Full Text of HB4461 95th General Assembly
HB4461 95TH GENERAL ASSEMBLY
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95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008 HB4461
Introduced , by Rep. Thomas Holbrook SYNOPSIS AS INTRODUCED: |
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205 ILCS 305/34 |
from Ch. 17, par. 4435 |
205 ILCS 305/42.1 new |
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205 ILCS 305/46 |
from Ch. 17, par. 4447 |
205 ILCS 305/46.3 new |
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Amends the Illinois Credit Union Act. Provides that under specified circumstances, a credit union may determine its historical loss rate using a defined period of time of less than 5 years in determining the appropriate balance in the allowance for loan losses account. Allows a credit union to sell to persons within its field of membership negotiable checks, to sell checks and money orders and to receive international and domestic electronic fund transfers for such persons for a fee. Allows credit unions to make first mortgage real estate loans for more than the estimated market value or appraised value of the real estate securing the loans where secured in full or in part by the insurance or guarantee of the federal government, a state government, or any political subdivision of either. Adds provisions concerning credit contracts. Effective immediately.
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A BILL FOR
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HB4461 |
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| AN ACT concerning regulation.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| 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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| (205 ILCS 305/34) (from Ch. 17, par. 4435)
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| 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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| 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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| 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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| 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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| (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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| (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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| 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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| 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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| 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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| (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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| 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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| shall constitute a quorum.
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| (Source: P.A. 86-238.)
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| (205 ILCS 305/42.1 new)
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| 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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| (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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| 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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| 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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| 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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| (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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| 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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| 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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| 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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| made, shall have been made. In the event of a prepayment of the
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| 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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| 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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| (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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| 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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| 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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| 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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| (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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| For purposes of this Section, "revolving credit" has the | 16 |
| meaning defined
in Section 4.1 of the Interest Act.
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| 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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| 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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| 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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| 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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| (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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| (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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| 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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| (205 ILCS 305/46.3 new)
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| 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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| 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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| Section 99. Effective date. This Act takes effect upon | 22 |
| becoming law.
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