Full Text of HB1288 95th General Assembly
HB1288eng 95TH GENERAL ASSEMBLY
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| AN ACT concerning regulation.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Illinois Credit Union Act is amended by | 5 |
| changing Sections 8, 22, 30, 46, 51, and 70 as follows:
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| (205 ILCS 305/8) (from Ch. 17, par. 4409)
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| Sec. 8. Director's powers and duties. Credit unions are | 8 |
| regulated by the
Department. The Director, in executing the | 9 |
| powers and discharging the duties
vested by law in the | 10 |
| Department has the following powers and duties:
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| (1) To exercise the rights, powers and duties set forth | 12 |
| in this Act or
any related Act.
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| (2) To prescribe rules and regulations for the | 14 |
| administration of this
Act. The provisions of the Illinois | 15 |
| Administrative Procedure Act are hereby
expressly adopted | 16 |
| and incorporated herein
as though a part of this Act, and | 17 |
| shall apply to all administrative rules
and procedures of | 18 |
| the Department under this Act.
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| (3) To direct and supervise all the administrative and | 20 |
| technical
activities
of the Department including the | 21 |
| employment of a Credit Union Supervisor
who shall have | 22 |
| knowledge in the theory and practice of, or experience in, | 23 |
| the
operations or supervision of financial institutions, |
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| preferably credit unions,
and such other persons as are | 2 |
| necessary to carry out his functions. The Director shall | 3 |
| ensure that all examiners appointed or assigned to examine | 4 |
| the affairs of State-chartered credit unions possess the | 5 |
| necessary training and continuing education to effectively | 6 |
| execute their jobs.
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| (4) To issue cease and desist orders when in the | 8 |
| opinion of the Director,
a credit union is engaged or has | 9 |
| engaged, or the Director has reasonable
cause to believe | 10 |
| the credit union is about to engage, in an unsafe or | 11 |
| unsound
practice, or is violating or has violated or the | 12 |
| Director has reasonable
cause to believe is about to | 13 |
| violate a law, rule or regulation or any condition
imposed | 14 |
| in writing by the Department.
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| (5) To suspend from office and to prohibit from further | 16 |
| participation
in any manner in the conduct of the affairs | 17 |
| of his credit union any director,
officer or committee | 18 |
| member who has committed any violation of a law, rule,
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| regulation or of a cease and desist order or who has | 20 |
| engaged or participated
in any unsafe or unsound practice | 21 |
| in connection with the credit union or
who has committed or | 22 |
| engaged in any act, omission, or practice which
constitutes | 23 |
| a breach of his fiduciary duty as such director, officer or
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| committee member, when the Director has determined that | 25 |
| such action or actions
have resulted or will result in | 26 |
| substantial financial loss or other damage that
seriously |
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| prejudices the interests of the members.
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| (6) Except for the fees established in this Act, to | 3 |
| prescribe, by rule
and regulation, fees and penalties for | 4 |
| preparing, approving, and filing
reports and other | 5 |
| documents; furnishing
transcripts; holding hearings; | 6 |
| investigating applications
for permission to
organize, | 7 |
| merge, or convert; failure to maintain accurate books and | 8 |
| records
to enable the Department to conduct an examination; | 9 |
| and taking supervisory
actions.
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| (7) To destroy, in his discretion, any or all books and | 11 |
| records of any
credit union in his possession or under his | 12 |
| control after the expiration
of three years from the date | 13 |
| of cancellation of the charter of such credit
unions.
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| (8) To make investigations and to conduct research and | 15 |
| studies and to
publish some of the problems of persons in | 16 |
| obtaining credit at reasonable
rates of interest and of the | 17 |
| methods and benefits of cooperative saving
and lending for | 18 |
| such persons.
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| (9) To authorize, foster or establish experimental, | 20 |
| developmental,
demonstration or pilot projects by public | 21 |
| or private organizations including
credit unions which:
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| (a) promote more effective operation of credit | 23 |
| unions so as to provide
members an opportunity to use | 24 |
| and control their own money to improve their
economic | 25 |
| and social conditions; or
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| (b) are in the best interests of credit unions, |
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| their members and the
people of the State of Illinois.
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| (10) To cooperate in studies, training or other | 3 |
| administrative activities
with, but not limited to, the | 4 |
| NCUA, other state credit union regulatory
agencies and | 5 |
| industry trade associations in order to promote more | 6 |
| effective
and efficient supervision of Illinois chartered | 7 |
| credit unions.
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| (Source: P.A. 91-357, eff. 7-29-99; 92-608, eff. 7-1-02.)
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| (205 ILCS 305/22) (from Ch. 17, par. 4423)
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| Sec. 22. Vacancies. | 11 |
| (a) The Board of Directors shall, by appointment from
among | 12 |
| the credit union members, fill any vacancies occurring on the | 13 |
| Board
for the remainder of the Director's unexpired term or | 14 |
| until a successor
is elected and qualified following completion | 15 |
| of the term filled by the Board . The Board shall, by | 16 |
| appointment from among the
credit union members, fill vacancies | 17 |
| in the Membership Committee, Credit
Committee, or credit | 18 |
| manager if no Credit Committee has been appointed, and
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| Supervisory
Committees. | 20 |
| (b) An office may be declared vacant by the Board when a | 21 |
| Director or a Committee member dies, resigns from the Board or | 22 |
| Committee, is removed from the Board or Committee, is no longer | 23 |
| a member of the credit union, is the owner of less than one | 24 |
| share of the credit union, or fails to attend three consecutive | 25 |
| regular meetings of the Board without good cause.
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| (Source: P.A. 91-929, eff. 12-15-00.)
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| (205 ILCS 305/30) (from Ch. 17, par. 4431)
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| Sec. 30. Duties of directors. | 4 |
| (a) It shall be the duty of the directors to:
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| (1) Review actions on applications
for membership. A | 6 |
| record of the Membership Committee's approval or
denial of | 7 |
| membership or management's approval or denial of | 8 |
| membership if no
Membership Committee has been appointed | 9 |
| shall be available to the Board of
Directors for | 10 |
| inspection. A person denied membership by the Membership
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| Committee or credit union management may appeal the denial | 12 |
| to the Board;
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| (2) Provide adequate fidelity bond coverage for | 14 |
| officers,
employees, directors and committee members, and | 15 |
| for losses caused by
persons outside of the credit union, | 16 |
| subject to rules and regulations
promulgated by the | 17 |
| Director;
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| (3) Determine from time to time the interest rates, not | 19 |
| in excess of that
allowed under this Act, which shall be | 20 |
| charged on loans to members and to
authorize interest | 21 |
| refunds, if any, to members from income earned and received
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| in proportion to the interest paid by them on such classes | 23 |
| of loans and
under such conditions as the Board prescribes. | 24 |
| The Directors may establish
different interest rates to be | 25 |
| charged on different classes of loans;
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| (4) Within any limitations set forth in the credit | 2 |
| union's bylaws, fix
the maximum amount which may be loaned | 3 |
| with and without security to a member;
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| (5) Declare dividends on various classes of shares in | 5 |
| the manner and form
as provided in the bylaws;
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| (6) Limit the number of shares which may be owned by a | 7 |
| member;
such limitations to apply alike to all members;
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| (7) Have charge of the investment of funds, except that | 9 |
| the Board of
Directors may designate an Investment | 10 |
| Committee or any qualified individual
or entity to have | 11 |
| charge of making investments under policies established
by | 12 |
| the Board of Directors;
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| (8) Authorize the employment of or contracting with | 14 |
| such persons or
organizations as may be necessary to carry | 15 |
| on the
operations of the credit union, provided that prior | 16 |
| approval is received from
the
Department before delegating | 17 |
| substantially all managerial duties and
responsibilities | 18 |
| to a credit union organization, and fix
the compensation, | 19 |
| if any, of the officers and provide for compensation for
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| other employees within
policies established by the Board of | 21 |
| Directors;
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| (9) Authorize the conveyance of property;
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| (10) Borrow or lend money consistent with the | 24 |
| provisions of this Act;
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| (11) Designate a depository or depositories for the | 26 |
| funds of the credit
union and supervise the investment of |
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| funds;
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| (12) Suspend or remove, or both, any or all officers or | 3 |
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or all members of the Membership, Credit, or other | 4 |
| committees
whenever, in the judgment of the Board of | 5 |
| Directors, the best interests of the credit union will be | 6 |
| served thereby; provided that members of the Supervisory | 7 |
| Committee may not be suspended or removed except for | 8 |
| failure to perform their duties; and provided that removal | 9 |
| of any officer shall be without prejudice to the contract | 10 |
| rights, if any, of the person so removed;
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| (13) Appoint any special committees deemed necessary; | 12 |
| and
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| (14) Perform such other duties as the members may | 14 |
| direct, and perform
or authorize any action not | 15 |
| inconsistent with this Act and not specifically
reserved by | 16 |
| the bylaws to the members. | 17 |
| (b) The Board of Directors may delegate to the chief | 18 |
| management official, according to guidelines established by | 19 |
| the Board that may include the authority to further delegate | 20 |
| one or more duties, all of the following duties: | 21 |
| (1) determining the interest rates on loans; | 22 |
| (2) determining the dividend rates on share accounts;
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| and | 24 |
| (3) hiring employees other than the chief management | 25 |
| official and fixing their compensation.
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| (Source: P.A. 92-608, eff. 7-1-02; 93-916, eff. 8-12-04.)
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| (205 ILCS 305/46) (from Ch. 17, par. 4447)
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| Sec. 46. Loans and interest rate.
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| (1) A credit union may make loans
to its members for such | 4 |
| purpose and upon such security and terms, including
rates of | 5 |
| interest, as the Credit Committee, credit manager, or loan | 6 |
| officer
approves.
Notwithstanding the provisions of any other | 7 |
| law in connection with extensions
of credit, a credit union may | 8 |
| elect to
contract for and receive interest and fees and other | 9 |
| charges for extensions of
credit subject only to the provisions | 10 |
| of this Act and rules promulgated under
this Act, except that | 11 |
| extensions of credit secured by residential real estate
shall | 12 |
| be subject to the laws applicable thereto.
The rates of | 13 |
| interest to be charged on loans to members shall be
set by the | 14 |
| Board of Directors of each individual credit union in | 15 |
| accordance with Section 30 of this Act and such
rates may be | 16 |
| less than, but may not exceed, the maximum rate set forth in
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| this Section. A borrower may repay his loan prior to maturity, | 18 |
| in whole or
in part, without penalty. The credit contract may | 19 |
| provide for the payment
by the member and receipt by the credit | 20 |
| union of all costs and
disbursements, including reasonable | 21 |
| attorney's fees and collection agency
charges, incurred by the | 22 |
| credit union to collect or enforce the debt in the
event of a | 23 |
| delinquency by the member, or in the event of a breach of any
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| obligation of the member under the credit contract. A | 25 |
| contingency or
hourly arrangement established under an |
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| agreement entered into by a credit
union with an attorney or | 2 |
| collection agency to collect a loan of a member
in default | 3 |
| shall be presumed prima facie reasonable.
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| (2) Credit unions may make loans based upon the security of | 5 |
| any
interest or equity in real estate, subject to rules and | 6 |
| regulations
promulgated by the Director. In any contract or | 7 |
| loan which
is secured by a mortgage, deed of
trust, or | 8 |
| conveyance in the nature of a mortgage, on residential real
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| estate, the interest which is computed, calculated, charged, or | 10 |
| collected
pursuant to such contract or loan, or pursuant to any | 11 |
| regulation or rule
promulgated pursuant to this Act, may not be | 12 |
| computed, calculated, charged
or collected for any period of | 13 |
| time occurring after the date on which the
total indebtedness, | 14 |
| with the exception of late payment penalties, is paid
in full.
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| For purposes of this subsection (2) of this Section 46, a | 16 |
| prepayment
shall mean the payment of the total indebtedness, | 17 |
| with the exception of
late payment penalties if incurred or | 18 |
| charged, on any date before the date
specified in the contract | 19 |
| or loan agreement on which the total indebtedness
shall be paid | 20 |
| in full, or before the date on which all payments, if timely
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| made, shall have been made. In the event of a prepayment of the
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| indebtedness which is made on a date
after the date on which | 23 |
| interest on the indebtedness was last computed,
calculated, | 24 |
| charged, or collected but before the next date on which | 25 |
| interest
on the indebtedness was to be calculated, computed, | 26 |
| charged, or collected,
the lender may calculate, charge and |
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| collect interest on the indebtedness
for the period which | 2 |
| elapsed between the date on which the prepayment is
made and | 3 |
| the date on which interest on the indebtedness was last | 4 |
| computed,
calculated, charged or collected at a rate equal to | 5 |
| 1/360 of the annual
rate for each day which so elapsed, which | 6 |
| rate shall be applied to the
indebtedness outstanding as of the | 7 |
| date of prepayment. The lender shall
refund to the borrower any | 8 |
| interest charged or collected which exceeds that
which the | 9 |
| lender may charge or collect pursuant to the preceding | 10 |
| sentence.
The provisions of this amendatory Act of 1985 shall | 11 |
| apply only to contracts
or loans entered into on or after the | 12 |
| effective date of this amendatory
Act.
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| (3) Notwithstanding any other provision of this Act, a | 14 |
| credit union
authorized under this Act to make loans secured by | 15 |
| an interest or equity in
real estate may engage in making | 16 |
| "reverse mortgage" loans to persons for
the purpose of making | 17 |
| home improvements or repairs, paying insurance
premiums or | 18 |
| paying real estate taxes on the homestead properties
of such | 19 |
| persons. If made, such loans shall be made on such terms and
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| conditions as the credit union shall determine and as shall be | 21 |
| consistent
with the provisions of this Section and such rules | 22 |
| and regulations as the
Director shall promulgate hereunder. For | 23 |
| purposes of this Section, a
"reverse mortgage" loan shall be a | 24 |
| loan extended on the basis of existing
equity in homestead | 25 |
| property and secured by a mortgage on such property.
Such loans | 26 |
| shall be repaid upon the sale of the property or upon the death
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| of the owner or, if the property is in joint tenancy, upon the | 2 |
| death of the
last surviving joint tenant who had such an | 3 |
| interest in the property at the
time the loan was initiated, | 4 |
| provided, however, that the credit union and
its member may by | 5 |
| mutual agreement, establish other repayment terms. A
credit | 6 |
| union, in making a "reverse mortgage" loan, may add deferred
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| interest to principal or otherwise provide for the charging of | 8 |
| interest or
premiums on such deferred interest. "Homestead" | 9 |
| property, for purposes of
this Section, means the domicile and | 10 |
| contiguous real estate owned and
occupied by the mortgagor. The | 11 |
| Director shall promulgate rules and
regulations under this | 12 |
| Section; provided that such rules and regulations
need not be | 13 |
| promulgated jointly with any other administrative agency of | 14 |
| this State.
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| (4) Notwithstanding any other provisions of this Act, a | 16 |
| credit union
authorized under this Act to make loans secured by | 17 |
| an interest or equity
in real property may engage in making | 18 |
| revolving credit loans secured by
mortgages or deeds of trust | 19 |
| on such real property or by security
assignments of beneficial | 20 |
| interests in land trusts.
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| For purposes of this Section, "revolving credit" has the | 22 |
| meaning defined
in Section 4.1 of the Interest Act.
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| Any mortgage or deed of trust given to secure a revolving | 24 |
| credit loan may,
and when so expressed therein shall, secure | 25 |
| not only the existing indebtedness
but also such future | 26 |
| advances, whether such advances are obligatory or to
be made at |
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| the option of the lender, or otherwise, as are made within | 2 |
| twenty
years from the date thereof, to the same extent as if | 3 |
| such future advances
were made on the date of the execution of | 4 |
| such mortgage or deed of trust,
although there may be no | 5 |
| advance made at the time of execution of such mortgage
or other | 6 |
| instrument, and although there may be no indebtedness | 7 |
| outstanding
at the time any advance is made. The lien of such | 8 |
| mortgage or deed of trust,
as to third persons
without actual | 9 |
| notice thereof, shall be valid as to all such indebtedness
and | 10 |
| future advances form the time said mortgage or deed of trust is | 11 |
| filed
for record in the office of the Recorder of Deeds or the | 12 |
| Registrar of Titles
of the county where the real property | 13 |
| described therein is located. The
total amount of indebtedness | 14 |
| that may be so secured may increase or decrease
from time to | 15 |
| time, but the total unpaid balance so secured at any one time
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| shall not exceed a maximum principal amount which must be | 17 |
| specified in such
mortgage or deed of trust, plus interest | 18 |
| thereon, and any disbursements
made for the payment of taxes, | 19 |
| special assessments, or insurance on said
real property, with | 20 |
| interest on such disbursements.
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| Any such mortgage or deed of trust shall be valid and have | 22 |
| priority over
all subsequent liens and encumbrances, including | 23 |
| statutory liens, except
taxes and assessments levied on said | 24 |
| real property.
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| (5) Compliance with federal or Illinois preemptive laws or | 26 |
| regulations
governing loans made by a credit union chartered |
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| under this Act shall
constitute compliance with this Act.
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| (Source: P.A. 93-640, eff. 12-31-03.)
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| (205 ILCS 305/51) (from Ch. 17, par. 4452)
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| Sec. 51. Other Loan Programs.
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| (1) Subject to such rules and regulations
as the Director | 6 |
| may promulgate, a credit union may participate in loans
to | 7 |
| credit union members jointly with other credit unions, | 8 |
| corporations, or
financial institutions. An originating credit | 9 |
| union may originate
loans only to its own members. A | 10 |
| participating credit union that is
not the originating lender | 11 |
| may participate in loans made to its own members or
to members | 12 |
| of another participating credit union.
"Originating lender" | 13 |
| means the participating credit union with which the member
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| contracts. A master participation agreement must be properly | 15 |
| executed, and the
agreement must include provisions for | 16 |
| identifying, either through documents
incorporated by | 17 |
| reference or directly in the agreement, the participation loan
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| or loans prior to their sale.
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| (2) Any credit union with assets of $500,000 or more may | 20 |
| loan to its members
under the State Scholarships Law or other | 21 |
| scholarship programs which are
subject to a federal or state | 22 |
| law providing 100% repayment guarantee.
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| (3) A credit union may purchase the conditional sales
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| contracts, notes
and similar instruments which evidence an | 25 |
| indebtedness of its members. In the management of its assets, |
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| liabilities, and liquidity, a credit union may purchase the | 2 |
| conditional sales contracts, notes, and other similar | 3 |
| instruments that evidence the consumer indebtedness of the | 4 |
| members of another credit union. "Consumer indebtedness" means | 5 |
| indebtedness incurred for personal, family, or household | 6 |
| purposes.
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| (4) With approval of the Board of Directors, a credit union | 8 |
| may make loans,
either on its own or jointly with other credit | 9 |
| unions, corporations or
financial
institutions, to credit | 10 |
| union organizations; provided, that the aggregate
amount of all | 11 |
| such loans outstanding shall not at any time exceed the greater
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| of 3% of the paid-in and unimpaired capital and surplus of the | 13 |
| credit
union or the amount authorized for federal credit | 14 |
| unions.
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| (Source: P.A. 92-293, eff. 8-9-01; 93-640, eff. 12-31-03.)
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| (205 ILCS 305/70) (from Ch. 17, par. 4471)
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| Sec. 70. Use of name, sentence. | 18 |
| (a) No individual, firm, association,
or body politic and | 19 |
| corporate, including, without limitation, any corporation, | 20 |
| limited liability company, general partnership, limited | 21 |
| partnership, or joint venture that is not an authorized user | 22 |
| may use any
name or title which contains the words
"credit | 23 |
| union" or any abbreviation thereof, and such use is a Class A
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| Misdemeanor. For purposes of this Section, "authorized user" | 25 |
| means a corporation organized under this Act, the credit union |
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| act of another state, or the Federal Credit Union Act, any | 2 |
| association of such a corporation, and subsidiaries and | 3 |
| affiliates of such an association.
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| (b) If the Director of the Division of Financial | 5 |
| Institutions of the Department of Financial and Professional | 6 |
| Regulation finds that an individual or entity that is not an | 7 |
| authorized user has transacted or intends to transact business | 8 |
| in this State in a manner that has a substantial likelihood of | 9 |
| misleading the public by: (i) implying that the business is a | 10 |
| credit union or (ii) using or intending to use the words | 11 |
| "credit union", or any abbreviation thereof, in connection with | 12 |
| its business, then the Director of the Division of Financial | 13 |
| Institutions may direct the individual or entity to cease and | 14 |
| desist from transacting its business or using the words "credit | 15 |
| union", or any abbreviation thereof. If the individual or | 16 |
| entity persists in transacting its business or using the words | 17 |
| "credit union", or any abbreviation thereof, then the Director | 18 |
| of the Division of Financial Institutions may impose a civil | 19 |
| penalty of up to $10,000 for each violation. Each day that the | 20 |
| individual or entity continues transacting business or using | 21 |
| the words "credit union", or any abbreviation thereof, in | 22 |
| connection with its business shall constitute a separate | 23 |
| violation of these provisions.
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| (c) Except as otherwise expressly permitted by law or with | 25 |
| the written consent of the credit union, no person or group of | 26 |
| persons other than an authorized user may use the name of or a |
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| name similar to the name of an existing credit union when | 2 |
| marketing or soliciting business from members or prospective | 3 |
| members if the name or similar name is used in a manner that | 4 |
| would cause a reasonable person to believe that the marketing | 5 |
| material or solicitation originated from or is endorsed by the | 6 |
| existing credit union or that the existing credit union is in | 7 |
| any other way responsible for the marketing material or | 8 |
| solicitation. The following remedies shall apply: | 9 |
| (1) Any person who violates subsection (c) of this | 10 |
| Section commits a business offense and shall be fined in an | 11 |
| amount not to exceed $5,000. | 12 |
| (2) In addition to any other available remedies, any | 13 |
| existing credit union may report an alleged violation of | 14 |
| any provision of this Section to the Director of the | 15 |
| Division of Financial Institutions. If the Director finds | 16 |
| that any person or group of persons is in violation of any | 17 |
| provision of this Section, then the Director may direct | 18 |
| that person or group of persons to cease and desist from | 19 |
| that violation. If the Director issues a cease and desist | 20 |
| order against any person or group of persons for violation | 21 |
| of subsection (c), then the order must require that person | 22 |
| or group of persons to cease and desist from using the | 23 |
| offending marketing material or solicitation in Illinois. | 24 |
| (3) If a person or group of persons against whom the | 25 |
| Director issued the cease and desist order persists in the | 26 |
| violation, then the Director may impose a civil penalty of |
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HB1288 Engrossed |
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LRB095 08529 MJR 28710 b |
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| 1 |
| up to $10,000 for each violation. Each day that a person or | 2 |
| group of persons is in violation of this Section | 3 |
| constitutes a separate violation of this Section and each | 4 |
| instance in which marketing material or a solicitation is | 5 |
| sent in violation of this subsection (c) constitutes a | 6 |
| separate violation of this Section. | 7 |
| (d) The Director of the Division of Financial Institutions | 8 |
| may adopt rules to administer the provisions of this Section.
| 9 |
| (Source: P.A. 94-150, eff. 7-8-05.)
| 10 |
| Section 99. Effective date. This Act takes effect upon | 11 |
| becoming law.
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