HB4462 EngrossedLRB102 22844 BMS 33257 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Credit Union Act is amended by
5changing Sections 19, 20, 34, 39, 42, and 59 and by adding
6Section 16.5 as follows:
 
7    (205 ILCS 305/16.5 new)
8    Sec. 16.5. Service to target markets.
9    (a) As used in this Section:
10    "Target market" means an investment area or a targeted
11population, or both, as defined in the Community Development
12Banking and Financial Institutions Act of 1994, 12 U.S.C.
134702, and regulations issued thereunder by the U.S. Department
14of the Treasury pursuant to 12 CFR 1805.104 et seq.
15    Terms used in this Section that are not defined in this
16Section shall have the meanings ascribed to them in the U.S.
17Department of Treasury regulations identified in this
18subsection.
19    (b) Notwithstanding anything to the contrary in Section 15
20or 16.1, persons who reside in investment areas and targeted
21populations consisting of individuals or identifiable groups
22of individuals who are low-income persons or lack adequate
23access to financial products or financial services may be

 

 

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1admitted to membership in a credit union in accordance with
2the terms of the credit union's written business plan
3submitted to the Secretary under subsection (e).
4    (c) In addition to serving persons who reside in
5investment areas that become members pursuant to subsection
6(b), a credit union may indirectly serve investment areas by
7making loans to or investments in community development
8financial institutions, minority depository institutions, and
9other businesses that serve the investment areas, subject to
10the limits set forth in subsection (5) of Section 51 and
11paragraph (14) of subsection (a) of Section 59.
12    (d) In addition to serving targeted populations of
13individuals that become members pursuant to subsection (b), a
14credit union may indirectly serve members of a targeted
15population by making loans to or investments in community
16development financial institutions, minority depository
17institutions, and other businesses that serve the targeted
18population, subject to the limits set forth in subsection (5)
19of Section 51 and paragraph (14) of subsection (a) of Section
2059.
21    (e) A credit union desiring to serve a target market in
22accordance with this Section shall do so pursuant to a written
23business plan that confirms the target market meets the
24definitional criteria set forth in subsection (a) and
25identifies the financial product and financial service needs
26of the target market, the financial products and financial

 

 

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1services to be delivered, and the manner of delivery of those
2financial products and financial services. The credit union
3must submit the business plan to the Secretary. The Secretary
4may, in his or her sole discretion, approve the business plan,
5disapprove the business plan, or require the credit union to
6modify the business plan to seek approval of the target market
7as an occupational, community, or associational common bond or
8common bonds, pursuant to 38 Ill. Adm. Code 190.10. The credit
9union must be advised in writing of the findings of the
10Secretary in support of the determination and the specific and
11reasonable time period in which to file a modified plan. If the
12Secretary approves the business plan, the credit union shall
13be required to add the target market to its field of
14membership.
 
15    (205 ILCS 305/19)  (from Ch. 17, par. 4420)
16    Sec. 19. Meeting of members.
17    (1)(a) The annual meeting shall be held each year during
18the months of January, February or March or such other month as
19may be approved by the Department. The meeting shall be held at
20the time, place and in the manner set forth in the bylaws. Any
21special meetings of the members of the credit union shall be
22held at the time, place and in the manner set forth in the
23bylaws. Unless otherwise set forth in this Act, quorum
24requirements for meetings of members shall be established by a
25credit union in its bylaws. Notice of all meetings must be

 

 

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1given by the secretary of the credit union at least 7 days
2before the date of such meeting, either by handing a written or
3printed notice to each member of the credit union, by mailing
4the notice to the member at his address as listed on the books
5and records of the credit union, by posting a notice of the
6meeting in three conspicuous places, including the office of
7the credit union, by posting the notice of the meeting on the
8credit union's website, or by disclosing the notice of the
9meeting in membership newsletters or account statements.
10    (b) Unless expressly prohibited by the articles of
11incorporation or bylaws and subject to applicable requirements
12of this Act, the board of directors may provide by resolution
13that members may attend, participate in, act in, and vote at
14any annual meeting or special meeting through the use of a
15conference telephone or interactive technology, including, but
16not limited to, electronic transmission, internet usage, or
17remote communication, by means of which all persons
18participating in the meeting can communicate with each other.
19Participation through the use of a conference telephone or
20interactive technology shall constitute attendance, presence,
21and representation in person at the annual meeting or special
22meeting of the person or persons so participating and count
23towards the quorum required to conduct business at the
24meeting. The following conditions shall apply to any virtual
25meeting of the members:
26        (i) the credit union must internally possess or retain

 

 

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1    the technological capacity to facilitate virtual meeting
2    attendance, participation, communication, and voting; and
3        (ii) the members must receive notice of the use of a
4    virtual meeting format and appropriate instructions for
5    joining, participating, and voting during the virtual
6    meeting at least 7 days before the virtual meeting.
7    (2) On all questions and at all elections, except election
8of directors, each member has one vote regardless of the
9number of his shares. There shall be no voting by proxy except
10on the election of directors, proposals for merger or
11voluntary dissolution. Members may vote on questions,
12including, without limitation, the approval of mergers and
13voluntary dissolutions under this Act, and in elections by
14secure electronic record if approved by the board of
15directors. All voting on the election of directors shall be by
16ballot, but when there is no contest, written or electronic
17ballots need not be cast. The record date to be used for the
18purpose of determining which members are entitled to notice of
19or to vote at any meeting of members, may be fixed in advance
20by the directors on a date not more than 90 days nor less than
2110 days prior to the date of the meeting. If no record date is
22fixed by the directors, the first day on which notice of the
23meeting is given, mailed or posted is the record date.
24    (3) Regardless of the number of shares owned by a society,
25association, club, partnership, other credit union or
26corporation, having membership in the credit union, it shall

 

 

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1be entitled to only one vote and it may be represented and have
2its vote cast by its designated agent acting on its behalf
3pursuant to a resolution adopted by the organization's board
4of directors or similar governing authority; provided that the
5credit union shall obtain a certified copy of such resolution
6before such vote may be cast.
7    (4) A member may revoke a proxy by delivery to the credit
8union of a written statement to that effect, by execution of a
9subsequently dated proxy, by execution of an a secure
10electronic record, or by attendance at a meeting and voting in
11person.
12    (5) The use of electronic records for member voting
13pursuant to this Section shall employ a security procedure
14that meets the attribution criteria set forth in Section 9 of
15the Uniform Electronic Transactions Act.
16    (6) (5) As used in this Section, "electronic", and
17"electronic record", and "security procedure" have the
18meanings ascribed to those terms in the Uniform Electronic
19Transactions Act. As used in this Section, "secured electronic
20record" means an electronic record that meets the criteria set
21forth in Uniform Electronic Transactions Act.
22(Source: P.A. 102-38, eff. 6-25-21; 102-496, eff. 8-20-21;
23revised 10-15-21.)
 
24    (205 ILCS 305/20)  (from Ch. 17, par. 4421)
25    Sec. 20. Election or appointment of officials.

 

 

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1    (1) The credit union shall be directed by a board of
2directors consisting of no less than 7 in number, to be elected
3at the annual meeting by and from the members. Directors shall
4hold office until the next annual meeting, unless their terms
5are staggered. Upon amendment of its bylaws, a credit union
6may divide the directors into 2 or 3 classes with each class as
7nearly equal in number as possible. The term of office of the
8directors of the first class shall expire at the first annual
9meeting after their election, that of the second class shall
10expire at the second annual meeting after their election, and
11that of the third class, if any, shall expire at the third
12annual meeting after their election. At each annual meeting
13after the classification, the number of directors equal to the
14number of directors whose terms expire at the time of the
15meeting shall be elected to hold office until the second
16succeeding annual meeting if there are 2 classes or until the
17third succeeding annual meeting if there are 3 classes. A
18director shall hold office for the term for which he or she is
19elected and until his or her successor is elected and
20qualified.
21    (1.5) Except as provided in subsection (1.10), in all
22elections for directors, every member has the right to vote,
23in person, by proxy, or by secure electronic record if
24approved by the board of directors, the number of shares owned
25by him, or in the case of a member other than a natural person,
26the member's one vote, for as many persons as there are

 

 

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1directors to be elected, or to cumulate such shares, and give
2one candidate as many votes as the number of directors
3multiplied by the number of his shares equals, or to
4distribute them on the same principle among as many candidates
5as he may desire and the directors shall not be elected in any
6other manner. Shares held in a joint account owned by more than
7one member may be voted by any one of the members, however, the
8number of cumulative votes cast may not exceed a total equal to
9the number of shares multiplied by the number of directors to
10be elected. A majority of the shares entitled to vote shall be
11represented either in person or by proxy for the election of
12directors. Each director shall wholly take and subscribe to an
13oath that he will diligently and honestly perform his duties
14in administering the affairs of the credit union, that while
15he may delegate to another the performance of those
16administrative duties he is not thereby relieved from his
17responsibility for their performance, that he will not
18knowingly violate or permit to be violated any law applicable
19to the credit union, and that he is the owner of at least one
20share of the credit union.
21    (1.10) Upon amendment of a credit union's bylaws approved
22by the members, in all elections for directors, every member
23who is a natural person shall have the right to cast one vote,
24regardless of the number of his or her shares, in person, by
25proxy, or by secure electronic record if approved by the board
26of directors, for as many persons as there are directors to be

 

 

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1elected.
2    (1.15) If the board of directors has adopted a policy
3addressing age eligibility standards on voting, holding
4office, or petitioning the board, then a credit union may
5require (i) that members be at least 18 years of age by the
6date of the meeting in order to vote at meetings of the
7members, sign nominating petitions, or sign petitions
8requesting special meetings, and (ii) that members be at least
918 years of age by the date of election or appointment in order
10to hold elective or appointive office.
11    (2) The board of directors shall appoint from among the
12members of the credit union, a supervisory committee of not
13less than 3 members at the organization meeting and within 30
14days following each annual meeting of the members for such
15terms as the bylaws provide. Members of the supervisory
16committee may, but need not be, on the board of directors, but
17shall not be officers of the credit union, members of the
18credit committee, or the credit manager if no credit committee
19has been appointed.
20    (3) The board of directors may appoint, from among the
21members of the credit union, a credit committee consisting of
22an odd number, not less than 3 for such terms as the bylaws
23provide. Members of the credit committee may, but need not be,
24directors or officers of the credit union, but shall not be
25members of the supervisory committee.
26    (4) The board of directors may appoint from among the

 

 

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1members of the credit union a membership committee of one or
2more persons. If appointed, the committee shall act upon all
3applications for membership and submit a report of its actions
4to the board of directors at the next regular meeting for
5review. If no membership committee is appointed, credit union
6management shall act upon all applications for membership and
7submit a report of its actions to the board of directors at the
8next regular meeting for review.
9    (5) The board of directors may appoint, from among the
10members of the credit union, a nominating committee of 3 or
11more persons. Members of the nominating committee may, but
12need not, be directors or officers of the credit union, but may
13not be members of the supervisory committee. The appointment,
14if made, shall be made in a timely manner to permit the
15nominating committee to recruit, evaluate, and nominate
16eligible candidates for each position to be filled in the
17election of directors or, in the event of a vacancy in office,
18to be filled by appointment of the board of directors for the
19remainder of the unexpired term of the director creating the
20vacancy. Factors the nominating committee may consider in
21evaluating prospective candidates include whether a candidate
22possesses or is willing to acquire through training the
23requisite skills and qualifications to carry out the statutory
24duties of a director. The board of directors may delegate to
25the nominating committee the recruitment, evaluation, and
26nomination of eligible candidates to serve on committees and

 

 

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1in executive officer positions.
2    (6) The use of electronic records for member voting
3pursuant to this Section shall employ a security procedure
4that meets the attribution criteria set forth in Section 9 of
5the Uniform Electronic Transactions Act.
6    (7) (5) As used in this Section, "electronic", and
7"electronic record", and "security procedure" have the
8meanings ascribed to those terms in the Uniform Electronic
9Transactions Act. As used in this Section, "secured electronic
10record" means an electronic record that meets the criteria set
11forth in the Uniform Electronic Transactions Act.
12(Source: P.A. 102-38, eff. 6-25-21; 102-687, eff. 12-17-21.)
 
13    (205 ILCS 305/34)  (from Ch. 17, par. 4435)
14    Sec. 34. Duties of supervisory committee.
15    (1) The supervisory committee shall make or cause to be
16made an annual internal audit of the books and affairs of the
17credit union to determine that the credit union's accounting
18records and reports are prepared promptly and accurately
19reflect operations and results, that internal controls are
20established and effectively maintained to safeguard the assets
21of the credit union, and that the policies, procedures and
22practices established by the board of directors and management
23of the credit union are being properly administered. The
24supervisory committee shall submit a report of that audit to
25the board of directors and a summary of that report to the

 

 

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1members at the next annual meeting of the credit union. It
2shall make or cause to be made such supplementary audits as it
3deems necessary or as are required by the Secretary or by the
4board of directors, and submit reports of these supplementary
5audits to the Secretary or board of directors as applicable.
6If the supervisory committee has not engaged a licensed
7certified public accountant or licensed certified public
8accounting firm to make the internal audit, the supervisory
9committee or other officials of the credit union shall not
10indicate or in any manner imply that such audit has been
11performed by a licensed certified public accountant or
12licensed certified public accounting firm or that the audit
13represents the independent opinion of a licensed certified
14public accountant or licensed certified public accounting
15firm. The supervisory committee must retain its tapes and
16working papers of each internal audit for inspection by the
17Department. The report of this audit must be made on a form
18approved by the Secretary. A copy of the report must be
19promptly delivered to the Secretary as set forth in paragraph
20(C) of subsection (3).
21    (2) The supervisory committee shall make or cause to be
22made at least once each year a reasonable percentage
23verification of members' share and loan accounts, consistent
24with rules promulgated by the Secretary.
25    (3) (A) The supervisory committee of a credit union with
26assets of $10,000,000 or more shall engage a licensed

 

 

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1certified public accountant or licensed certified public
2accounting firm to perform an annual external independent
3audit of the credit union's financial statements in accordance
4with generally accepted auditing standards and the financial
5statements shall be issued in accordance with accounting
6principles generally accepted in the United States of America.
7    (B) The supervisory committee of a credit union with
8assets of $5,000,000 or more, but less than $10,000,000, shall
9engage a licensed certified public accountant or licensed
10certified public accounting firm to perform on an annual
11basis: (i) an agreed-upon procedures engagement under
12attestation standards established by the American Institute of
13Certified Public Accountants to minimally satisfy the
14supervisory committee internal audit standards set forth in
15subsection (1); or (ii) an external independent audit of the
16credit union's financial statements pursuant to the standards
17set forth in paragraph (A) of subsection (3); or (iii) an
18external independent audit of the credit union's financial
19statements in accordance with subsection (5).
20    (C) Notwithstanding anything to the contrary in Section 6,
21each credit union organized under this Act shall select the
22annual period it desires to use for purposes of performing the
23external independent audit, agreed-upon procedures engagement,
24or internal audit described in this Section. The annual period
25may end on the final day of any month and shall be construed to
26mean once every calendar year and not once every 12-month

 

 

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1period. Irrespective of the annual period selected, the credit
2union shall complete its external independent audit report,
3agreed-upon procedures report, or internal audit report and
4deliver a copy to the Secretary no later than 120 days after
5the effective date of the audit or engagement, which shall
6mean the last day of the selected annual period. A credit union
7or group of credit unions may obtain an extension of the due
8date upon application to and receipt of written approval from
9the Secretary.
10    (D) If the credit union engages a licensed certified
11public accountant or licensed certified public accounting firm
12to perform an annual external independent audit of the credit
13union's financial statements pursuant to the standards in
14paragraph (A) of subsection (3) or an annual agreed-upon
15procedures engagement pursuant to the standards in paragraph
16(B) of subsection (3), then the annual internal audit
17requirements of subsection (1) shall be deemed satisfied and
18met in all respects.
19    (4) In determining the appropriate balance in the
20allowance for loan losses account, a credit union may
21determine its historical loss rate using a defined period of
22time of less than 5 years, provided that:
23        (A) the methodology used to determine the defined
24    period of time is formally documented in the credit
25    union's policies and procedures and is appropriate to the
26    credit union's size, business strategy, and loan portfolio

 

 

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1    characteristics and the economic environment of the areas
2    and employers served by the credit union;
3        (B) supporting documentation is maintained for the
4    technique used to develop the credit union loss rates,
5    including the period of time used to accumulate historical
6    loss data and the factors considered in establishing the
7    time frames; and
8        (C) the external auditor conducting the credit union's
9    financial statement audit has analyzed the methodology
10    employed by the credit union and concludes that the
11    financial statements, including the allowance for loan
12    losses, are fairly stated in all material respects in
13    accordance with U.S. Generally Accepted Accounting
14    Principles, as promulgated by the Financial Accounting
15    Standards Board, or the regulatory basis of accounting
16    identified in subsection (5).
17    (5) A credit union with total assets of less than
18$10,000,000 that does not engage a licensed certified public
19accountant or licensed certified public accounting firm to
20perform an annual external independent audit of the credit
21union's financial statements pursuant to the standards in
22paragraph (A) of subsection (3) is not required to determine
23its allowance for loan losses in accordance with generally
24accepted accounting principles. Any such credit union may
25instead use any reasonable reserve methodology, including
26incurred loss, if it adequately covers known and probable loan

 

 

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1losses and complies with the Department's rule addressing loan
2loss accounting procedures in 38 Ill. Adm. Code 190.70. Any
3such credit union shall also have the option of engaging a
4licensed certified public accountant or licensed certified
5public accounting firm to perform a financial statement audit
6in accordance with this regulatory basis of accounting rather
7than the standards in paragraph (A) of subsection (3).
8    (6) (5) A majority of the members of the supervisory
9committee shall constitute a quorum.
10    (7) (6) On an annual basis commencing January 1, 2015, the
11members of the supervisory committee shall receive training
12related to their statutory duties. Supervisory committee
13members may receive the training through internal credit union
14training, external training offered by the credit union's
15retained auditors, trade associations, vendors, regulatory
16agencies, or any other sources or on-the-job experience, or a
17combination of those activities. The training may be received
18through any medium, including, but not limited to,
19conferences, workshops, audit closing meetings, seminars,
20teleconferences, webinars, and other Internet-based delivery
21channels.
22(Source: P.A. 101-81, eff. 7-12-19; 102-496, eff. 8-20-21.)
 
23    (205 ILCS 305/39)  (from Ch. 17, par. 4440)
24    Sec. 39. Special purpose share accounts; charitable
25donation accounts.

 

 

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1    (1) If provided for in and consistent with the bylaws,
2Christmas clubs, vacation clubs and other special purpose
3share accounts may be established and offered under conditions
4and restrictions established by the board of directors.
5    (2) Pursuant to a policy adopted by the board of
6directors, which may be amended from time to time, a credit
7union may establish one or more charitable donation accounts.
8The investments and purchases to fund a charitable donation
9account are not subject to the investment limitations of this
10Act, provided the charitable donation account is structured in
11accordance with this Act. At their time of purchase, the book
12value of the investments in all charitable donation accounts,
13in the aggregate, shall not exceed 5% of the credit union's net
14worth.
15        (a) If a credit union chooses to establish a
16    charitable donation account using a trust vehicle, the
17    trustee must be an entity regulated by the Office of the
18    Comptroller of the Currency, the U.S. Securities and
19    Exchange Commission, another federal regulatory agency, or
20    a State financial regulatory agency. A regulated trustee
21    or other person who is authorized to make investment
22    decisions for a charitable donation account, other than
23    the credit union itself, shall either be registered with
24    the U.S. Securities and Exchange Commission as an
25    investment advisor or regulated by the Office of the
26    Comptroller of the Currency.

 

 

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1        (b) The parties to the charitable donation account
2    must document the terms and conditions controlling the
3    account in a written operating agreement, trust agreement,
4    or similar instrument. The terms of the agreement shall be
5    consistent with the requirements and conditions set forth
6    in this Section. The agreement, if applicable, and
7    policies must document the investment strategies of the
8    charitable donation account trustee or other manager in
9    administering the charitable donation account and provide
10    for the accounting of all aspects of the account,
11    including its distributions and liquidation, in accordance
12    with generally accepted accounting principles.
13        (c) A credit union's charitable donation account
14    agreement, if applicable, and policies shall provide that
15    the charitable organization or non-profit entity
16    recipients of any charitable donation account funds must
17    be identified in the policy and be exempt from taxation
18    under Section 501(c)(3) of the Internal Revenue Code.
19        (d) Upon termination of a charitable donation account,
20    the credit union may receive a distribution of the
21    remaining assets in cash, or a distribution in kind of the
22    remaining assets, but only if those assets are permissible
23    investments for credit unions pursuant to this Act.
24    (3) Pursuant to subsection (20) of Section 13 authorizing
25a credit union to make reasonable contributions to civic,
26charitable, service, or religious corporations and to avoid

 

 

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1the cost, administrative expenses, and reporting requirements
2associated with establishing its own private foundation, a
3credit union may establish one or more donor-advised fund
4accounts. The credit union shall maintain the account on its
5books and records under a name it selects, which may identify
6the account as a charitable or grant fund or other name that
7reflects the charitable nature of the account. The account
8shall be subject to the terms and restrictions set forth in
9this subsection.
10        (a) Transfers from a donor-advised fund account shall
11    be limited to foundations exempt from taxation under
12    Section 501(c)(3) of the Internal Revenue Code.
13        (b) Distributions by a foundation receiving
14    donor-advised funds from the credit union shall be:
15            (i) based upon specific grant recommendations of
16        the credit union; and
17            (ii) limited to public charities exempt from
18        taxation under Section 501(c)(3) of the Internal
19        Revenue Code.
20        (c) Transfers by a credit union from its donor-advised
21    fund account to a foundation irrevocably conveys all
22    right, title, and interest in the funds to the foundation,
23    subject only to the continuing right of the credit union
24    to designate the entity or entities that will receive the
25    grant funds. Grants may not be used to satisfy any
26    obligation of the credit union and no goods or services

 

 

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1    may be received by the credit union from the recipient
2    organization in consideration of the grant.
3(Source: P.A. 97-133, eff. 1-1-12; 98-784, eff. 7-24-14.)
 
4    (205 ILCS 305/42)  (from Ch. 17, par. 4443)
5    Sec. 42. Shares in trust.
6    (1) Shares may be issued in trust to a member as trustee or
7to an individual or corporate trustee. If a corporate trustee
8is a bank or trust company, shares may be issued to the
9corporate trustee only if such bank or trust company is
10organized under the laws of the State of Illinois or is a
11nationally chartered bank located principally in the State of
12Illinois. An individual trustee shall be a member of the
13credit union unless the person establishing the trust in
14respect to which such shares are issued or each beneficiary of
15the trust is a member of the credit union and the name of each
16beneficiary is disclosed to the credit union. Shares may also
17be issued in the name of an individual or corporate
18representative under the Illinois Probate Act of 1975 (i) for
19or in respect to a member of a credit union; or (ii) for or in
20respect of a nonmember of a credit union, if the
21representative is an individual who is a member of the credit
22union. Shares may also be issued in trust under the Illinois
23Funeral or Burial Funds Act, for or in respect to a member of a
24credit union, to a trustee licensed under said Act. Any credit
25union which issues shares in trust as provided in this Section

 

 

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1must be insured by the NCUA or another approved insurer.
2Payment of part or all of such shares to such trustee or member
3shall, to the extent of such payment, discharge the liability
4of the credit union to the member and the beneficiary and the
5credit union shall be under no obligation to see to the
6application of such payment.
7    (2) If a credit union's shares are insured as provided for
8in this Act, such credit union shall have power to act as
9trustee or custodian under individual retirement accounts or
10plans, health savings accounts, and similar tax-advantaged
11savings plans established pursuant to the Internal Revenue
12Code for its members or groups or organizations of its members
13provided the funds of such accounts or plans are invested
14solely in (1) share accounts of, or (2) share accounts and
15obligations issued by such credit union. All funds held in
16such fiduciary capacity shall be maintained in accordance with
17applicable statutes and regulations promulgated thereunder by
18any authority exercising jurisdiction over such trusts or
19custodial accounts.
20    (3) Notwithstanding any language to the contrary in this
21Section 42, a credit union may act as trustee or custodian of
22individual retirement plans of its members established
23pursuant to the Employee Retirement Income Security Act of
241974 or self-employed retirement plans established pursuant to
25the Self-Employed Individuals Retirement Act of 1962, and any
26laws amendatory or supplementary to such Acts, provided that:

 

 

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1        (a) All contributions of funds are initially made to a
2    share account in the credit union;
3        (b) Any subsequent transfer of funds to other assets
4    is solely at the direction of the member and the credit
5    union performs only custodial duties, exercises no
6    investment discretion and provides no investment advice
7    with respect to plan assets;
8        (c) The member is notified of the fact that share
9    insurance coverage is limited to funds held in share
10    accounts; and
11        (d) The credit union complies with all applicable
12    provisions of this Act and applicable laws and regulations
13    as may be promulgated by any authority exercising
14    jurisdiction over such trust or custodial accounts.
15(Source: P.A. 94-150, eff. 7-8-05.)
 
16    (205 ILCS 305/59)  (from Ch. 17, par. 4460)
17    Sec. 59. Investment of funds.
18    (a) Funds not used in loans to members may be invested,
19pursuant to subsection (7) of Section 30 of this Act, and
20subject to Departmental rules and regulations:
21        (1) In securities, obligations or other instruments of
22    or issued by or fully guaranteed as to principal and
23    interest by the United States of America or any agency
24    thereof or in any trust or trusts established for
25    investing directly or collectively in the same;

 

 

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1        (2) In obligations of any state of the United States,
2    the District of Columbia, the Commonwealth of Puerto Rico,
3    and the several territories organized by Congress, or any
4    political subdivision thereof; however, a credit union may
5    not invest more than 10% of its unimpaired capital and
6    surplus in the obligations of one issuer, exclusive of
7    general obligations of the issuer, and investments in
8    municipal securities must be limited to securities rated
9    in one of the 4 highest rating categories by a nationally
10    recognized statistical rating organization;
11        (3) In certificates of deposit or passbook type
12    accounts issued by a state or national bank, mutual
13    savings bank or savings and loan association; provided
14    that such institutions have their accounts insured by the
15    Federal Deposit Insurance Corporation or the Federal
16    Savings and Loan Insurance Corporation; but provided,
17    further, that a credit union's investment in an account in
18    any one institution may exceed the insured limit on
19    accounts;
20        (4) In shares, classes of shares or share certificates
21    of other credit unions, including, but not limited to
22    corporate credit unions; provided that such credit unions
23    have their members' accounts insured by the NCUA or other
24    approved insurers, and that if the members' accounts are
25    so insured, a credit union's investment may exceed the
26    insured limit on accounts;

 

 

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1        (5) In shares of a cooperative society organized under
2    the laws of this State or the laws of the United States in
3    the total amount not exceeding 10% of the unimpaired
4    capital and surplus of the credit union; provided that
5    such investment shall first be approved by the Department;
6        (6) In obligations of the State of Israel, or
7    obligations fully guaranteed by the State of Israel as to
8    payment of principal and interest;
9        (7) In shares, stocks or obligations of other
10    financial institutions in the total amount not exceeding
11    5% of the unimpaired capital and surplus of the credit
12    union;
13        (8) In federal funds and bankers' acceptances;
14        (9) In shares or stocks of Credit Union Service
15    Organizations in the total amount not exceeding the
16    greater of 6% of the unimpaired capital and surplus of the
17    credit union or the amount authorized for federal credit
18    unions;
19        (10) In corporate bonds identified as investment grade
20    by at least one nationally recognized statistical rating
21    organization, provided that:
22            (i) the board of directors has established a
23        written policy that addresses corporate bond
24        investment procedures and how the credit union will
25        manage credit risk, interest rate risk, liquidity
26        risk, and concentration risk; and

 

 

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1            (ii) the credit union has documented in its
2        records that a credit analysis of a particular
3        investment and the issuing entity was conducted by the
4        credit union, a third party on behalf of the credit
5        union qualified by education or experience to assess
6        the risk characteristics of corporate bonds, or a
7        nationally recognized statistical rating agency before
8        purchasing the investment and the analysis is updated
9        at least annually for as long as it holds the
10        investment;
11        (11) To aid in the credit union's management of its
12    assets, liabilities, and liquidity in the purchase of an
13    investment interest in a pool of loans, in whole or in part
14    and without regard to the membership of the borrowers,
15    from other depository institutions and financial type
16    institutions, including mortgage banks, finance companies,
17    insurance companies, and other loan sellers, subject to
18    such safety and soundness standards, limitations, and
19    qualifications as the Department may establish by rule or
20    guidance from time to time;
21        (12) To aid in the credit union's management of its
22    assets, liabilities, and liquidity by receiving funds from
23    another financial institution as evidenced by certificates
24    of deposit, share certificates, or other classes of shares
25    issued by the credit union to the financial institution;
26        (13) In the purchase and assumption of assets held by

 

 

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1    other financial institutions, with approval of the
2    Secretary and subject to any safety and soundness
3    standards, limitations, and qualifications as the
4    Department may establish by rule or guidance from time to
5    time; and
6        (14) In the shares, stocks, or obligations of
7    community development financial institutions as defined in
8    regulations issued by the U.S. Department of the Treasury
9    and minority depository institutions as defined by the
10    National Credit Union Administration; however the
11    aggregate amount of all such investments shall not at any
12    time exceed 5% of the paid-in and unimpaired capital and
13    surplus of the credit union; and .
14        (15)(A) In shares, stocks, or member units of
15    financial technology companies in the total amount not
16    exceeding 2.5% of the net worth of the credit union, so
17    long as:
18            (i) the credit union would remain well capitalized
19        as defined by 12 CFR 702.102 if the credit union
20        reduced its net worth by the full investment amount at
21        the time the investment is made or at any point during
22        the time the investment is held by the credit union;
23            (ii) the credit union and the financial technology
24        company are operated in a manner that demonstrates to
25        the public the separate corporate existence of the
26        credit union and financial technology company; and

 

 

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1            (iii) the credit union has received a composite
2        rating of 1 or 2 under the CAMELS supervisory rating
3        system.
4        (B) The investment limit in subparagraph (A) of this
5    paragraph (15) is increased to 5% of the net worth of the
6    credit union, if it has received a management rating of 1
7    under the CAMELS supervisory rating system at the time a
8    specific investment is made and at all times during the
9    term of the investment. A credit union that satisfies the
10    criteria in subparagraph (A) of this paragraph (15) and
11    this subparagraph may request approval from the Secretary
12    for an exception to the 5% limit up to a limit of 10% of
13    the net worth of the credit union, subject to such safety
14    and soundness standards, limitations, and qualifications
15    as the Department may establish by rule or guidance from
16    time to time. The request shall be in writing and
17    substantiate the need for the higher limit, describe the
18    credit union's record of investment activity, and include
19    financial statements reflecting a sound fiscal history.
20        (C) Before investing in a financial technology
21    company, the credit union shall obtain a written legal
22    opinion as to whether the financial technology company is
23    established in a manner that will limit potential exposure
24    of the credit union to no more than the loss of funds
25    invested in the financial technology company and the legal
26    opinion shall:

 

 

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1            (i) address factors that have led courts to
2        "pierce the corporate veil", such as inadequate
3        capitalization, lack of separate corporate identity,
4        common boards of directors and employees, control of
5        one entity over another, and lack of separate books
6        and records; and
7            (ii) be provided by independent legal counsel of
8        the credit union.
9        (D) Before investing in the financial technology
10    company, the credit union shall enter into a written
11    investment agreement with the financial technology company
12    and the agreement shall contain the following clauses:
13            (i) the financial technology company will: (I)
14        provide the Department with access to the books and
15        records of the financial technology company relating
16        to the investment made by the credit union, with the
17        costs of examining those records borne by the credit
18        union in accordance with the per diem rate established
19        by the Department by rule; (II) follow generally
20        accepted accounting principles; and (III) provide the
21        credit union with its financial statements on at least
22        a quarterly basis and certified public accountant
23        audited financial statements on an annual basis; and
24            (ii) the financial technology company and credit
25        union agree to terminate their contractual
26        relationship: (I) upon 90 days' written notice to the

 

 

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1        parties by the Secretary that the safety and soundness
2        of the credit union is threatened pursuant to the
3        Department's cease and desist and suspension authority
4        in Sections 8 and 61; (II) upon 30 days' written notice
5        to the parties if the credit union's net worth ratio
6        falls below the level that classifies it as
7        well-capitalized as defined by 12 CFR 702.102; and
8        (III) immediately upon the parties' receipt of written
9        notice from the Secretary when the Secretary
10        reasonably concludes, based upon specific facts set
11        forth in the notice to the parties, that the credit
12        union will suffer immediate, substantial, and
13        irreparable injury or loss if it remains a party to the
14        investment agreement.
15        (E) The termination of the investment agreement
16    between the financial technology company and credit union
17    shall in no way operate to relieve the financial
18    technology company from repaying the investment or other
19    obligation due and owing the credit union at the time of
20    termination.
21        (F) Any financial technology company in which a credit
22    union invests pursuant to this paragraph (15) that
23    directly or indirectly originates, purchases, facilitates,
24    brokers, or services loans to consumers in Illinois shall
25    not charge an interest rate that exceeds the applicable
26    maximum rate established by the Board of the National

 

 

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1    Credit Union Administration pursuant to 12 CFR
2    701.21(c)(7)(iii)-(iv). The maximum interest rate
3    described in this subparagraph that may be charged by a
4    financial technology company applies to all consumer loans
5    and consumer credit products.
6    (b) As used in this Section:
7    "Political subdivision" includes, but is not limited to,
8counties, townships, cities, villages, incorporated towns,
9school districts, educational service regions, special road
10districts, public water supply districts, fire protection
11districts, drainage districts, levee districts, sewer
12districts, housing authorities, park districts, and any
13agency, corporation, or instrumentality of a state or its
14political subdivisions, whether now or hereafter created and
15whether herein specifically mentioned or not.
16    "Financial institution" includes any bank, savings bank,
17savings and loan association, or credit union established
18under the laws of the United States, this State, or any other
19state.
20    "Financial technology company" includes any corporation,
21partnership, limited liability company, or other entity
22organized under the laws of Illinois, another state, or the
23United States of America:
24        (1) that the principal business of which is the
25    provision of financial products or financial services, or
26    both, that:

 

 

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1            (i) currently relate or may prospectively relate
2        to the daily operations of credit unions;
3            (ii) are of current or prospective benefit to the
4        members of credit unions; or
5            (iii) are of current or prospective benefit to
6        consumers eligible for membership in credit unions;
7        and
8        (2) that applies technological interventions,
9    including, without limitation, specialized software or
10    algorithm processes, products, or solutions, to improve
11    and automate the delivery and use of those financial
12    products or financial services.
13    (c) A credit union investing to fund an employee benefit
14plan obligation is not subject to the investment limitations
15of this Act and this Section and may purchase an investment
16that would otherwise be impermissible if the investment is
17directly related to the credit union's obligation under the
18employee benefit plan and the credit union holds the
19investment only for so long as it has an actual or potential
20obligation under the employee benefit plan.
21    (d) If a credit union acquires loans from another
22financial institution or financial-type institution pursuant
23to this Section, the credit union shall be authorized to
24provide loan servicing and collection services in connection
25with those loans.
26(Source: P.A. 101-567, eff. 8-23-19; 102-496, eff. 8-20-21.)
 

 

 

HB4462 Engrossed- 32 -LRB102 22844 BMS 33257 b

1    Section 99. Effective date. This Act takes effect upon
2becoming law, except that Section 16.5 of the Illinois Credit
3Union Act takes effect January 1, 2023.

 

 

HB4462 Engrossed- 33 -LRB102 22844 BMS 33257 b

1 INDEX
2 Statutes amended in order of appearance
3    205 ILCS 305/16.5 new
4    205 ILCS 305/19from Ch. 17, par. 4420
5    205 ILCS 305/20from Ch. 17, par. 4421
6    205 ILCS 305/29from Ch. 17, par. 4430
7    205 ILCS 305/34from Ch. 17, par. 4435
8    205 ILCS 305/39from Ch. 17, par. 4440
9    205 ILCS 305/42from Ch. 17, par. 4443
10    205 ILCS 305/59from Ch. 17, par. 4460