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1 | AN ACT concerning regulation.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Credit Union Act is amended by | |||||||||||||||||||||||||
5 | changing Section 34 and adding Sections 42.1, 46 and 46.3 as | |||||||||||||||||||||||||
6 | follows:
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7 | (205 ILCS 305/34) (from Ch. 17, par. 4435)
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8 | Sec. 34. Duties of Supervisory Committee. | |||||||||||||||||||||||||
9 | (1) The Supervisory Committee
shall make or cause to be | |||||||||||||||||||||||||
10 | made an annual internal audit of the books and
affairs of the | |||||||||||||||||||||||||
11 | credit union to determine that the credit union's accounting
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12 | records and reports are prepared promptly and accurately | |||||||||||||||||||||||||
13 | reflect operations
and results, that internal controls are | |||||||||||||||||||||||||
14 | established and effectively
maintained to safeguard the assets | |||||||||||||||||||||||||
15 | of the credit union, and that the
policies, procedures and | |||||||||||||||||||||||||
16 | practices established by the Board of Directors
and management | |||||||||||||||||||||||||
17 | of the credit union are being properly administered. The
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18 | Supervisory Committee shall submit a report of that audit to | |||||||||||||||||||||||||
19 | the Board
of Directors and a summary of that report to the | |||||||||||||||||||||||||
20 | members at the next annual
meeting of the credit union. It | |||||||||||||||||||||||||
21 | shall make or cause to be made such
supplementary audits as it | |||||||||||||||||||||||||
22 | deems necessary or as are required by the
Director or by the | |||||||||||||||||||||||||
23 | Board of Directors, and submit reports of these
supplementary |
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1 | audits to the Director or Board of Directors as applicable.
If | ||||||
2 | the Supervisory Committee has not engaged a public accountant | ||||||
3 | registered
by the Department of Professional Regulation to make | ||||||
4 | the internal audit,
the Supervisory Committee or other | ||||||
5 | officials of the credit union shall not
indicate or in any | ||||||
6 | manner imply that such audit has been performed by a
public | ||||||
7 | accountant or that the audit represents the independent opinion | ||||||
8 | of a
public accountant. The Committee must retain its tapes and | ||||||
9 | working papers
of each internal audit for inspection by the | ||||||
10 | Department. The report of this
audit must be made on a form | ||||||
11 | approved by the Director. A copy of the report
must be promptly | ||||||
12 | mailed to the Director.
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13 | (2) The Supervisory Committee shall make or cause to be | ||||||
14 | made at least
once each year a reasonable percentage | ||||||
15 | verification of members' share and
loan accounts, consistent | ||||||
16 | with rules promulgated by the Director.
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17 | (3) The Supervisory Committee of a credit union with assets | ||||||
18 | of
$5,000,000 or more shall engage a public accountant | ||||||
19 | registered by the
Department of Professional Regulation to | ||||||
20 | perform an annual external
independent audit of the credit | ||||||
21 | union's financial statements in accordance
with generally | ||||||
22 | accepted auditing standards. The Supervisory Committee of a
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23 | credit union with assets of $3,000,000 or more, but less than | ||||||
24 | $5,000,000,
shall engage a public accountant registered by the | ||||||
25 | Department of
Professional Regulation to perform an external | ||||||
26 | independent audit of the
credit union's financial statements in |
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1 | accordance with generally accepted
auditing standards at least | ||||||
2 | once every 3 years. A copy of an external
independent audit | ||||||
3 | shall be mailed to the Director upon completion. If the
annual | ||||||
4 | internal audit of such a credit union is conducted by a public
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5 | accountant registered by the Department of Professional | ||||||
6 | Regulation and the
annual internal audit is done in conjunction | ||||||
7 | with the credit union's annual
external audit, the requirements | ||||||
8 | of subsection (1) of this Section shall
be deemed met.
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9 | (4) In determining the appropriate balance in the allowance | ||||||
10 | for loan losses account, a credit union may determine its | ||||||
11 | historical loss rate using a defined period of time of less | ||||||
12 | than 5 years, provided: | ||||||
13 | (A) the methodology used to determine the defined | ||||||
14 | period of time is formally documented in the credit union's | ||||||
15 | policies and procedures and is appropriate to the credit | ||||||
16 | union's size, business strategy, and loan portfolio | ||||||
17 | characteristics and the economic environment of the areas | ||||||
18 | and employers served by the credit union; | ||||||
19 | (B) supporting documentation is maintained for the | ||||||
20 | technique used to develop the credit union loss rates, | ||||||
21 | including the period of time used to accumulate historical | ||||||
22 | loss data and the factors considered in establishing the | ||||||
23 | time frames; and | ||||||
24 | (C) the external auditor conducting the credit union's | ||||||
25 | financial statement audit has analyzed the methodology | ||||||
26 | employed by the credit union and concludes that the |
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1 | financial statements, including the allowance for loan | ||||||
2 | losses, are fairly stated in all material respects in | ||||||
3 | accordance with U.S. Generally Accepted Accounting | ||||||
4 | Principles, as promulgated by the Financial Accounting | ||||||
5 | Standards Board. | ||||||
6 | The Department shall adopt rules consistent with the | ||||||
7 | provisions of this subsection (4). | ||||||
8 | (5) A majority of the members of the Supervisory Committee
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9 | shall constitute a quorum.
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10 | (Source: P.A. 86-238.)
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11 | (205 ILCS 305/42.1 new)
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12 | Sec. 42.1. Marketing of services. For purposes of | ||||||
13 | promoting its services to persons eligible for membership, a | ||||||
14 | credit union may sell to persons within its field of membership | ||||||
15 | negotiable checks, including travelers checks, money orders, | ||||||
16 | and similar money transfer instruments (including | ||||||
17 | international and domestic electronic fund transfers) and may | ||||||
18 | cash checks and money orders, and may receive international and | ||||||
19 | domestic electronic fund transfers for such persons for a fee. | ||||||
20 | (205 ILCS 305/46) (from Ch. 17, par. 4447) | ||||||
21 | Sec. 46. Loans and interest rate.
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22 | (1) A credit union may make loans
to its members for such | ||||||
23 | purpose and upon such security and terms, including
rates of | ||||||
24 | interest, as the Credit Committee, credit manager, or loan |
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1 | officer
approves.
Notwithstanding the provisions of any other | ||||||
2 | law in connection with extensions
of credit, a credit union may | ||||||
3 | elect to
contract for and receive interest and fees and other | ||||||
4 | charges for extensions of
credit subject only to the provisions | ||||||
5 | of this Act and rules promulgated under
this Act, except that | ||||||
6 | extensions of credit secured by residential real estate
shall | ||||||
7 | be subject to the laws applicable thereto.
The rates of | ||||||
8 | interest to be charged on loans to members shall be
set by the | ||||||
9 | Board of Directors of each individual credit union in | ||||||
10 | accordance with Section 30 of this Act and such
rates may be | ||||||
11 | less than, but may not exceed, the maximum rate set forth in
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12 | this Section. A borrower may repay his loan prior to maturity, | ||||||
13 | in whole or
in part, without penalty. The credit contract may | ||||||
14 | provide for the payment
by the member and receipt by the credit | ||||||
15 | union of all costs and
disbursements, including reasonable | ||||||
16 | attorney's fees and collection agency
charges, incurred by the | ||||||
17 | credit union to collect or enforce the debt in the
event of a | ||||||
18 | delinquency by the member, or in the event of a breach of any
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19 | obligation of the member under the credit contract. A | ||||||
20 | contingency or
hourly arrangement established under an | ||||||
21 | agreement entered into by a credit
union with an attorney or | ||||||
22 | collection agency to collect a loan of a member
in default | ||||||
23 | shall be presumed prima facie reasonable.
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24 | (2) Credit unions may make loans based upon the security of | ||||||
25 | any
interest or equity in real estate, subject to rules and | ||||||
26 | regulations
promulgated by the Director. In any contract or |
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1 | loan which
is secured by a mortgage, deed of
trust, or | ||||||
2 | conveyance in the nature of a mortgage, on residential real
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3 | estate, the interest which is computed, calculated, charged, or | ||||||
4 | collected
pursuant to such contract or loan, or pursuant to any | ||||||
5 | regulation or rule
promulgated pursuant to this Act, may not be | ||||||
6 | computed, calculated, charged
or collected for any period of | ||||||
7 | time occurring after the date on which the
total indebtedness, | ||||||
8 | with the exception of late payment penalties, is paid
in full.
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9 | For purposes of this subsection (2) of this Section 46, a | ||||||
10 | prepayment
shall mean the payment of the total indebtedness, | ||||||
11 | with the exception of
late payment penalties if incurred or | ||||||
12 | charged, on any date before the date
specified in the contract | ||||||
13 | or loan agreement on which the total indebtedness
shall be paid | ||||||
14 | in full, or before the date on which all payments, if timely
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15 | made, shall have been made. In the event of a prepayment of the
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16 | indebtedness which is made on a date
after the date on which | ||||||
17 | interest on the indebtedness was last computed,
calculated, | ||||||
18 | charged, or collected but before the next date on which | ||||||
19 | interest
on the indebtedness was to be calculated, computed, | ||||||
20 | charged, or collected,
the lender may calculate, charge and | ||||||
21 | collect interest on the indebtedness
for the period which | ||||||
22 | elapsed between the date on which the prepayment is
made and | ||||||
23 | the date on which interest on the indebtedness was last | ||||||
24 | computed,
calculated, charged or collected at a rate equal to | ||||||
25 | 1/360 of the annual
rate for each day which so elapsed, which | ||||||
26 | rate shall be applied to the
indebtedness outstanding as of the |
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1 | date of prepayment. The lender shall
refund to the borrower any | ||||||
2 | interest charged or collected which exceeds that
which the | ||||||
3 | lender may charge or collect pursuant to the preceding | ||||||
4 | sentence.
The provisions of this amendatory Act of 1985 shall | ||||||
5 | apply only to contracts
or loans entered into on or after the | ||||||
6 | effective date of this amendatory
Act.
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7 | (3) Notwithstanding any other provision of this Act, a | ||||||
8 | credit union
authorized under this Act to make loans secured by | ||||||
9 | an interest or equity in
real estate may engage in making | ||||||
10 | "reverse mortgage" loans to persons for
the purpose of making | ||||||
11 | home improvements or repairs, paying insurance
premiums or | ||||||
12 | paying real estate taxes on the homestead properties
of such | ||||||
13 | persons. If made, such loans shall be made on such terms and
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14 | conditions as the credit union shall determine and as shall be | ||||||
15 | consistent
with the provisions of this Section and such rules | ||||||
16 | and regulations as the
Director shall promulgate hereunder. For | ||||||
17 | purposes of this Section, a
"reverse mortgage" loan shall be a | ||||||
18 | loan extended on the basis of existing
equity in homestead | ||||||
19 | property and secured by a mortgage on such property.
Such loans | ||||||
20 | shall be repaid upon the sale of the property or upon the death
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21 | of the owner or, if the property is in joint tenancy, upon the | ||||||
22 | death of the
last surviving joint tenant who had such an | ||||||
23 | interest in the property at the
time the loan was initiated, | ||||||
24 | provided, however, that the credit union and
its member may by | ||||||
25 | mutual agreement, establish other repayment terms. A
credit | ||||||
26 | union, in making a "reverse mortgage" loan, may add deferred
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1 | interest to principal or otherwise provide for the charging of | ||||||
2 | interest or
premiums on such deferred interest. "Homestead" | ||||||
3 | property, for purposes of
this Section, means the domicile and | ||||||
4 | contiguous real estate owned and
occupied by the mortgagor. The | ||||||
5 | Director shall promulgate rules and
regulations under this | ||||||
6 | Section; provided that such rules and regulations
need not be | ||||||
7 | promulgated jointly with any other administrative agency of | ||||||
8 | this State.
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9 | (4) Notwithstanding any other provisions of this Act, a | ||||||
10 | credit union
authorized under this Act to make loans secured by | ||||||
11 | an interest or equity
in real property may engage in making | ||||||
12 | revolving credit loans secured by
mortgages or deeds of trust | ||||||
13 | on such real property or by security
assignments of beneficial | ||||||
14 | interests in land trusts.
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15 | For purposes of this Section, "revolving credit" has the | ||||||
16 | meaning defined
in Section 4.1 of the Interest Act.
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17 | Any mortgage or deed of trust given to secure a revolving | ||||||
18 | credit loan may,
and when so expressed therein shall, secure | ||||||
19 | not only the existing indebtedness
but also such future | ||||||
20 | advances, whether such advances are obligatory or to
be made at | ||||||
21 | the option of the lender, or otherwise, as are made within | ||||||
22 | twenty
years from the date thereof, to the same extent as if | ||||||
23 | such future advances
were made on the date of the execution of | ||||||
24 | such mortgage or deed of trust,
although there may be no | ||||||
25 | advance made at the time of execution of such mortgage
or other | ||||||
26 | instrument, and although there may be no indebtedness |
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1 | outstanding
at the time any advance is made. The lien of such | ||||||
2 | mortgage or deed of trust,
as to third persons
without actual | ||||||
3 | notice thereof, shall be valid as to all such indebtedness
and | ||||||
4 | future advances form the time said mortgage or deed of trust is | ||||||
5 | filed
for record in the office of the Recorder of Deeds or the | ||||||
6 | Registrar of Titles
of the county where the real property | ||||||
7 | described therein is located. The
total amount of indebtedness | ||||||
8 | that may be so secured may increase or decrease
from time to | ||||||
9 | time, but the total unpaid balance so secured at any one time
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10 | shall not exceed a maximum principal amount which must be | ||||||
11 | specified in such
mortgage or deed of trust, plus interest | ||||||
12 | thereon, and any disbursements
made for the payment of taxes, | ||||||
13 | special assessments, or insurance on said
real property, with | ||||||
14 | interest on such disbursements.
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15 | Any such mortgage or deed of trust shall be valid and have | ||||||
16 | priority over
all subsequent liens and encumbrances, including | ||||||
17 | statutory liens, except
taxes and assessments levied on said | ||||||
18 | real property.
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19 | (5) Compliance with federal or Illinois preemptive laws or | ||||||
20 | regulations
governing loans made by a credit union chartered | ||||||
21 | under this Act shall
constitute compliance with this Act.
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22 | (6) Credit unions may make first mortgage real estate loans | ||||||
23 | for more than the estimated market value or appraised value of | ||||||
24 | the real estate securing the loans where secured in full or in | ||||||
25 | part by the insurance or guarantee of the federal government, a | ||||||
26 | state government, or any political subdivision of either. The |
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1 | maximum loan-to-value ratio or loan-to-purchase price ratio | ||||||
2 | and terms and conditions for such loans shall be as specified | ||||||
3 | in the law, regulations, or program under which the insurance | ||||||
4 | or guarantee is provided. | ||||||
5 | (Source: P.A. 95-98, eff. 8-13-07.)
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6 | (205 ILCS 305/46.3 new)
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7 | Sec. 46.3. Credit contracts. | ||||||
8 | (1) A borrower may not maintain an action on or in any way | ||||||
9 | related to a credit contract, unless the credit contract is in | ||||||
10 | writing, expresses an agreement or commitment to lend money or | ||||||
11 | extend credit or delay or forbear repayment of money, sets | ||||||
12 | forth the relevant terms and conditions, and is signed by the | ||||||
13 | credit union and the borrower. | ||||||
14 | (2) No credit union shall be liable to a person not in | ||||||
15 | privity of contract with the credit union for civil damages | ||||||
16 | arising out of a credit contract, or any conditions precedent | ||||||
17 | thereto, except for acts or conduct by the credit union that | ||||||
18 | constitute fraud against the person. | ||||||
19 | (3) The following actions do not give rise to a claim, | ||||||
20 | counter-claim, or defense by a borrower that a new credit | ||||||
21 | contract is created, unless the contract satisfies the | ||||||
22 | requirements of paragraph (1): | ||||||
23 | (a) the rendering of financial advice by a credit union | ||||||
24 | to a borrower; | ||||||
25 | (b) the consultation by a credit union with a borrower; |
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1 | or | ||||||
2 | (c) the agreement by a credit union to modify or amend | ||||||
3 | an existing credit contract or to otherwise take certain | ||||||
4 | actions, such as entering into a new credit contract, | ||||||
5 | forbearing from exercising remedies in connection with an | ||||||
6 | existing credit contract, or rescheduling or extending | ||||||
7 | installments due under an existing credit contract. | ||||||
8 | (4) For the purpose of this Section 46.3, the following | ||||||
9 | terms have the meanings given them: | ||||||
10 | "Credit contract" means an agreement or commitment by a | ||||||
11 | credit union to lend money or extend credit or delay or | ||||||
12 | forbear repayment of money, not in connection with the | ||||||
13 | issuance of credit cards. | ||||||
14 | "Borrower" means a person who obtains credit or seeks a | ||||||
15 | credit contract or claims the existence of a credit | ||||||
16 | contract with a credit union or who owes money to a credit | ||||||
17 | union. | ||||||
18 | "Person" means an individual, corporation, | ||||||
19 | partnership, joint venture, trust estate, unincorporated | ||||||
20 | association, or other entity.
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21 | Section 99. Effective date. This Act takes effect upon | ||||||
22 | becoming law.
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