HB2477 99TH GENERAL ASSEMBLY

LRB099 06130 MGM 26186 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB2477

Introduced 2/18/2015, by Rep. Lou Lang

SYNOPSIS AS INTRODUCED:

205 ILCS 305/7	from Ch. 17, par. 4408
205 ILCS 305/46	from Ch. 17, par. 4447
205 ILCS 305/57.1

Amends the Illinois Credit Union Act. Provides that the failure of an out-of-state credit union to register with the Secretary of Financial and Professional Regulation shall not impair the collectability of a loan made to a resident of this State. Provides that, for a renewal, refinancing, or restructuring of an existing loan at the credit union that is secured by an interest or equity in real estate, a new appraisal of the collateral shall not be required when (i) no new moneys are advanced other than funds necessary to cover reasonable closing costs, or (ii) there has been no obvious or material change in market conditions or physical aspects of the real estate that threatens the adequacy of the credit union's real estate collateral protection after the transaction, even with the advancement of new moneys. Provides that a credit union may act as a representative of and enter into an agreement with credit unions or other organizations for the purposes of providing implementation and administrative support services related to the use of debit cards, payroll debit cards, and other prepaid debit cards and credit cards. Effective immediately.

A BILL FOR

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 7, 46, and 57.1 as follows:

(205 ILCS 305/7) (from Ch. 17, par. 4408)

Sec. 7. Reciprocity; out-of-state Reciprocity - out of state credit unions.

(1) A credit union organized and duly chartered as a credit union in another state shall be permitted to conduct business as a credit union in this State state if and so long as a credit union chartered under the laws of this State state is permitted to do business in such other state, provided that:

(a) The credit union shall register with the office prior to operating in this State, on a form specified by the Secretary.

(b) The credit union may be required to pay a registration fee in accordance with rules promulgated by the Secretary and the Director.

(c) The credit union shall comply with rules promulgated by the Secretary concerning the operation of out-of-state out of state credit unions in this State.

(d) The credit union shall not conduct business in Illinois on terms that are less restrictive than the standards applicable to its operation in its home chartering state. In every instance with respect to its activities and operations in Illinois, the credit union shall comply with applicable Illinois law.

(e) Permission to operate in the State may be revoked by the Secretary or the Director if the credit union engages in any activity in the State that would constitute (i) a violation of this Act or other applicable law, (ii) a violation of any rule adopted in accordance with this Act or other applicable law, (iii) a violation of any order of the Secretary or Director issued under his or her authority under this Act, or (iv) an unsafe or unsound practice in the discretion of the Secretary or Director.

(1.5) The failure of a credit union chartered in another state to register with the Secretary shall not impair the collectability of a loan made to a resident of this State.

(2) It is intended that the legal existence of credit unions chartered under this Act be recognized beyond the limits of this State and that, subject to any reasonable registration requirements, any credit union transacting business outside of this State be granted the protection of full faith and credit under Section 1 of Article IV of the Constitution of the United States.

(Source: P.A. 97-133, eff. 1-1-12.)

(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 Secretary. 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 Secretary 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.

(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.

(4-5) For purposes of this Section, "real estate" and "real property" include a manufactured home as defined in subdivision (53) of Section 9-102 of the Uniform Commercial Code which is real property as defined in Section 5-35 of the Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act.

(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.

(7) For a renewal, refinancing, or restructuring of an existing loan at the credit union that is secured by an interest or equity in real estate, a new appraisal of the collateral shall not be required when (i) the transaction involves an existing extension of credit at the credit union, no new moneys are advanced other than funds necessary to cover reasonable closing costs, or (ii) and there has been no obvious or material change in market conditions or physical aspects of the real estate that threatens the adequacy of the credit union's real estate collateral protection after the transaction, even with the advancement of new moneys.

(Source: P.A. 97-133, eff. 1-1-12; 98-749, eff. 7-16-14; 98-784, eff. 7-24-14; revised 10-2-14.)

(205 ILCS 305/57.1)

Sec. 57.1. Services to other credit unions.

(a) A credit union may act as a representative of and enter into an agreement with credit unions or other organizations for the purposes purpose of:

(1) sharing, utilizing, renting, leasing, purchasing, selling, and joint ownership of fixed assets or engaging in activities and services that relate to the daily operations of credit unions; and

(2) providing correspondent services to other credit unions that the service provider credit union is authorized to perform for its own members or as part of its operations, including, but not limited to, loan processing, loan servicing, member check cashing services, disbursing share withdrawals and loan proceeds, cashing and selling money orders, ACH and wire transfer services, implementation and administrative support services related to the use of debit cards, payroll debit cards, and other prepaid debit cards and credit cards, coin and currency services, performing internal audits, and automated teller machine deposit services.

(Source: P.A. 98-784, eff. 7-24-14; revised 11-26-14.)

Section 99. Effective date. This Act takes effect upon becoming law.