Rep. Jay Hoffman

Filed: 3/1/2022

 

 


 

 


 
10200HB4462ham002LRB102 22844 BMS 37167 a

1
AMENDMENT TO HOUSE BILL 4462

2    AMENDMENT NO. ______. Amend House Bill 4462 on page 1,
3line 5, by deleting "29,"; and
 
4on page 1, line 19, by replacing "Section" with "Section 15
5or"; and
 
6on page 2, line 1, after "union", by inserting "in accordance
7with the terms of the credit union's written business plan
8submitted to the Secretary under subsection (e)"; and
 
9on page 3, by replacing lines 1 through 9 with the following:
10"must submit the business plan to the Secretary. The Secretary
11may, in his or her sole discretion, approve the business plan,
12disapprove the business plan, or require the credit union to
13modify the business plan to seek approval of the target market
14as an occupational, community, or associational common bond or
15common bonds, pursuant to 38 Ill. Adm. Code 190.10. The credit

 

 

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1union must be advised in writing of the findings of the
2Secretary in support of the determination and the specific and
3reasonable time period in which to file a modified plan. If the
4Secretary approves the business plan, the credit union shall
5be required to add the target market to its field of
6membership."; and
 
7by deleting line 8 on page 11 through line 3 on page 13; and
 
8on page 15, line 6, by replacing "or" with "or"; and
 
9on page 15, line 8, after "subsection (3)", by inserting "; or
10(iii) an external independent audit of the credit union's
11financial statements in accordance with subsection (5)"; and
 
12on page 17, line 4, after "Board", by inserting ", or the
13regulatory basis of accounting identified in subsection (5)";
14and
 
15on page 17, line 15, after "losses", by inserting "and
16complies with the Department's rule addressing loan loss
17accounting procedures in 38 Ill. Adm. Code 190.70"; and
 
18on page 28, by replacing lines 1 through 7 with the following:
19        "(15)(A) In shares, stocks, or member units of
20    financial technology companies in the total amount not

 

 

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1    exceeding 2.5% of the net worth of the credit union, so
2    long as:
3            (i) the credit union would remain well capitalized
4        as defined by 12 CFR 702.102 if the credit union
5        reduced its net worth by the full investment amount at
6        the time the investment is made or at any point during
7        the time the investment is held by the credit union;
8            (ii) the credit union and the financial technology
9        company are operated in a manner that demonstrates to
10        the public the separate corporate existence of the
11        credit union and financial technology company; and
12            (iii) the credit union has received a composite
13        rating of 1 or 2 under the CAMELS supervisory rating
14        system.
15        (B) The investment limit in subparagraph (A) of this
16    paragraph (15) is increased to 5% of the net worth of the
17    credit union, if it has received a management rating of 1
18    under the CAMELS supervisory rating system at the time a
19    specific investment is made and at all times during the
20    term of the investment. A credit union that satisfies the
21    criteria in subparagraph (A) of this paragraph (15) and
22    this subparagraph may request approval from the Secretary
23    for an exception to the 5% limit up to a limit of 10% of
24    the net worth of the credit union, subject to such safety
25    and soundness standards, limitations, and qualifications
26    as the Department may establish by rule or guidance from

 

 

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1    time to time. The request shall be in writing and
2    substantiate the need for the higher limit, describe the
3    credit union's record of investment activity, and include
4    financial statements reflecting a sound fiscal history.
5        (C) Before investing in a financial technology
6    company, the credit union shall obtain a written legal
7    opinion as to whether the financial technology company is
8    established in a manner that will limit potential exposure
9    of the credit union to no more than the loss of funds
10    invested in the financial technology company and the legal
11    opinion shall:
12            (i) address factors that have led courts to
13        "pierce the corporate veil", such as inadequate
14        capitalization, lack of separate corporate identity,
15        common boards of directors and employees, control of
16        one entity over another, and lack of separate books
17        and records; and
18            (ii) be provided by independent legal counsel of
19        the credit union.
20        (D) Before investing in the financial technology
21    company, the credit union shall enter into a written
22    investment agreement with the financial technology company
23    and the agreement shall contain the following clauses:
24            (i) the financial technology company will: (I)
25        provide the Department with access to the books and
26        records of the financial technology company relating

 

 

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1        to the investment made by the credit union, with the
2        costs of examining those records borne by the credit
3        union in accordance with the per diem rate established
4        by the Department by rule; (II) follow generally
5        accepted accounting principles; and (III) provide the
6        credit union with its financial statements on at least
7        a quarterly basis and certified public accountant
8        audited financial statements on an annual basis; and
9            (ii) the financial technology company and credit
10        union agree to terminate their contractual
11        relationship: (I) upon 90 days' written notice to the
12        parties by the Secretary that the safety and soundness
13        of the credit union is threatened pursuant to the
14        Department's cease and desist and suspension authority
15        in Sections 8 and 61; (II) upon 30 days' written notice
16        to the parties if the credit union's net worth ratio
17        falls below the level that classifies it as
18        well-capitalized as defined by 12 CFR 702.102; and
19        (III) immediately upon the parties' receipt of written
20        notice from the Secretary when the Secretary
21        reasonably concludes, based upon specific facts set
22        forth in the notice to the parties, that the credit
23        union will suffer immediate, substantial, and
24        irreparable injury or loss if it remains a party to the
25        investment agreement.
26        (E) The termination of the investment agreement

 

 

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1    between the financial technology company and credit union
2    shall in no way operate to relieve the financial
3    technology company from repaying the investment or other
4    obligation due and owing the credit union at the time of
5    termination.
6        (F) Any financial technology company in which a credit
7    union invests pursuant to this paragraph (15) that
8    directly or indirectly originates, purchases, facilitates,
9    brokers, or services loans to consumers in Illinois shall
10    not charge an interest rate that exceeds the applicable
11    maximum rate established by the Board of the National
12    Credit Union Administration pursuant to 12 CFR
13    701.21(c)(7)(iii)-(iv). The maximum interest rate
14    described in this subparagraph that may be charged by a
15    financial technology company applies to all consumer loans
16    and consumer credit products."; and
 
17on page 30, immediately below line 2, by inserting the
18following:
 
19    "Section 99. Effective date. This Act takes effect upon
20becoming law, except that Section 16.5 of the Illinois Credit
21Union Act takes effect January 1, 2023.".