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Public Act 096-0141
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| HB0348 Enrolled |
LRB096 04653 MJR 14712 b |
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AN ACT concerning financial 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 |
changing Sections 34 and 46 and by adding Section 42.5 as |
follows:
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(205 ILCS 305/34) (from Ch. 17, par. 4435)
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Sec. 34. Duties of Supervisory Committee. |
(1) The Supervisory Committee
shall make or cause to be |
made an annual internal audit of the books and
affairs of the |
credit union to determine that the credit union's accounting
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records and reports are prepared promptly and accurately |
reflect operations
and results, that internal controls are |
established and effectively
maintained to safeguard the assets |
of the credit union, and that the
policies, procedures and |
practices established by the Board of Directors
and management |
of the credit union are being properly administered. The
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Supervisory Committee shall submit a report of that audit to |
the Board
of Directors and a summary of that report to the |
members at the next annual
meeting of the credit union. It |
shall make or cause to be made such
supplementary audits as it |
deems necessary or as are required by the
Director or by the |
Board of Directors, and submit reports of these
supplementary |
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audits to the Director or Board of Directors as applicable.
If |
the Supervisory Committee has not engaged a public accountant |
registered
by the Department of Professional Regulation to make |
the internal audit,
the Supervisory Committee or other |
officials of the credit union shall not
indicate or in any |
manner imply that such audit has been performed by a
public |
accountant or that the audit represents the independent opinion |
of a
public accountant. The Committee must retain its tapes and |
working papers
of each internal audit for inspection by the |
Department. The report of this
audit must be made on a form |
approved by the Director. A copy of the report
must be promptly |
mailed to the Director.
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(2) The Supervisory Committee shall make or cause to be |
made at least
once each year a reasonable percentage |
verification of members' share and
loan accounts, consistent |
with rules promulgated by the Director.
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(3) The Supervisory Committee of a credit union with assets |
of
$5,000,000 or more shall engage a public accountant |
registered by the
Department of Professional Regulation to |
perform an annual external
independent audit of the credit |
union's financial statements in accordance
with generally |
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 |
$5,000,000,
shall engage a public accountant registered by the |
Department of
Professional Regulation to perform an external |
independent audit of the
credit union's financial statements in |
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accordance with generally accepted
auditing standards at least |
once every 3 years. A copy of an external
independent audit |
shall be mailed to the Director upon completion. If the
annual |
internal audit of such a credit union is conducted by a public
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accountant registered by the Department of Professional |
Regulation and the
annual internal audit is done in conjunction |
with the credit union's annual
external audit, the requirements |
of subsection (1) of this Section shall
be deemed met.
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(4) In determining the appropriate balance in the allowance |
for loan losses account, a credit union may determine its |
historical loss rate using a defined period of time of less |
than 5 years, provided that: |
(A) the methodology used to determine the defined |
period of time is formally documented in the credit union's |
policies and procedures and is appropriate to the credit |
union's size, business strategy, and loan portfolio |
characteristics and the economic environment of the areas |
and employers served by the credit union; |
(B) supporting documentation is maintained for the |
technique used to develop the credit union loss rates, |
including the period of time used to accumulate historical |
loss data and the factors considered in establishing the |
time frames; and |
(C) the external auditor conducting the credit union's |
financial statement audit has analyzed the methodology |
employed by the credit union and concludes that the |
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financial statements, including the allowance for loan |
losses, are fairly stated in all material respects in |
accordance with U.S. Generally Accepted Accounting |
Principles, as promulgated by the Financial Accounting |
Standards Board. |
(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 305/42.5 new) |
Sec. 42.5. Marketing of services. For purposes of |
promoting its services to persons eligible for membership, a |
credit union may sell to persons within its field of membership |
negotiable checks, including travelers checks, money orders, |
and similar money transfer instruments (including |
international and domestic electronic fund transfers) and may |
cash checks and money orders, and may receive international and |
domestic electronic fund transfers for such persons for a fee.
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(205 ILCS 305/46) (from Ch. 17, par. 4447)
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Sec. 46. Loans and interest rate.
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(1) A credit union may make loans
to its members for such |
purpose and upon such security and terms, including
rates of |
interest, as the Credit Committee, credit manager, or loan |
officer
approves.
Notwithstanding the provisions of any other |
law in connection with extensions
of credit, a credit union may |
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elect to
contract for and receive interest and fees and other |
charges for extensions of
credit subject only to the provisions |
of this Act and rules promulgated under
this Act, except that |
extensions of credit secured by residential real estate
shall |
be subject to the laws applicable thereto.
The rates of |
interest to be charged on loans to members shall be
set by the |
Board of Directors of each individual credit union in |
accordance with Section 30 of this Act and such
rates may be |
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, |
in whole or
in part, without penalty. The credit contract may |
provide for the payment
by the member and receipt by the credit |
union of all costs and
disbursements, including reasonable |
attorney's fees and collection agency
charges, incurred by the |
credit union to collect or enforce the debt in the
event of a |
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 |
contingency or
hourly arrangement established under an |
agreement entered into by a credit
union with an attorney or |
collection agency to collect a loan of a member
in default |
shall be presumed prima facie reasonable.
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(2) Credit unions may make loans based upon the security of |
any
interest or equity in real estate, subject to rules and |
regulations
promulgated by the Director. In any contract or |
loan which
is secured by a mortgage, deed of
trust, or |
conveyance in the nature of a mortgage, on residential real
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estate, the interest which is computed, calculated, charged, or |
collected
pursuant to such contract or loan, or pursuant to any |
regulation or rule
promulgated pursuant to this Act, may not be |
computed, calculated, charged
or collected for any period of |
time occurring after the date on which the
total indebtedness, |
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 |
prepayment
shall mean the payment of the total indebtedness, |
with the exception of
late payment penalties if incurred or |
charged, on any date before the date
specified in the contract |
or loan agreement on which the total indebtedness
shall be paid |
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 |
interest on the indebtedness was last computed,
calculated, |
charged, or collected but before the next date on which |
interest
on the indebtedness was to be calculated, computed, |
charged, or collected,
the lender may calculate, charge and |
collect interest on the indebtedness
for the period which |
elapsed between the date on which the prepayment is
made and |
the date on which interest on the indebtedness was last |
computed,
calculated, charged or collected at a rate equal to |
1/360 of the annual
rate for each day which so elapsed, which |
rate shall be applied to the
indebtedness outstanding as of the |
date of prepayment. The lender shall
refund to the borrower any |
interest charged or collected which exceeds that
which the |
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lender may charge or collect pursuant to the preceding |
sentence.
The provisions of this amendatory Act of 1985 shall |
apply only to contracts
or loans entered into on or after the |
effective date of this amendatory
Act.
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(3) Notwithstanding any other provision of this Act, a |
credit union
authorized under this Act to make loans secured by |
an interest or equity in
real estate may engage in making |
"reverse mortgage" loans to persons for
the purpose of making |
home improvements or repairs, paying insurance
premiums or |
paying real estate taxes on the homestead properties
of such |
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 |
consistent
with the provisions of this Section and such rules |
and regulations as the
Director shall promulgate hereunder. For |
purposes of this Section, a
"reverse mortgage" loan shall be a |
loan extended on the basis of existing
equity in homestead |
property and secured by a mortgage on such property.
Such loans |
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 |
death of the
last surviving joint tenant who had such an |
interest in the property at the
time the loan was initiated, |
provided, however, that the credit union and
its member may by |
mutual agreement, establish other repayment terms. A
credit |
union, in making a "reverse mortgage" loan, may add deferred
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interest to principal or otherwise provide for the charging of |
interest or
premiums on such deferred interest. "Homestead" |
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property, for purposes of
this Section, means the domicile and |
contiguous real estate owned and
occupied by the mortgagor. The |
Director shall promulgate rules and
regulations under this |
Section; provided that such rules and regulations
need not be |
promulgated jointly with any other administrative agency of |
this State.
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(4) Notwithstanding any other provisions of this Act, a |
credit union
authorized under this Act to make loans secured by |
an interest or equity
in real property may engage in making |
revolving credit loans secured by
mortgages or deeds of trust |
on such real property or by security
assignments of beneficial |
interests in land trusts.
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For purposes of this Section, "revolving credit" has the |
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 |
credit loan may,
and when so expressed therein shall, secure |
not only the existing indebtedness
but also such future |
advances, whether such advances are obligatory or to
be made at |
the option of the lender, or otherwise, as are made within |
twenty
years from the date thereof, to the same extent as if |
such future advances
were made on the date of the execution of |
such mortgage or deed of trust,
although there may be no |
advance made at the time of execution of such mortgage
or other |
instrument, and although there may be no indebtedness |
outstanding
at the time any advance is made. The lien of such |
mortgage or deed of trust,
as to third persons
without actual |
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notice thereof, shall be valid as to all such indebtedness
and |
future advances form the time said mortgage or deed of trust is |
filed
for record in the office of the Recorder of Deeds or the |
Registrar of Titles
of the county where the real property |
described therein is located. The
total amount of indebtedness |
that may be so secured may increase or decrease
from time to |
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 |
specified in such
mortgage or deed of trust, plus interest |
thereon, and any disbursements
made for the payment of taxes, |
special assessments, or insurance on said
real property, with |
interest on such disbursements.
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Any such mortgage or deed of trust shall be valid and have |
priority over
all subsequent liens and encumbrances, including |
statutory liens, except
taxes and assessments levied on said |
real property.
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(5) Compliance with federal or Illinois preemptive laws or |
regulations
governing loans made by a credit union chartered |
under this Act shall
constitute compliance with this Act.
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(6) Credit unions may make residential real estate mortgage |
loans on terms and conditions established by the United States |
Department of Agriculture through its Rural Development |
Housing and Community Facilities Program. The portion of any |
loan in excess of the appraised value of the real estate shall |
be allocable only to the guarantee fee required under the |
program. |