287.105 or OAG 74-16 suggest that banks can lease such vehicles.
Finally, it is our opinion that KRS 287.103 was designed to permit banks to acquire real and personal property that is proper and necessary for carrying out its legitimate banking business.
Question No. 4:
"Are there any restrictions imposed by Kentucky's statutes or regulations which would affect Central Bank's proposed motor vehicle leasing plan as outlined?"
The answer to this question is given in Question No. 3, above.
Question No. 5:
May Central Bank purchase and lease motor vehicles, pursuant to KRS 287.105, which are not required to be registered under Chapter 186?"
The answer to this question is "yes", provided that the vehicle is acquired by the bank upon the specific request of and for the use of a customer.