Illinois General Assembly - Full Text of Public Act 095-0098
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Public Act 095-0098




Public Act 095-0098
HB1288 Enrolled LRB095 08529 MJR 28710 b

    AN ACT concerning regulation.
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
    Section 5. The Illinois Credit Union Act is amended by
changing Sections 8, 22, 30, 46, 51, and 70 as follows:
    (205 ILCS 305/8)  (from Ch. 17, par. 4409)
    Sec. 8. Director's powers and duties. Credit unions are
regulated by the Department. The Director, in executing the
powers and discharging the duties vested by law in the
Department has the following powers and duties:
        (1) To exercise the rights, powers and duties set forth
    in this Act or any related Act.
        (2) To prescribe rules and regulations for the
    administration of this Act. The provisions of the Illinois
    Administrative Procedure Act are hereby expressly adopted
    and incorporated herein as though a part of this Act, and
    shall apply to all administrative rules and procedures of
    the Department under this Act.
        (3) To direct and supervise all the administrative and
    technical activities of the Department including the
    employment of a Credit Union Supervisor who shall have
    knowledge in the theory and practice of, or experience in,
    the operations or supervision of financial institutions,
    preferably credit unions, and such other persons as are
    necessary to carry out his functions. The Director shall
    ensure that all examiners appointed or assigned to examine
    the affairs of State-chartered credit unions possess the
    necessary training and continuing education to effectively
    execute their jobs.
        (4) To issue cease and desist orders when in the
    opinion of the Director, a credit union is engaged or has
    engaged, or the Director has reasonable cause to believe
    the credit union is about to engage, in an unsafe or
    unsound practice, or is violating or has violated or the
    Director has reasonable cause to believe is about to
    violate a law, rule or regulation or any condition imposed
    in writing by the Department.
        (5) To suspend from office and to prohibit from further
    participation in any manner in the conduct of the affairs
    of his credit union any director, officer or committee
    member who has committed any violation of a law, rule,
    regulation or of a cease and desist order or who has
    engaged or participated in any unsafe or unsound practice
    in connection with the credit union or who has committed or
    engaged in any act, omission, or practice which constitutes
    a breach of his fiduciary duty as such director, officer or
    committee member, when the Director has determined that
    such action or actions have resulted or will result in
    substantial financial loss or other damage that seriously
    prejudices the interests of the members.
        (6) Except for the fees established in this Act, to
    prescribe, by rule and regulation, fees and penalties for
    preparing, approving, and filing reports and other
    documents; furnishing transcripts; holding hearings;
    investigating applications for permission to organize,
    merge, or convert; failure to maintain accurate books and
    records to enable the Department to conduct an examination;
    and taking supervisory actions.
        (7) To destroy, in his discretion, any or all books and
    records of any credit union in his possession or under his
    control after the expiration of three years from the date
    of cancellation of the charter of such credit unions.
        (8) To make investigations and to conduct research and
    studies and to publish some of the problems of persons in
    obtaining credit at reasonable rates of interest and of the
    methods and benefits of cooperative saving and lending for
    such persons.
        (9) To authorize, foster or establish experimental,
    developmental, demonstration or pilot projects by public
    or private organizations including credit unions which:
            (a) promote more effective operation of credit
        unions so as to provide members an opportunity to use
        and control their own money to improve their economic
        and social conditions; or
            (b) are in the best interests of credit unions,
        their members and the people of the State of Illinois.
        (10) To cooperate in studies, training or other
    administrative activities with, but not limited to, the
    NCUA, other state credit union regulatory agencies and
    industry trade associations in order to promote more
    effective and efficient supervision of Illinois chartered
    credit unions.
(Source: P.A. 91-357, eff. 7-29-99; 92-608, eff. 7-1-02.)
    (205 ILCS 305/22)  (from Ch. 17, par. 4423)
    Sec. 22. Vacancies.
    (a) The Board of Directors shall, by appointment from among
the credit union members, fill any vacancies occurring on the
Board for the remainder of the Director's unexpired term or
until a successor is elected and qualified following completion
of the term filled by the Board. The Board shall, by
appointment from among the credit union members, fill vacancies
in the Membership Committee, Credit Committee, or credit
manager if no Credit Committee has been appointed, and
Supervisory Committees.
    (b) An office may be declared vacant by the Board when a
Director or a Committee member dies, resigns from the Board or
Committee, is removed from the Board or Committee, is no longer
a member of the credit union, is the owner of less than one
share of the credit union, or fails to attend three consecutive
regular meetings of the Board without good cause.
(Source: P.A. 91-929, eff. 12-15-00.)
    (205 ILCS 305/30)  (from Ch. 17, par. 4431)
    Sec. 30. Duties of directors.
    (a) It shall be the duty of the directors to:
        (1) Review actions on applications for membership. A
    record of the Membership Committee's approval or denial of
    membership or management's approval or denial of
    membership if no Membership Committee has been appointed
    shall be available to the Board of Directors for
    inspection. A person denied membership by the Membership
    Committee or credit union management may appeal the denial
    to the Board;
        (2) Provide adequate fidelity bond coverage for
    officers, employees, directors and committee members, and
    for losses caused by persons outside of the credit union,
    subject to rules and regulations promulgated by the
        (3) Determine from time to time the interest rates, not
    in excess of that allowed under this Act, which shall be
    charged on loans to members and to authorize interest
    refunds, if any, to members from income earned and received
    in proportion to the interest paid by them on such classes
    of loans and under such conditions as the Board prescribes.
    The Directors may establish different interest rates to be
    charged on different classes of loans;
        (4) Within any limitations set forth in the credit
    union's bylaws, fix the maximum amount which may be loaned
    with and without security to a member;
        (5) Declare dividends on various classes of shares in
    the manner and form as provided in the bylaws;
        (6) Limit the number of shares which may be owned by a
    member; such limitations to apply alike to all members;
        (7) Have charge of the investment of funds, except that
    the Board of Directors may designate an Investment
    Committee or any qualified individual or entity to have
    charge of making investments under policies established by
    the Board of Directors;
        (8) Authorize the employment of or contracting with
    such persons or organizations as may be necessary to carry
    on the operations of the credit union, provided that prior
    approval is received from the Department before delegating
    substantially all managerial duties and responsibilities
    to a credit union organization, and fix the compensation,
    if any, of the officers and provide for compensation for
    other employees within policies established by the Board of
        (9) Authorize the conveyance of property;
        (10) Borrow or lend money consistent with the
    provisions of this Act;
        (11) Designate a depository or depositories for the
    funds of the credit union and supervise the investment of
        (12) Suspend or remove, or both, any or all officers or
    any or all members of the Membership, Credit, or other
    committees whenever, in the judgment of the Board of
    Directors, the best interests of the credit union will be
    served thereby; provided that members of the Supervisory
    Committee may not be suspended or removed except for
    failure to perform their duties; and provided that removal
    of any officer shall be without prejudice to the contract
    rights, if any, of the person so removed;
        (13) Appoint any special committees deemed necessary;
        (14) Perform such other duties as the members may
    direct, and perform or authorize any action not
    inconsistent with this Act and not specifically reserved by
    the bylaws to the members.
    (b) The Board of Directors may delegate to the chief
management official, according to guidelines established by
the Board that may include the authority to further delegate
one or more duties, all of the following duties:
        (1) determining the interest rates on loans;
        (2) determining the dividend rates on share accounts;
        (3) hiring employees other than the chief management
    official and fixing their compensation.
(Source: P.A. 92-608, eff. 7-1-02; 93-916, eff. 8-12-04.)
    (205 ILCS 305/46)  (from Ch. 17, par. 4447)
    Sec. 46. Loans and interest rate.
    (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
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
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
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.
    (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
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.
    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
made, shall have been made. In the event of a prepayment of the
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
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.
    (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
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
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
interest to principal or otherwise provide for the charging of
interest or premiums on such deferred interest. "Homestead"
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.
    (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.
    For purposes of this Section, "revolving credit" has the
meaning defined in Section 4.1 of the Interest Act.
    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
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
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.
    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.
    (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.
(Source: P.A. 93-640, eff. 12-31-03.)
    (205 ILCS 305/51)  (from Ch. 17, par. 4452)
    Sec. 51. Other Loan Programs.
    (1) Subject to such rules and regulations as the Director
may promulgate, a credit union may participate in loans to
credit union members jointly with other credit unions,
corporations, or financial institutions. An originating credit
union may originate loans only to its own members. A
participating credit union that is not the originating lender
may participate in loans made to its own members or to members
of another participating credit union. "Originating lender"
means the participating credit union with which the member
contracts. A master participation agreement must be properly
executed, and the agreement must include provisions for
identifying, either through documents incorporated by
reference or directly in the agreement, the participation loan
or loans prior to their sale.
    (2) Any credit union with assets of $500,000 or more may
loan to its members under the State Scholarships Law or other
scholarship programs which are subject to a federal or state
law providing 100% repayment guarantee.
    (3) A credit union may purchase the conditional sales
contracts, notes and similar instruments which evidence an
indebtedness of its members. In the management of its assets,
liabilities, and liquidity, a credit union may purchase the
conditional sales contracts, notes, and other similar
instruments that evidence the consumer indebtedness of the
members of another credit union. "Consumer indebtedness" means
indebtedness incurred for personal, family, or household
    (4) With approval of the Board of Directors, a credit union
may make loans, either on its own or jointly with other credit
unions, corporations or financial institutions, to credit
union organizations; provided, that the aggregate amount of all
such loans outstanding shall not at any time exceed the greater
of 3% of the paid-in and unimpaired capital and surplus of the
credit union or the amount authorized for federal credit
(Source: P.A. 92-293, eff. 8-9-01; 93-640, eff. 12-31-03.)
    (205 ILCS 305/70)  (from Ch. 17, par. 4471)
    Sec. 70. Use of name, sentence.
    (a) No individual, firm, association, or body politic and
corporate, including, without limitation, any corporation,
limited liability company, general partnership, limited
partnership, or joint venture that is not an authorized user
may use any name or title which contains the words "credit
union" or any abbreviation thereof, and such use is a Class A
Misdemeanor. For purposes of this Section, "authorized user"
means a corporation organized under this Act, the credit union
act of another state, or the Federal Credit Union Act, any
association of such a corporation, and subsidiaries and
affiliates of such an association.
    (b) If the Director of the Division of Financial
Institutions of the Department of Financial and Professional
Regulation finds that an individual or entity that is not an
authorized user has transacted or intends to transact business
in this State in a manner that has a substantial likelihood of
misleading the public by: (i) implying that the business is a
credit union or (ii) using or intending to use the words
"credit union", or any abbreviation thereof, in connection with
its business, then the Director of the Division of Financial
Institutions may direct the individual or entity to cease and
desist from transacting its business or using the words "credit
union", or any abbreviation thereof. If the individual or
entity persists in transacting its business or using the words
"credit union", or any abbreviation thereof, then the Director
of the Division of Financial Institutions may impose a civil
penalty of up to $10,000 for each violation. Each day that the
individual or entity continues transacting business or using
the words "credit union", or any abbreviation thereof, in
connection with its business shall constitute a separate
violation of these provisions.
    (c) Except as otherwise expressly permitted by law or with
the written consent of the credit union, no person or group of
persons other than an authorized user may use the name of or a
name similar to the name of an existing credit union when
marketing or soliciting business from members or prospective
members if the name or similar name is used in a manner that
would cause a reasonable person to believe that the marketing
material or solicitation originated from or is endorsed by the
existing credit union or that the existing credit union is in
any other way responsible for the marketing material or
solicitation. The following remedies shall apply:
        (1) Any person who violates subsection (c) of this
    Section commits a business offense and shall be fined in an
    amount not to exceed $5,000.
        (2) In addition to any other available remedies, any
    existing credit union may report an alleged violation of
    any provision of this Section to the Director of the
    Division of Financial Institutions. If the Director finds
    that any person or group of persons is in violation of any
    provision of this Section, then the Director may direct
    that person or group of persons to cease and desist from
    that violation. If the Director issues a cease and desist
    order against any person or group of persons for violation
    of subsection (c), then the order must require that person
    or group of persons to cease and desist from using the
    offending marketing material or solicitation in Illinois.
        (3) If a person or group of persons against whom the
    Director issued the cease and desist order persists in the
    violation, then the Director may impose a civil penalty of
    up to $10,000 for each violation. Each day that a person or
    group of persons is in violation of this Section
    constitutes a separate violation of this Section and each
    instance in which marketing material or a solicitation is
    sent in violation of this subsection (c) constitutes a
    separate violation of this Section.
    (d) The Director of the Division of Financial Institutions
may adopt rules to administer the provisions of this Section.
(Source: P.A. 94-150, eff. 7-8-05.)
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/13/2007