Illinois General Assembly - Full Text of SB3787
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Full Text of SB3787  102nd General Assembly




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1    AN ACT concerning regulation.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Credit Union Act is amended by
5changing Sections 8, 9, 20 and 59 as follows:
6    (205 ILCS 305/8)  (from Ch. 17, par. 4409)
7    Sec. 8. Secretary's powers and duties. Credit unions are
8regulated by the Department. The Secretary in executing the
9powers and discharging the duties vested by law in the
10Department has the following powers and duties:
11        (1) To exercise the rights, powers and duties set
12    forth in this Act or any related Act. The Director shall
13    oversee the functions of the Division and report to the
14    Secretary, with respect to the Director's exercise of any
15    of the rights, powers, and duties vested by law in the
16    Secretary under this Act. All references in this Act to
17    the Secretary shall be deemed to include the Director, as
18    a person authorized by the Secretary or this Act to assume
19    responsibility for the oversight of the functions of the
20    Department relating to the regulatory supervision of
21    credit unions under this Act.
22        (2) To prescribe rules and regulations for the
23    administration of this Act. The provisions of the Illinois



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1    Administrative Procedure Act are hereby expressly adopted
2    and incorporated herein as though a part of this Act, and
3    shall apply to all administrative rules and procedures of
4    the Department under this Act.
5        (3) To direct and supervise all the administrative and
6    technical activities of the Department including the
7    employment of a Credit Union Supervisor who shall have
8    knowledge in the theory and practice of, or experience in,
9    the operations or supervision of financial institutions,
10    preferably credit unions, and such other persons as are
11    necessary to carry out his functions. The Secretary shall
12    ensure that all examiners appointed or assigned to examine
13    the affairs of State-chartered credit unions possess the
14    necessary training and continuing education to effectively
15    execute their jobs.
16        (4) To issue cease and desist orders when in the
17    opinion of the Secretary, a credit union is engaged or has
18    engaged, or the Secretary has reasonable cause to believe
19    the credit union is about to engage, in an unsafe or
20    unsound practice, or is violating or has violated or the
21    Secretary has reasonable cause to believe is about to
22    violate a law, rule or regulation or any condition imposed
23    in writing by the Department.
24        (5) To suspend from office and to prohibit from
25    further participation in any manner in the conduct of the
26    affairs of any his credit union any director, officer or



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1    committee member who has committed any violation of a law,
2    rule, regulation or of a cease and desist order or who has
3    engaged or participated in any unsafe or unsound practice
4    in connection with the credit union or who has committed
5    or engaged in any act, omission, or practice which
6    constitutes a breach of his fiduciary duty as such
7    director, officer or committee member, when the Secretary
8    has determined that such action or actions have resulted
9    or will result in substantial financial loss or other
10    damage that seriously prejudices the interests of the
11    members.
12        (6) To assess a civil penalty against a credit union
13    provided that:
14            (A) the Secretary reasonably determines, based on
15        objective facts and an accurate assessment of
16        applicable legal standards, that the credit union has:
17                (i) committed a violation of this Act, any
18            rule adopted in accordance with this Act, or any
19            order of the Secretary issued pursuant to his or
20            her authority under this Act; or
21                (ii) engaged or participated in any unsafe or
22            unsound practice;
23            (B) before a civil penalty is assessed under this
24        item (6), the Secretary must make the further
25        reasonable determination, based on objective facts and
26        an accurate assessment of applicable legal standards,



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1        that the credit union's action constituting a
2        violation under subparagraph (i) of paragraph (A) of
3        item (6) or an unsafe and unsound practice under
4        subparagraph (ii) of paragraph (A) of item (6):
5                (i) directly resulted in a substantial and
6            material financial loss or created a reasonable
7            probability that a substantial and material
8            financial loss will directly result; or
9                (ii) constituted willful misconduct or a
10            material breach of fiduciary duty of any director,
11            officer, or committee member of the credit union;
12            Material financial loss, as referenced in this
13        paragraph (B), shall be assessed in light of
14        surrounding circumstances and the relative size and
15        nature of the financial loss or probable financial
16        loss. Certain benchmarks shall be used in determining
17        whether financial loss is material, such as a
18        percentage of total assets or total gross income for
19        the immediately preceding 12-month period. Absent
20        compelling and extraordinary circumstances, no civil
21        penalty shall be assessed, unless the financial loss
22        or probable financial loss is equal to or greater than
23        either 1% of the credit union's total assets for the
24        immediately preceding 12-month period, or 1% of the
25        credit union's total gross income for the immediately
26        preceding 12-month period, whichever is less;



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1            (C) before a civil penalty is assessed under this
2        item (6), the credit union must be expressly advised
3        in writing of the:
4                (i) specific violation that could subject it
5            to a penalty under this item (6); and
6                (ii) specific remedial action to be taken
7            within a specific and reasonable time frame to
8            avoid imposition of the penalty;
9            (D) Civil penalties assessed under this item (6)
10        shall be remedial, not punitive, and reasonably
11        tailored to ensure future compliance by the credit
12        union with the provisions of this Act and any rules
13        adopted pursuant to this Act;
14            (E) a credit union's failure to take timely
15        remedial action with respect to the specific violation
16        may result in the issuance of an order assessing a
17        civil penalty up to the following maximum amount,
18        based upon the total assets of the credit union:
19                (i) Credit unions with assets of less than $10
20            million................................................$1,000
21                (ii) Credit unions with assets of at least $10
22            million and less than $50 million......................$2,500
23                (iii) Credit unions with assets of at least
24            $50 million and less than $100 million.................$5,000
25                (iv) Credit unions with assets of at least
26            $100 million and less than $500 million...............$10,000



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1                (v) Credit unions with assets of at least $500
2            million and less than $1 billion......................$25,000
3                (vi) Credit unions with assets of $1 billion
4            and greater.....................................$50,000; and
5            (F) an order assessing a civil penalty under this
6        item (6) shall take effect upon service of the order,
7        unless the credit union makes a written request for a
8        hearing under 38 IL. Adm. Code 190.20 of the
9        Department's rules for credit unions within 90 days
10        after issuance of the order; in that event, the order
11        shall be stayed until a final administrative order is
12        entered.
13        This item (6) shall not apply to violations separately
14    addressed in rules as authorized under item (7) of this
15    Section.
16        (7) Except for the fees established in this Act, to
17    prescribe, by rule and regulation, fees and penalties for
18    preparing, approving, and filing reports and other
19    documents; furnishing transcripts; holding hearings;
20    investigating applications for permission to organize,
21    merge, or convert; failure to maintain accurate books and
22    records to enable the Department to conduct an
23    examination; and taking supervisory actions.
24        (8) To destroy, in his discretion, any or all books
25    and records of any credit union in his possession or under
26    his control after the expiration of three years from the



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1    date of cancellation of the charter of such credit unions.
2        (9) To make investigations and to conduct research and
3    studies and to publish some of the problems of persons in
4    obtaining credit at reasonable rates of interest and of
5    the methods and benefits of cooperative saving and lending
6    for such persons.
7        (10) To authorize, foster or establish experimental,
8    developmental, demonstration or pilot projects by public
9    or private organizations including credit unions which:
10            (a) promote more effective operation of credit
11        unions so as to provide members an opportunity to use
12        and control their own money to improve their economic
13        and social conditions; or
14            (b) are in the best interests of credit unions,
15        their members and the people of the State of Illinois.
16        (11) To cooperate in studies, training or other
17    administrative activities with, but not limited to, the
18    NCUA, other state credit union regulatory agencies and
19    industry trade associations in order to promote more
20    effective and efficient supervision of Illinois chartered
21    credit unions.
22        (12) Notwithstanding the provisions of this Section,
23    the Secretary shall not:
24            (1) issue an order against a credit union
25        organized under this Act for unsafe or unsound banking
26        practices solely because the entity provides or has



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1        provided financial services to a cannabis-related
2        legitimate business;
3            (2) prohibit, penalize, or otherwise discourage a
4        credit union from providing financial services to a
5        cannabis-related legitimate business solely because
6        the entity provides or has provided financial services
7        to a cannabis-related legitimate business;
8            (3) recommend, incentivize, or encourage a credit
9        union not to offer financial services to an account
10        holder or to downgrade or cancel the financial
11        services offered to an account holder solely because:
12                (A) the account holder is a manufacturer or
13            producer, or is the owner, operator, or employee
14            of a cannabis-related legitimate business;
15                (B) the account holder later becomes an owner
16            or operator of a cannabis-related legitimate
17            business; or
18                (C) the credit union was not aware that the
19            account holder is the owner or operator of a
20            cannabis-related legitimate business; and
21            (4) take any adverse or corrective supervisory
22        action on a loan made to an owner or operator of:
23                (A) a cannabis-related legitimate business
24            solely because the owner or operator owns or
25            operates a cannabis-related legitimate business;
26            or



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1                (B) real estate or equipment that is leased to
2            a cannabis-related legitimate business solely
3            because the owner or operator of the real estate
4            or equipment leased the equipment or real estate
5            to a cannabis-related legitimate business.
6(Source: P.A. 101-27, eff. 6-25-19.)
7    (205 ILCS 305/9)  (from Ch. 17, par. 4410)
8    Sec. 9. Reports and examinations.
9    (1) Credit unions shall report to the Department on forms
10supplied by the Department, in accordance with a schedule
11published by the Department. A recapitulation of the annual
12reports shall be compiled and published annually by the
13Department, for the use of the General Assembly, credit
14unions, various educational institutions and other interested
15parties. A credit union which fails to file any report when due
16shall pay to the Department a late filing fee for each day the
17report is overdue as prescribed by rule. The Secretary may
18extend the time for filing a report.
19    (2) The Secretary may require special examinations of and
20special financial reports from a credit union or a credit
21union organization in which a credit union loans, invests, or
22delegates substantially all managerial duties and
23responsibilities when he determines that such examinations and
24reports are necessary to enable the Department to determine
25the safety of a credit union's operation or its solvency. The



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1cost to the Department of the aforesaid special examinations
2shall be borne by the credit union being examined as
3prescribed by rule.
4    (3) All credit unions incorporated under this Act shall be
5examined at least biennially by the Department or, at the
6discretion of the Secretary, by a public accountant registered
7by the Department of Financial and Professional Regulation.
8The costs of an examination shall be paid by the credit union.
9The scope of all examinations by a public accountant shall be
10at least equal to the examinations made by the Department. The
11examiners shall have full access to, and may compel the
12production of, all the books, papers, securities and accounts
13of any credit union. A special examination shall be made by the
14Department or by a public accountant approved by the
15Department upon written request of 5 or more members, who
16guarantee the expense of the same. Any credit union refusing
17to submit to an examination when ordered by the Department
18shall be reported to the Attorney General, who shall institute
19proceedings to have its charter revoked. If the Secretary
20determines that the examination of a credit union is to be
21conducted by a public accountant registered by the Department
22of Financial and Professional Regulation and the examination
23is done in conjunction with the credit union's external
24independent audit of financial statements, the requirements of
25this Section and subsection (3) of Section 34 shall be deemed



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1    (3.5) Pursuant to Section 8, the Secretary shall adopt
2rules that ensure consistency and due process in the
3examination process. The Secretary may also establish
4guidelines that (i) define the scope of the examination
5process and (ii) clarify examination items to be resolved. The
6rules, formal guidance, interpretive letters, or opinions
7furnished to credit unions by the Secretary may be relied upon
8by the credit unions.
9    (4) A copy of the completed report of examination and a
10review comment letter, if any, citing exceptions revealed
11during the examination, shall be submitted to the credit union
12by the Department. A detailed report stating the corrective
13actions taken by the board of directors on each exception set
14forth in the review comment letter shall be filed with the
15Department within 40 days after the date of the review comment
16letter, or as otherwise directed by the Department. Any credit
17union through its officers, directors, committee members or
18employees, which willfully provides fraudulent or misleading
19information regarding the corrective actions taken on
20exceptions appearing in a review comment letter may have its
21operations restricted to the collection of principal and
22interest on loans outstanding and the payment of normal
23expenses and salaries until all exceptions are corrected and
24accepted by the Department.
25    (5) The Secretary may accept an examination from the
26National Credit Union Administration or a private insurer of



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1share deposits approved by the Secretary instead of an
2examination conducted by the Department or by a public
3accountant registered by the Department pursuant to subsection
4(3). Acceptance of an examination from the National Credit
5Union Administration or an approved private insurer of share
6deposits shall only be permitted on an alternating basis with
7examinations that the Department or a registered public
8accountant conducts.
9(Source: P.A. 102-558, eff. 8-20-21.)
10    (205 ILCS 305/20)  (from Ch. 17, par. 4421)
11    Sec. 20. Election or appointment of officials.
12    (1) The credit union shall be directed by a board of
13directors consisting of no less than 7 in number, to be elected
14at the annual meeting by and from the members. Directors shall
15hold office until the next annual meeting, unless their terms
16are staggered. Upon amendment of its bylaws, a credit union
17may divide the directors into 2 or 3 classes with each class as
18nearly equal in number as possible. The term of office of the
19directors of the first class shall expire at the first annual
20meeting after their election, that of the second class shall
21expire at the second annual meeting after their election, and
22that of the third class, if any, shall expire at the third
23annual meeting after their election. At each annual meeting
24after the classification, the number of directors equal to the
25number of directors whose terms expire at the time of the



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1meeting shall be elected to hold office until the second
2succeeding annual meeting if there are 2 classes or until the
3third succeeding annual meeting if there are 3 classes. A
4director shall hold office for the term for which he or she is
5elected and until his or her successor is elected and
7    (1.5) Except as provided in subsection (1.10), in all
8elections for directors, every member has the right to vote,
9in person, by proxy, or by secure electronic record if
10approved by the board of directors, the number of shares owned
11by him, or in the case of a member other than a natural person,
12the member's one vote, for as many persons as there are
13directors to be elected, or to cumulate such shares, and give
14one candidate as many votes as the number of directors
15multiplied by the number of his shares equals, or to
16distribute them on the same principle among as many candidates
17as he may desire and the directors shall not be elected in any
18other manner. Shares held in a joint account owned by more than
19one member may be voted by any one of the members, however, the
20number of cumulative votes cast may not exceed a total equal to
21the number of shares multiplied by the number of directors to
22be elected. A majority of the shares entitled to vote shall be
23represented either in person or by proxy for the election of
24directors. Each director shall wholly take and subscribe to an
25oath that he will diligently and honestly perform his duties
26in administering the affairs of the credit union, that while



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1he may delegate to another the performance of those
2administrative duties he is not thereby relieved from his
3responsibility for their performance, that he will not
4knowingly violate or permit to be violated any law applicable
5to the credit union, and that he is the owner of at least one
6share of the credit union.
7    (1.10) Upon amendment of a credit union's bylaws approved
8by the members, in all elections for directors, every member
9who is a natural person shall have the right to cast one vote,
10regardless of the number of his or her shares, in person, by
11proxy, or by secure electronic record if approved by the board
12of directors, for as many persons as there are directors to be
14    (1.15) If the board of directors has adopted a policy
15addressing age eligibility standards on voting, holding
16office, or petitioning the board, then a credit union may
17require (i) that members be at least 18 years of age by the
18date of the meeting in order to vote at meetings of the
19members, sign nominating petitions, or sign petitions
20requesting special meetings, and (ii) that members be at least
2118 years of age by the date of election or appointment in order
22to hold elective or appointive office.
23    (2) The board of directors shall appoint from among the
24members of the credit union, a supervisory committee of not
25less than 3 members at the organization meeting and within 30
26days following each annual meeting of the members for such



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1terms as the bylaws provide. Members of the supervisory
2committee may, but need not be, on the board of directors, but
3shall not be officers of the credit union, members of the
4credit committee, or the credit manager if no credit committee
5has been appointed.
6    (3) The board of directors may appoint, from among the
7members of the credit union, a credit committee consisting of
8an odd number, not less than 3 for such terms as the bylaws
9provide. Members of the credit committee may, but need not be,
10directors or officers of the credit union, but shall not be
11members of the supervisory committee.
12    (4) The board of directors may appoint from among the
13members of the credit union a membership committee of one or
14more persons. If appointed, the committee shall act upon all
15applications for membership and submit a report of its actions
16to the board of directors at the next regular meeting for
17review. If no membership committee is appointed, credit union
18management shall act upon all applications for membership and
19submit a report of its actions to the board of directors at the
20next regular meeting for review.
21    (5) As used in this Section, "electronic" and "electronic
22record" have the meanings ascribed to those terms in the
23Uniform Electronic Transactions Act. As used in this Section,
24"secured electronic record" means an electronic record that
25meets the criteria set forth in the Uniform Electronic
26Transactions Act.



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1(Source: P.A. 102-38, eff. 6-25-21; revised 8-3-21.)
2    (205 ILCS 305/59)  (from Ch. 17, par. 4460)
3    Sec. 59. Investment of funds.
4    (a) Funds not used in loans to members may be invested,
5pursuant to subsection (7) of Section 30 of this Act, and
6subject to Departmental rules and regulations:
7        (1) In securities, obligations or other instruments of
8    or issued by or fully guaranteed as to principal and
9    interest by the United States of America or any agency
10    thereof or in any trust or trusts established for
11    investing directly or collectively in the same;
12        (2) In obligations of any state of the United States,
13    the District of Columbia, the Commonwealth of Puerto Rico,
14    and the several territories organized by Congress, or any
15    political subdivision thereof; however, a credit union may
16    not invest more than 10% of its unimpaired capital and
17    surplus in the obligations of one issuer, exclusive of
18    general obligations of the issuer, and investments in
19    municipal securities must be limited to securities rated
20    in one of the 4 highest rating investment grades
21    categories by a nationally recognized statistical rating
22    organization;
23        (3) In certificates of deposit or passbook type
24    accounts issued by a state or national bank, mutual
25    savings bank or savings and loan association; provided



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1    that such institutions have their accounts insured by the
2    Federal Deposit Insurance Corporation or the Federal
3    Savings and Loan Insurance Corporation; but provided,
4    further, that a credit union's investment in an account in
5    any one institution may exceed the insured limit on
6    accounts;
7        (4) In shares, classes of shares or share certificates
8    of other credit unions, including, but not limited to
9    corporate credit unions; provided that such credit unions
10    have their members' accounts insured by the NCUA or other
11    approved insurers, and that if the members' accounts are
12    so insured, a credit union's investment may exceed the
13    insured limit on accounts;
14        (5) In shares of a cooperative society organized under
15    the laws of this State or the laws of the United States in
16    the total amount not exceeding 10% of the unimpaired
17    capital and surplus of the credit union; provided that
18    such investment shall first be approved by the Department;
19        (6) In obligations of the State of Israel, or
20    obligations fully guaranteed by the State of Israel as to
21    payment of principal and interest;
22        (7) In shares, stocks or obligations of other
23    financial institutions in the total amount not exceeding
24    5% of the unimpaired capital and surplus of the credit
25    union;
26        (8) In federal funds and bankers' acceptances;



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1        (9) In shares or stocks of Credit Union Service
2    Organizations in the total amount not exceeding the
3    greater of 6% of the unimpaired capital and surplus of the
4    credit union or the amount authorized for federal credit
5    unions;
6        (10) In corporate bonds identified as investment grade
7    by at least one nationally recognized statistical rating
8    organization, provided that:
9            (i) the board of directors has established a
10        written policy that addresses corporate bond
11        investment procedures and how the credit union will
12        manage credit risk, interest rate risk, liquidity
13        risk, and concentration risk; and
14            (ii) the credit union has documented in its
15        records that a credit analysis of a particular
16        investment and the issuing entity was conducted by the
17        credit union, a third party on behalf of the credit
18        union qualified by education or experience to assess
19        the risk characteristics of corporate bonds, or a
20        nationally recognized statistical rating agency before
21        purchasing the investment and the analysis is updated
22        at least annually for as long as it holds the
23        investment;
24        (11) To aid in the credit union's management of its
25    assets, liabilities, and liquidity in the purchase of an
26    investment interest in a pool of loans, in whole or in part



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1    and without regard to the membership of the borrowers,
2    from other depository institutions and financial type
3    institutions, including mortgage banks, finance companies,
4    insurance companies, and other loan sellers, subject to
5    such safety and soundness standards, limitations, and
6    qualifications as the Department may establish by rule or
7    guidance from time to time;
8        (12) To aid in the credit union's management of its
9    assets, liabilities, and liquidity by receiving funds from
10    another financial institution as evidenced by certificates
11    of deposit, share certificates, or other classes of shares
12    issued by the credit union to the financial institution;
13        (13) In the purchase and assumption of assets held by
14    other financial institutions, with approval of the
15    Secretary and subject to any safety and soundness
16    standards, limitations, and qualifications as the
17    Department may establish by rule or guidance from time to
18    time; and
19        (14) In the shares, stocks, or obligations of
20    community development financial institutions as defined in
21    regulations issued by the U.S. Department of the Treasury
22    and minority depository institutions as defined by the
23    National Credit Union Administration; however the
24    aggregate amount of all such investments shall not at any
25    time exceed 5% of the paid-in and unimpaired capital and
26    surplus of the credit union.



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1    (b) As used in this Section:
2    "Political subdivision" includes, but is not limited to,
3counties, townships, cities, villages, incorporated towns,
4school districts, educational service regions, special road
5districts, public water supply districts, fire protection
6districts, drainage districts, levee districts, sewer
7districts, housing authorities, park districts, and any
8agency, corporation, or instrumentality of a state or its
9political subdivisions, whether now or hereafter created and
10whether herein specifically mentioned or not.
11    "Financial institution" includes any bank, savings bank,
12savings and loan association, or credit union established
13under the laws of the United States, this State, or any other
15    (c) A credit union investing to fund an employee benefit
16plan obligation is not subject to the investment limitations
17of this Act and this Section and may purchase an investment
18that would otherwise be impermissible if the investment is
19directly related to the credit union's obligation under the
20employee benefit plan and the credit union holds the
21investment only for so long as it has an actual or potential
22obligation under the employee benefit plan.
23    (d) If a credit union acquires loans from another
24financial institution or financial-type institution pursuant
25to this Section, the credit union shall be authorized to
26provide loan servicing and collection services in connection



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1with those loans.
2(Source: P.A. 101-567, eff. 8-23-19; 102-496, eff. 8-20-21.)
3    Section 99. Effective date. This Act takes effect upon
4becoming law.