HB4462ham002 102ND GENERAL ASSEMBLY

Rep. Jay Hoffman

Filed: 3/1/2022

10200HB4462ham002 LRB102 22844 BMS 37167 a

AMENDMENT TO HOUSE BILL 4462

AMENDMENT NO. ______. Amend House Bill 4462 on page 1, line 5, by deleting "29,"; and

on page 1, line 19, by replacing "Section" with "Section 15 or"; and

on page 2, line 1, after "union", by inserting "in accordance with the terms of the credit union's written business plan submitted to the Secretary under subsection (e)"; and

on page 3, by replacing lines 1 through 9 with the following: "must submit the business plan to the Secretary. The Secretary may, in his or her sole discretion, approve the business plan, disapprove the business plan, or require the credit union to modify the business plan to seek approval of the target market as an occupational, community, or associational common bond or common bonds, pursuant to 38 Ill. Adm. Code 190.10. The credit union must be advised in writing of the findings of the Secretary in support of the determination and the specific and reasonable time period in which to file a modified plan. If the Secretary approves the business plan, the credit union shall be required to add the target market to its field of membership."; and

by deleting line 8 on page 11 through line 3 on page 13; and

on page 15, line 6, by replacing "or" with "or"; and

on page 15, line 8, after "subsection (3)", by inserting "; or (iii) an external independent audit of the credit union's financial statements in accordance with subsection (5)"; and

on page 17, line 4, after "Board", by inserting ", or the regulatory basis of accounting identified in subsection (5)"; and

on page 17, line 15, after "losses", by inserting "and complies with the Department's rule addressing loan loss accounting procedures in 38 Ill. Adm. Code 190.70"; and

on page 28, by replacing lines 1 through 7 with the following:

"(15)(A) In shares, stocks, or member units of financial technology companies in the total amount not exceeding 2.5% of the net worth of the credit union, so long as:

(i) the credit union would remain well capitalized as defined by 12 CFR 702.102 if the credit union reduced its net worth by the full investment amount at the time the investment is made or at any point during the time the investment is held by the credit union;

(ii) the credit union and the financial technology company are operated in a manner that demonstrates to the public the separate corporate existence of the credit union and financial technology company; and

(iii) the credit union has received a composite rating of 1 or 2 under the CAMELS supervisory rating system.

(B) The investment limit in subparagraph (A) of this paragraph (15) is increased to 5% of the net worth of the credit union, if it has received a management rating of 1 under the CAMELS supervisory rating system at the time a specific investment is made and at all times during the term of the investment. A credit union that satisfies the criteria in subparagraph (A) of this paragraph (15) and this subparagraph may request approval from the Secretary for an exception to the 5% limit up to a limit of 10% of the net worth of the credit union, subject to such safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time. The request shall be in writing and substantiate the need for the higher limit, describe the credit union's record of investment activity, and include financial statements reflecting a sound fiscal history.

(C) Before investing in a financial technology company, the credit union shall obtain a written legal opinion as to whether the financial technology company is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in the financial technology company and the legal opinion shall:

(i) address factors that have led courts to "pierce the corporate veil", such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records; and

(ii) be provided by independent legal counsel of the credit union.

(D) Before investing in the financial technology company, the credit union shall enter into a written investment agreement with the financial technology company and the agreement shall contain the following clauses:

(i) the financial technology company will: (I) provide the Department with access to the books and records of the financial technology company relating to the investment made by the credit union, with the costs of examining those records borne by the credit union in accordance with the per diem rate established by the Department by rule; (II) follow generally accepted accounting principles; and (III) provide the credit union with its financial statements on at least a quarterly basis and certified public accountant audited financial statements on an annual basis; and

(ii) the financial technology company and credit union agree to terminate their contractual relationship: (I) upon 90 days' written notice to the parties by the Secretary that the safety and soundness of the credit union is threatened pursuant to the Department's cease and desist and suspension authority in Sections 8 and 61; (II) upon 30 days' written notice to the parties if the credit union's net worth ratio falls below the level that classifies it as well-capitalized as defined by 12 CFR 702.102; and (III) immediately upon the parties' receipt of written notice from the Secretary when the Secretary reasonably concludes, based upon specific facts set forth in the notice to the parties, that the credit union will suffer immediate, substantial, and irreparable injury or loss if it remains a party to the investment agreement.

(E) The termination of the investment agreement between the financial technology company and credit union shall in no way operate to relieve the financial technology company from repaying the investment or other obligation due and owing the credit union at the time of termination.

(F) Any financial technology company in which a credit union invests pursuant to this paragraph (15) that directly or indirectly originates, purchases, facilitates, brokers, or services loans to consumers in Illinois shall not charge an interest rate that exceeds the applicable maximum rate established by the Board of the National Credit Union Administration pursuant to 12 CFR 701.21(c)(7)(iii)-(iv). The maximum interest rate described in this subparagraph that may be charged by a financial technology company applies to all consumer loans and consumer credit products."; and

on page 30, immediately below line 2, by inserting the following:

"Section 99. Effective date. This Act takes effect upon becoming law, except that Section 16.5 of the Illinois Credit Union Act takes effect January 1, 2023.".