SB3346 101ST GENERAL ASSEMBLY

LRB101 18453 BMS 67901 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB3346

Introduced 2/14/2020, by Sen. Antonio Muņoz

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Credit Union Act. Allows the board of directors of a credit union to appoint one or more associate directors to serve in an advisory capacity. Provides that an associate director shall not be deemed or considered to be a director for any purpose under the Act, and that the board of directors shall not delegate to associate directors any of the duties or responsibilities required to be performed by directors duly elected by members of a credit union. Provides that prior to appointing an associate director, the board of directors shall confirm that the person meets all of the requirements to serve as a director. Provides that the board of directors of a credit union or a network credit union shall require each associate director to sign a confidentiality and nondisclosure agreement. Makes changes concerning compensation for directors and committee members. Provides that upon prior written approval by the Secretary of Financial and Professional Regulation, the board of directors and the executive committee of a credit union may hold regular meetings less frequently than once each month but at least once each calendar quarter. Allows a surviving credit union to identify the merging credit union as a division, branch, unit, or other descriptive reference in the case of a merger. Changes the maximum percentage of the unimpaired capital and surplus of a credit union that may be loaned to credit union organizations, and the maximum percentage of the unimpaired capital and surplus of a credit union that may be invested in shares or stocks of a credit union service organization. Makes other changes. Effective immediately.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Credit Union Act is amended by changing Sections 23, 29, 51, 57, 59, and 64.7 and by adding Section 20.5 as follows:

(205 ILCS 305/20.5 new)

Sec. 20.5. Appointment of associate directors.

(a) The board of directors of a credit union may, in its discretion, appoint one or more associate directors to serve in an advisory capacity. The board shall prescribe the duties of an associate director and the manner in which associate directors are appointed and removed. The board shall not delegate to associate directors any of the duties or responsibilities prescribed by this Act or other applicable law to be performed by directors duly elected by their members. An associate director shall not be deemed or considered to be a director for any purpose under this Act.

(b) Prior to appointing an associate director, the board shall confirm that the person meets all of the requirements to serve as a director, including, without limitation, a working familiarity with the financial and accounting practices of the credit union as set forth in subsection (c) of Section 30.

(c) An associate director may participate in meetings of the board but may not vote or otherwise act as a director. With respect to any issue that comes before the board for deliberation, the board may request that all associate directors excuse themselves from the meeting of the board and the associate directors shall immediately comply with the request.

(d) The board shall require each associate director to sign a confidentiality and nondisclosure agreement to ensure that information concerning the credit union remains confidential.

(205 ILCS 305/23) (from Ch. 17, par. 4424)

Sec. 23. Compensation of officials.

(1) Directors and committee members may receive reasonable compensation for their service as such, the amount of which shall be set by the board of directors, in accordance with written policies and procedures established by the board of directors. If the Department determines the payment of director or committee member compensation, or both, creates a safety and soundness issue for a credit union, the Department shall utilize the standards set forth in its Regulatory Examination Consistency and Due Process Rule, 38 Ill. Adm. Code 190.25, and supplemental guidelines to address and resolve the issue. An enforcement action taken pursuant to the Rule and guidelines and specified by this Act shall be used to reduce or suspend the compensation paid to the directors and committee members. The Department shall, by rule, establish maximum rates of reasonable compensation that are generally applicable to credit unions considering factors the Department may establish from time to time, including, but not limited to, total assets, nonprofit cooperative structure, and the best interests of members. "Compensation" as used in this subsection (1) refers to remuneration expense to the credit union for services provided by a director or committee member in his or her capacity as director or committee member. The remuneration expense is in the form of monetary payments and shall be disclosed on an annual basis to the membership in the financial statement that is part of the annual membership meeting materials. The disclosure shall contain: (i) the amount paid to each director and (ii) the amount paid to the directors as a group. "Compensation" does not include any of the expenses described in subsections (2) and (3).

(2) The credit union may incur the expense of providing reasonable life, health, accident, and similar insurance protection benefits for directors and committee members.

(3) Directors, committee members and employees, while on official business of the credit union, may be reimbursed for reasonable and necessary expenses. Alternatively, the credit union may make direct payment to a third party for such business expenses. Reasonable and necessary expenses may include the payment of travel costs for the foregoing officials and one guest per official. All payment of costs shall be made in accordance with written policies and procedures established by the board of directors.

(4) The board of directors may establish compensation for officers of the credit union.

(Source: P.A. 101-567, eff. 8-23-19.)

(205 ILCS 305/29) (from Ch. 17, par. 4430)

Sec. 29. Meetings of directors.

(1) The board of directors and the executive committee shall meet as often as necessary, but one body must meet at least monthly and the other at least quarterly, as prescribed in the bylaws. A month in which one body meets does not require the other body to meet, irrespective of the other body's meeting frequency. Upon prior written approval by the Secretary, both bodies may hold regular meetings less frequently than once each month but at least once each calendar quarter. Unless a greater number is required by the bylaws, a majority of the whole board of directors shall constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors unless the act of a greater number is required by this Act, the credit union's articles of incorporation or the bylaws.

(2) Unless specifically prohibited by the articles of incorporation or bylaws, directors and committee members may participate in and act at any meeting of the board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can communicate with each other. Participation in the meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating.

(3) Unless specifically prohibited by the articles of incorporation or bylaws, any action required by this Act to be taken at a meeting of the board of directors or a committee and any other action that may be taken at a meeting of the board of directors or a committee may be taken without a meeting if a consent in writing setting forth the action taken is signed by all the directors entitled to vote with respect to the subject matter thereof, or by all members of the committee, as the case may be. The consent shall be evidenced by one or more written approvals, each of which sets forth the action taken and bears the signatures of one or more directors or committee members. All the approvals evidencing the consent shall be delivered to the secretary to be filed in the corporate records of the credit union. The action taken shall be effective when all the directors or committee members have approved the consent unless the consent specifies a different effective date. A consent signed by all the directors or all the members of a committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the director under this Act.

(Source: P.A. 89-603, eff. 8-2-96.)

(205 ILCS 305/51) (from Ch. 17, par. 4452)

Sec. 51. Other loan programs.

(1) Subject to such rules and regulations as the Secretary may promulgate, a credit union may participate in loans to credit union members jointly with other credit unions, corporations, or financial institutions. An originating credit union may originate loans only to its own members. A participating credit union that is not the originating lender may participate in loans made to its own members or to members of another participating credit union. "Originating lender" means the participating credit union with which the member contracts. A master participation agreement must be properly executed, and the agreement must include provisions for identifying, either through documents incorporated by reference or directly in the agreement, the participation loan or loans prior to their sale.

(2) Any credit union with assets of $500,000 or more may loan to its members under scholarship programs which are subject to a federal or state law providing 100% repayment guarantee.

(3) A credit union may purchase the conditional sales contracts, notes and similar instruments which evidence an indebtedness of its members. In the management of its assets, liabilities, and liquidity, a credit union may purchase the conditional sales contracts, notes, and other similar instruments that evidence the consumer indebtedness of the members of another credit union. "Consumer indebtedness" means indebtedness incurred for personal, family, or household purposes.

(4) With approval of the board of directors, a credit union may make loans, either on its own or jointly with other credit unions, corporations or financial institutions, to credit union organizations; provided, that the aggregate amount of all such loans outstanding shall not at any time exceed the greater of 6% 3% of the paid-in and unimpaired capital and surplus of the credit union or the amount authorized for federal credit unions.

(Source: P.A. 97-133, eff. 1-1-12.)

(205 ILCS 305/57) (from Ch. 17, par. 4458)

Sec. 57. Group purchasing and marketing.

(a) A credit union may, consistent with rules and regulations promulgated by the Secretary, enter into cooperative marketing arrangements to facilitate its members' voluntary purchase of such goods and services as are in the interest of improving economic and social conditions of the members.

(b) A credit union may create and use descriptive and brand references to promote and market its identity, services, and products to its members. In the case of a merger pursuant to Section 63, the surviving credit union may identify the merging credit union as a division, branch, unit, or other descriptive reference that ensures the members understand they are dealing with one credit union rather than multiple credit unions as of the effective date of the merger.

(Source: P.A. 100-361, eff. 8-25-17.)

(205 ILCS 305/59) (from Ch. 17, par. 4460)

Sec. 59. Investment of funds.

(a) Funds not used in loans to members may be invested, pursuant to subsection (7) of Section 30 of this Act, and subject to Departmental rules and regulations:

(1) In securities, obligations or other instruments of or issued by or fully guaranteed as to principal and interest by the United States of America or any agency thereof or in any trust or trusts established for investing directly or collectively in the same;

(2) In obligations of any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the several territories organized by Congress, or any political subdivision thereof; however, a credit union may not invest more than 10% of its unimpaired capital and surplus in the obligations of one issuer, exclusive of general obligations of the issuer, and investments in municipal securities must be limited to securities rated in one of the 4 highest rating categories by a nationally recognized statistical rating organization;

(3) In certificates of deposit or passbook type accounts issued by a state or national bank, mutual savings bank or savings and loan association; provided that such institutions have their accounts insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation; but provided, further, that a credit union's investment in an account in any one institution may exceed the insured limit on accounts;

(4) In shares, classes of shares or share certificates of other credit unions, including, but not limited to corporate credit unions; provided that such credit unions have their members' accounts insured by the NCUA or other approved insurers, and that if the members' accounts are so insured, a credit union's investment may exceed the insured limit on accounts;

(5) In shares of a cooperative society organized under the laws of this State or the laws of the United States in the total amount not exceeding 10% of the unimpaired capital and surplus of the credit union; provided that such investment shall first be approved by the Department;

(6) In obligations of the State of Israel, or obligations fully guaranteed by the State of Israel as to payment of principal and interest;

(7) In shares, stocks or obligations of other financial institutions in the total amount not exceeding 5% of the unimpaired capital and surplus of the credit union;

(8) In federal funds and bankers' acceptances;

(9) In shares or stocks of Credit Union Service Organizations in the total amount not exceeding the greater of 6% 3% of the unimpaired capital and surplus of the credit union or the amount authorized for federal credit unions;

(10) In corporate bonds identified as investment grade by at least one nationally recognized statistical rating organization, provided that:

(i) the board of directors has established a written policy that addresses corporate bond investment procedures and how the credit union will manage credit risk, interest rate risk, liquidity risk, and concentration risk; and

(ii) the credit union has documented in its records that a credit analysis of a particular investment and the issuing entity was conducted by the credit union, a third party on behalf of the credit union qualified by education or experience to assess the risk characteristics of corporate bonds, or a nationally recognized statistical rating agency before purchasing the investment and the analysis is updated at least annually for as long as it holds the investment;

(11) To aid in the credit union's management of its assets, liabilities, and liquidity in the purchase of an investment interest in a pool of loans, in whole or in part and without regard to the membership of the borrowers, from other depository institutions and financial type institutions, including mortgage banks, finance companies, insurance companies, and other loan sellers, subject to such safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time;

(12) To aid in the credit union's management of its assets, liabilities, and liquidity by receiving funds from another financial institution as evidenced by certificates of deposit, share certificates, or other classes of shares issued by the credit union to the financial institution; and

(13) In the purchase and assumption of assets held by other financial institutions, with approval of the Secretary and subject to any safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time.

(b) As used in this Section:

"Political subdivision" includes, but is not limited to, counties, townships, cities, villages, incorporated towns, school districts, educational service regions, special road districts, public water supply districts, fire protection districts, drainage districts, levee districts, sewer districts, housing authorities, park districts, and any agency, corporation, or instrumentality of a state or its political subdivisions, whether now or hereafter created and whether herein specifically mentioned or not.

"Financial institution" includes any bank, savings bank, savings and loan association, or credit union established under the laws of the United States, this State, or any other state.

(c) A credit union investing to fund an employee benefit plan obligation is not subject to the investment limitations of this Act and this Section and may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit union's obligation under the employee benefit plan and the credit union holds the investment only for so long as it has an actual or potential obligation under the employee benefit plan.

(d) If a credit union acquires loans from another financial institution or financial-type institution pursuant to this Section, the credit union shall be authorized to provide loan servicing and collection services in connection with those loans.

(Source: P.A. 100-361, eff. 8-25-17; 100-778, eff. 8-10-18; 101-567, eff. 8-23-19.)

(205 ILCS 305/64.7)

Sec. 64.7. Network credit unions.

(a) Two or more credit unions merging pursuant to Section 63 of this Act may elect to request a network credit union designation for the surviving credit union from the Secretary. The request shall be set forth in the plan of merger and certificate of merger executed by the credit unions and submitted to the Secretary pursuant to subsection (4) of Section 63. The Secretary's approval of a certificate of merger containing a network credit union designation request shall constitute approval of the use of the network designation as a brand or other identifier of the surviving credit union. If the surviving credit union desires to include the network designation in its legal name, make any other change to its legal name, or both, it shall proceed with an amendment to the articles of incorporation and bylaws of the surviving credit union pursuant to Section 4 of this Act.

(b) A network credit union is a cooperative business structure comprised of 2 or more merging credit unions with a collective goal of efficiently serving their combined membership and gaining economies of scale through common vision, strategy and initiative. The merging credit unions shall be identified as divisional credit unions, branches, or units of the network credit union or by other descriptive references that ensure the members understand they are dealing with one credit union rather than multiple credit unions. Descriptive and brand references may also be created and used to promote the identity, services, and products of the network credit union to its members.

(c) Each divisional credit union may have an advisory board of directors and a chief management official to assist in maintaining and leveraging its respective local identity for the benefit of the surviving credit union. The divisional credit union advisory boards shall be appointed by the network credit union board of directors. Each divisional credit union's advisory board of directors may appoint a divisional credit union chief management official and may also appoint one of its directors to serve on the network credit union's nominating committee. A divisional credit union may determine to identify its advisory board as a committee and its divisional chief management official with a title it deems reasonable and appropriate. The network credit union board of directors shall require each advisory board member to sign a confidentiality and nondisclosure agreement to ensure that information concerning the credit union remains confidential.

(d) The network credit union is the surviving legal entity in the merger and supervision, examination, audit, reporting, governance, and management shall be conducted or performed at the network credit union level. All share insurance, safety and soundness, and statutory and regulatory requirements and limitations shall be evaluated at the network credit union level.

(Source: P.A. 99-614, eff. 7-22-16; 100-361, eff. 8-25-17.)

Section 99. Effective date. This Act takes effect upon becoming law.