Public Act 096-0141
 
HB0348 Enrolled LRB096 04653 MJR 14712 b

    AN ACT concerning financial 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 34 and 46 and by adding Section 42.5 as
follows:
 
    (205 ILCS 305/34)  (from Ch. 17, par. 4435)
    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
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
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
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.
    (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.
    (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
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
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
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.
    (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
    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
shall constitute a quorum.
(Source: P.A. 86-238.)
 
    (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.
 
    (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.
    (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.
(Source: P.A. 95-98, eff. 8-13-07.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.