093_HB1516re-enr HB1516 Re-Enrolled LRB093 05054 JLS 07768 b 1 AN ACT relating to certain financial institutions. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Credit Union Act is amended by 5 changing Sections 15, 40, 46, 51, and 59 as follows: 6 (205 ILCS 305/15) (from Ch. 17, par. 4416) 7 Sec. 15. Membership defined. 8 (1) The membership of a credit union shall be limited to 9 and consist of the subscribers to the articles of 10 incorporation and such other persons within the common bond, 11 as defined in this Act and as set forth in the credit union's 12 articles of incorporation, as have been duly admitted 13 members, have paid the required entrance fee or membership 14 fee, or both, if any, have subscribed for one or more shares, 15 and have paid the initial installment thereon, and have 16 complied with such other requirements as the articles of 17 incorporation or bylaws specify. Two or more persons within 18 the common bond who have jointly subscribed for one or more 19 shares under a joint account and have complied with all 20 membership requirements may each be admitted to membership. 21 The surviving spouse of a credit union member may, within 6 22 months of the member's death, become a member of the credit 23 union by paying the required entrance fee or membership fee 24 or both, if any, by subscribing for one or more shares and 25 paying the initial installment thereon, and by complying with 26 such other requirements as the articles of incorporation or 27 bylaws specify. 28 (2) Any member may withdraw from a credit union at any 29 time upon giving notice of withdrawal as required by the 30 bylaws. 31 (3) Any member may be expelled by a 2/3 vote of the HB1516 Re-Enrolled -2- LRB093 05054 JLS 07768 b 1 members present at any regular or special meeting called to 2 consider the matter, but only after an opportunity has been 3 given to the member to be heard. 4 (4) A member who has caused a loss to the credit union, 5or who hasfailed to maintain one or more shares at the 6 credit union, or violated Board policy applicable to members 7 may be expelled by a majority vote of a quorum of directors 8 if the board has adopted a policy providing for expulsion 9 under those circumstances. In maintaining and enforcing a 10 policy based on loss, the board may consider, without 11 limitation, a member's failure to pay amounts due under a 12 loan, failure to provide collected funds to cover withdrawals 13 or personal share drafts or credit union drafts where the 14 member is a remitter, or failure to pay fees or charges due 15 the credit union. If a policy is adopted by the board 16 pursuant to this subsection (4), written notice of the policy 17 and the effective date of the policy shall be mailed to each 18 member of the credit union at the member's current address 19 appearing on the records of the credit union. The policy 20 shall be mailed to members not fewer than 30 days prior to 21 the effective date of the policy. In addition, new members 22 shall be provided written notice of the policy prior to or 23 upon applying for membership. 24 (5) All or any part of the amount paid on shares of a 25 withdrawing member or expelled member with any declared 26 dividends or interest on the date of withdrawal or expulsion 27 must, after deducting all amounts due from the member to the 28 credit union, be paid to him. The credit union may require 29 not more than 60 days' written notice of intention to 30 withdraw shares, but a notice of withdrawal does not entitle 31 the member to any preferred or prior claim in the event of 32 liquidation. Withdrawing or expelled members have no further 33 rights in the credit union, but are not, by withdrawal or 34 expulsion, released from any obligation they owe to the HB1516 Re-Enrolled -3- LRB093 05054 JLS 07768 b 1 credit union. 2 (6) A member who has caused a loss to the credit union 3 or has violated Board policy applicable to members may be 4 denied any or all credit union services in accordance with 5 board policy, however, members who are denied services shall 6 be allowed to maintain a share account and to vote on all 7 issues put to a vote of the membership. 8 (Source: P.A. 91-929, eff. 12-15-00.) 9 (205 ILCS 305/40) (from Ch. 17, par. 4441) 10 Sec. 40. Shares to Minors. Shares may be issued in the 11 name of a minor or in the name of a custodian under the 12 Illinois Uniform Transfers to Minors Act, as amended. If 13 shares are issued in the name of a minor, redemption of any 14 part or all of the shares by payment to the minor or upon 15 order of the minor of the amount of the shares and any 16 declared dividends releases the credit union from all 17 obligations to the minor as to the shares redeemed. Further, 18 if shares are issued in the name of a minor, the minor shall 19 be considered as being of the age of majority and having 20 contractual capacity. 21 (Source: P.A. 84-915.) 22 (205 ILCS 305/46) (from Ch. 17, par. 4447) 23 Sec. 46. Loans and interest rate. 24 (1) A credit union may make loans to its members for 25 such purpose and upon such security and terms, including 26 rates of interest, as the Credit Committee, credit manager, 27 or loan officer approves. Notwithstanding the provisions of 28 any other law in connection with extensions of credit, a 29 credit union may elect to contract for and receive interest 30 and fees and other charges for extensions of credit subject 31 only to the provisions of this Act and rules promulgated 32 under this Act, except that extensions of credit secured by HB1516 Re-Enrolled -4- LRB093 05054 JLS 07768 b 1 residential real estate shall be subject to the laws 2 applicable thereto. The rates of interest to be charged on 3 loans to members shall be set by the Board of Directors of 4 each individual credit union and such rates may be less than, 5 but may not exceed, the maximum rate set forth in this 6 Section. A borrower may repay his loan prior to maturity, in 7 whole or in part, without penalty. The credit contract may 8 provide for the payment by the member and receipt by the 9 credit union of all costs and disbursements, including 10 reasonable attorney's fees and collection agency charges, 11 incurred by the credit union to collect or enforce the debt 12 in the event of a delinquency by the member, or in the event 13 of a breach of any obligation of the member under the credit 14 contract. A contingency or hourly arrangement established 15 under an agreement entered into by a credit union with an 16 attorney or collection agency to collect a loan of a member 17 in default shall be presumed prima facie reasonable. 18 (2) Credit unions may make loans based upon the security 19 of any interest or equity in real estate, subject to rules 20 and regulations promulgated by the Director. In any contract 21 or loan which is secured by a mortgage, deed of trust, or 22 conveyance in the nature of a mortgage, on residential real 23 estate, the interest which is computed, calculated, charged, 24 or collected pursuant to such contract or loan, or pursuant 25 to any regulation or rule promulgated pursuant to this Act, 26 may not be computed, calculated, charged or collected for any 27 period of time occurring after the date on which the total 28 indebtedness, with the exception of late payment penalties, 29 is paid in full. 30 For purposes of this subsection (2) of this Section 46, a 31 prepayment shall mean the payment of the total indebtedness, 32 with the exception of late payment penalties if incurred or 33 charged, on any date before the date specified in the 34 contract or loan agreement on which the total indebtedness HB1516 Re-Enrolled -5- LRB093 05054 JLS 07768 b 1 shall be paid in full, or before the date on which all 2 payments, if timely made, shall have been made. In the event 3 of a prepayment of the indebtedness which is made on a date 4 after the date on which interest on the indebtedness was last 5 computed, calculated, charged, or collected but before the 6 next date on which interest on the indebtedness was to be 7 calculated, computed, charged, or collected, the lender may 8 calculate, charge and collect interest on the indebtedness 9 for the period which elapsed between the date on which the 10 prepayment is made and the date on which interest on the 11 indebtedness was last computed, calculated, charged or 12 collected at a rate equal to 1/360 of the annual rate for 13 each day which so elapsed, which rate shall be applied to the 14 indebtedness outstanding as of the date of prepayment. The 15 lender shall refund to the borrower any interest charged or 16 collected which exceeds that which the lender may charge or 17 collect pursuant to the preceding sentence. The provisions 18 of this amendatory Act of 1985 shall apply only to contracts 19 or loans entered into on or after the effective date of this 20 amendatory Act. 21 (3) Notwithstanding any other provision of this Act, a 22 credit union authorized under this Act to make loans secured 23 by an interest or equity in real estate may engage in making 24 "reverse mortgage" loans to persons for the purpose of making 25 home improvements or repairs, paying insurance premiums or 26 paying real estate taxes on the homestead properties of such 27 persons. If made, such loans shall be made on such terms and 28 conditions as the credit union shall determine and as shall 29 be consistent with the provisions of this Section and such 30 rules and regulations as the Director shall promulgate 31 hereunder. For purposes of this Section, a "reverse 32 mortgage" loan shall be a loan extended on the basis of 33 existing equity in homestead property and secured by a 34 mortgage on such property. Such loans shall be repaid upon HB1516 Re-Enrolled -6- LRB093 05054 JLS 07768 b 1 the sale of the property or upon the death of the owner or, 2 if the property is in joint tenancy, upon the death of the 3 last surviving joint tenant who had such an interest in the 4 property at the time the loan was initiated, provided, 5 however, that the credit union and its member may by mutual 6 agreement, establish other repayment terms. A credit union, 7 in making a "reverse mortgage" loan, may add deferred 8 interest to principal or otherwise provide for the charging 9 of interest or premiums on such deferred interest. 10 "Homestead" property, for purposes of this Section, means the 11 domicile and contiguous real estate owned and occupied by the 12 mortgagor. The Director shall promulgate rules and 13 regulations under this Section; provided that such rules and 14 regulations need not be promulgated jointly with any other 15 administrative agency of this State. 16 (4) Notwithstanding any other provisions of this Act, a 17 credit union authorized under this Act to make loans secured 18 by an interest or equity in real property may engage in 19 making revolving credit loans secured by mortgages or deeds 20 of trust on such real property or by security assignments of 21 beneficial interests in land trusts. 22 For purposes of this Section, "revolving credit" has the 23 meaning defined in Section 4.1 of the Interest Act. 24 Any mortgage or deed of trust given to secure a revolving 25 credit loan may, and when so expressed therein shall, secure 26 not only the existing indebtedness but also such future 27 advances, whether such advances are obligatory or to be made 28 at the option of the lender, or otherwise, as are made within 29 twenty years from the date thereof, to the same extent as if 30 such future advances were made on the date of the execution 31 of such mortgage or deed of trust, although there may be no 32 advance made at the time of execution of such mortgage or 33 other instrument, and although there may be no indebtedness 34 outstanding at the time any advance is made. The lien of HB1516 Re-Enrolled -7- LRB093 05054 JLS 07768 b 1 such mortgage or deed of trust, as to third persons without 2 actual notice thereof, shall be valid as to all such 3 indebtedness and future advances form the time said mortgage 4 or deed of trust is filed for record in the office of the 5 Recorder of Deeds or the Registrar of Titles of the county 6 where the real property described therein is located. The 7 total amount of indebtedness that may be so secured may 8 increase or decrease from time to time, but the total unpaid 9 balance so secured at any one time shall not exceed a maximum 10 principal amount which must be specified in such mortgage or 11 deed of trust, plus interest thereon, and any disbursements 12 made for the payment of taxes, special assessments, or 13 insurance on said real property, with interest on such 14 disbursements. 15 Any such mortgage or deed of trust shall be valid and 16 have priority over all subsequent liens and encumbrances, 17 including statutory liens, except taxes and assessments 18 levied on said real property. 19 (5) Compliance with federal or Illinois preemptive laws 20 or regulations governing loans made by a credit union 21 chartered under this Act shall constitute compliance with 22 this Act. 23 (Source: P.A. 90-222, eff. 7-25-97.) 24 (205 ILCS 305/51) (from Ch. 17, par. 4452) 25 Sec. 51. Other Loan Programs. 26 (1) Subject to such rules and regulations as the 27 Director may promulgate, a credit union may participate in 28 loans to credit union members jointly with other credit 29 unions, corporations, or financial institutions. An 30 originating credit union may originate loans only to its own 31 members. A participating credit union that is not the 32 originating lender may participate in loans made to its own 33 members or to members of another participating credit union. HB1516 Re-Enrolled -8- LRB093 05054 JLS 07768 b 1 "Originating lender" means the participating credit union 2 with which the member contracts. A master participation 3 agreement must be properly executed, and the agreement must 4 include provisions for identifying, either through documents 5 incorporated by reference or directly in the agreement, the 6 participation loan or loans prior to their sale. 7 (2) Any credit union with assets of $500,000 or more may 8 loan to its members under the State Scholarships Law or other 9 scholarship programs which are subject to a federal or state 10 law providing 100% repayment guarantee. 11 (3) A credit union may purchase the conditional sales 12 contracts, notes and similar instruments which evidence an 13 indebtedness of its members. 14 (4) With approval of the Board of Directors, a credit 15 union may make loans, either on its own or jointly with other 16 credit unions, corporations or financial institutions, to 17 credit union organizations; provided, that the aggregate 18 amount of all such loans outstanding shall not at any time 19 exceed the greater of 3%1%of the paid-in and unimpaired 20 capital and surplus of the credit union or the amount 21 authorized for federal credit unions. 22 (Source: P.A. 92-293, eff. 8-9-01.) 23 (205 ILCS 305/59) (from Ch. 17, par. 4460) 24 Sec. 59. Investment of Funds. Funds not used in loans to 25 members may be invested, pursuant to subsection (7) of 26 Section 30 of this Act, and subject to Departmental rules and 27 regulations: 28 (1) In securities, obligations or other instruments of 29 or issued by or fully guaranteed as to principal and interest 30 by the United States of America or any agency thereof or in 31 any trust or trusts established for investing directly or 32 collectively in the same; 33 (2) In obligations of any state of the United States, HB1516 Re-Enrolled -9- LRB093 05054 JLS 07768 b 1 the District of Columbia, the Commonwealth of Puerto Rico, 2 and the several territories organized by Congress, or any 3 political subdivision thereof; however, a credit union may 4 not invest more than 10% of its unimpaired capital and 5 surplus in the obligations of one issuer, exclusive of 6 general obligations of the issuer, and investments in 7 municipal securities must be limited to securities rated in 8 one of the 4 highest rating categories by a nationally 9 recognized statistical rating organization; 10 (3) In certificates of deposit or passbook type accounts 11 issued by a state or national bank, mutual savings bank or 12 savings and loan association; provided that such institutions 13 have their accounts insured by the Federal Deposit Insurance 14 Corporation or the Federal Savings and Loan Insurance 15 Corporation; but provided, further, that a credit union's 16 investment in an account in any one institution may exceed 17 the insured limit on accounts; 18 (4) In shares, classes of shares or share certificates 19 of other credit unions, including, but not limited to 20 corporate credit unions; provided that such credit unions 21 have their members' accounts insured by the NCUA or other 22 approved insurers, and that if the members' accounts are so 23 insured, a credit union's investment may exceed the insured 24 limit on accounts; 25 (5) In shares of a cooperative society organized under 26 the laws of this State or the laws of the United States in 27 the total amount not exceeding 10% of the unimpaired capital 28 and surplus of the credit union; provided that such 29 investment shall first be approved by the Department; 30 (6) In obligations of the State of Israel, or 31 obligations fully guaranteed by the State of Israel as to 32 payment of principal and interest; 33 (7) In shares, stocks or obligations of other financial 34 institutions in the total amount not exceeding 5% of the HB1516 Re-Enrolled -10- LRB093 05054 JLS 07768 b 1 unimpaired capital and surplus of the credit union; 2 (8) In federal funds and bankers' acceptances; 3 (9) In shares or stocks of Credit Union Service 4 Organizations in the total amount not exceeding the greater 5 of 3%1%of the unimpaired capital and surplus of the credit 6 union or the amount authorized for federal credit unions. 7 As used in this Section, "political subdivision" 8 includes, but is not limited to, counties, townships, cities, 9 villages, incorporated towns, school districts, educational 10 service regions, special road districts, public water supply 11 districts, fire protection districts, drainage districts, 12 levee districts, sewer districts, housing authorities, park 13 districts, and any agency, corporation, or instrumentality of 14 a state or its political subdivisions, whether now or 15 hereafter created and whether herein specifically mentioned 16 or not. 17 (Source: P.A. 92-293, eff. 8-9-01.) 18 Section 99. Effective date. This Act takes effect upon 19 becoming law.