Illinois General Assembly - Full Text of HB5342
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Full Text of HB5342  98th General Assembly




State of Illinois
2013 and 2014


Introduced , by Rep. Lou Lang


205 ILCS 305/1.1  from Ch. 17, par. 4402
205 ILCS 305/9  from Ch. 17, par. 4410
205 ILCS 305/30  from Ch. 17, par. 4431
205 ILCS 305/34  from Ch. 17, par. 4435
205 ILCS 305/39  from Ch. 17, par. 4440
205 ILCS 305/46  from Ch. 17, par. 4447
205 ILCS 305/57.1 new

    Amends the Illinois Credit Union Act. Defines "charitable donation account" and provides that a credit union may establish one or more charitable donation accounts that must comply with the requirements of the Act. Further provides that the investments and purchases to fund a charitable donation account are not subject to the investment limitations of the Act and that the aggregate book value of the investments in all charitable donation accounts shall not exceed 5% of the credit union's net worth. Adds provisions establishing the procedural requirements of the Department of Financial and Professional Regulation's examination process and prescribes the requirements of the Department's examination reports. Provides that each member of the board of directors of a credit union shall have a working familiarity with basic finance and accounting practices consistent with the size and complexity of the credit union they serve. Further provides that members of the supervisory committee of a credit union shall receive training related to their duties under the Act and establishes the acceptable forms of such training. Provides that, for a renewal, refinancing, or restructuring of an existing loan that is secured by an interest in real estate, a new appraisal of the collateral shall not be required under certain circumstances. Additionally provides that a credit union may act as a representative of and enter into an agreement with other credit unions or organizations for certain purposes. Generally effective immediately, but some provisions take effect on January 1, 2015.

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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 1.1, 9, 30, 34, 39, and 46 and by adding
6Section 57.1 as follows:
7    (205 ILCS 305/1.1)  (from Ch. 17, par. 4402)
8    Sec. 1.1. Definitions.
9    Credit Union - The term "credit union" means a cooperative,
10non-profit association, incorporated under this Act, under the
11laws of the United States of America or under the laws of
12another state, for the purposes of encouraging thrift among its
13members, creating a source of credit at a reasonable rate of
14interest, and providing an opportunity for its members to use
15and control their own money in order to improve their economic
16and social conditions. The membership of a credit union shall
17consist of a group or groups each having a common bond as set
18forth in this Act.
19    Common Bond - The term "common bond" refers to groups of
20people who meet one of the following qualifications:
21        (1) Persons belonging to a specific association, group
22    or organization, such as a church, labor union, club or
23    society and members of their immediate families which shall



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1    include any relative by blood or marriage or foster and
2    adopted children.
3        (2) Persons who reside in a reasonably compact and well
4    defined neighborhood or community, and members of their
5    immediate families which shall include any relative by
6    blood or marriage or foster and adopted children.
7        (3) Persons who have a common employer or who are
8    members of an organized labor union or an organized
9    occupational or professional group within a defined
10    geographical area, and members of their immediate families
11    which shall include any relative by blood or marriage or
12    foster and adopted children.
13    Shares - The term "shares" or "share accounts" means any
14form of shares issued by a credit union and established by a
15member in accordance with standards specified by a credit
16union, including but not limited to common shares, share draft
17accounts, classes of shares, share certificates, special
18purpose share accounts, shares issued in trust, custodial
19accounts, and individual retirement accounts or other plans
20established pursuant to Section 401(d) or (f) or Section 408(a)
21of the Internal Revenue Code, as now or hereafter amended, or
22similar provisions of any tax laws of the United States that
23may hereafter exist.
24    Credit Union Organization - The term "credit union
25organization" means any organization established to serve the
26needs of credit unions, the business of which relates to the



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1daily operations of credit unions.
2    Department - The term "Department" means the Illinois
3Department of Financial and Professional Regulation.
4    Secretary - The term "Secretary" means the Secretary of
5Financial and Professional Regulation or a person authorized by
6the Secretary or this Act to act in the Secretary's stead.
7    Division of Financial Institutions - The term "Division of
8Financial Institutions" means the Division of Financial
9Institutions of the Department of Financial and Professional
11    Director - The term "Director of Financial Institutions"
12means the Director of the Division of Financial Institutions of
13the Department of Financial and Professional Regulation.
14    Office - The term "office" means the Division of Financial
15Institutions of the Department of Financial and Professional
17    NCUA - The term "NCUA" means the National Credit Union
18Administration, an agency of the United States Government
19charged with the supervision of credit unions chartered under
20the laws of the United States of America.
21    Central Credit Union - The term "central credit union"
22means a credit union incorporated primarily to receive shares
23from and make loans to credit unions and directors, officers,
24committee members and employees of credit unions. A central
25credit union may also accept as members persons who were
26members of credit unions which were liquidated and persons from



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1occupational groups not otherwise served by another credit
3    Corporate Credit Union - The term "corporate credit union"
4means a credit union which is a cooperative, non-profit
5association, the membership of which is limited primarily to
6other credit unions.
7    Insolvent - "Insolvent" means the condition that results
8when the total of all liabilities and shares exceeds net assets
9of the credit union.
10    Danger of insolvency - For purposes of Section 61, a credit
11union is in "danger of insolvency" if its net worth to asset
12ratio falls below 2%. In calculating the danger of insolvency
13ratio, secondary capital shall be excluded. For purposes of
14Section 61, a credit union is also in "danger of insolvency" if
15the Department is unable to ascertain, upon examination, the
16true financial condition of the credit union.
17    Net Worth - "Net worth" means the retained earnings balance
18of the credit union, as determined under generally accepted
19accounting principles, and forms of secondary capital approved
20by the Secretary and the Director pursuant to rulemaking.
21    Charitable Donation Account – The term "charitable
22donation account" means an account owned by a credit union that
23is held in a segregated custodial account or special purpose
24entity and specifically identified as a charitable donation
25account whereby, no less frequently than every 5 years and upon
26termination of the account, at least 51% of the total return on



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1assets in the account is distributed to one or more charitable
2organizations or non-profit entities.
3(Source: P.A. 97-133, eff. 1-1-12.)
4    (205 ILCS 305/9)  (from Ch. 17, par. 4410)
5    Sec. 9. Reports and examinations.
6    (1) Credit unions shall report to the Department on forms
7supplied by the Department, in accordance with a schedule
8published by the Department. A recapitulation of the annual
9reports shall be compiled and published annually by the
10Department, for the use of the General Assembly, credit unions,
11various educational institutions and other interested parties.
12A credit union which fails to file any report when due shall
13pay to the Department a late filing fee for each day the report
14is overdue as prescribed by rule. The Secretary may extend the
15time for filing a report.
16    (2) The Secretary may require special examinations of and
17special financial reports from a credit union or a credit union
18organization in which a credit union loans, invests, or
19delegates substantially all managerial duties and
20responsibilities when he determines that such examinations and
21reports are necessary to enable the Department to determine the
22safety of a credit union's operation or its solvency. The cost
23to the Department of the aforesaid special examinations shall
24be borne by the credit union being examined as prescribed by



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1    (3) All credit unions incorporated under this Act shall be
2examined at least biennially by the Department or, at the
3discretion of the Secretary, by a public accountant registered
4by the Department of Financial and Professional Regulation. The
5costs of an examination shall be paid by the credit union. The
6scope of all examinations by a public accountant shall be at
7least equal to the examinations made by the Department. The
8examiners shall have full access to, and may compel the
9production of, all the books, papers, securities and accounts
10of any credit union. A special examination shall be made by the
11Department or by a public accountant approved by the Department
12upon written request of 5 or more members, who guarantee the
13expense of the same. Any credit union refusing to submit to an
14examination when ordered by the Department shall be reported to
15the Attorney General, who shall institute proceedings to have
16its charter revoked. If the Secretary determines that the
17examination of a credit union is to be conducted by a public
18accountant registered by the Department of Financial and
19Professional Regulation and the examination is done in
20conjunction with the credit union's external independent audit
21of financial statements, the requirements of this Section and
22subsection (3) of Section 34 shall be deemed met.
23    (4)(a) In conducting its examinations of credit unions, it
24shall be the objective of the Department to work together with
25the credit unions to proactively identify problems and
26reasonable solutions and the Department shall adhere to the



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1following standards of performance:
2        (i) Credit union management shall be involved in the
3    development of any corrective action plans.
4        (ii) As examiners identify concerns, credit union
5    management should articulate solutions.
6        (iii) The goal shall be to utilize management's
7    preferred strategies to address and resolve any issues
8    identified in the examination, if the preferred strategies
9    represent a reasonable chance of success.
10        (iv) Reasonable solutions provided by the credit union
11    shall become the corrective action plan included in any
12    document of resolution issued to the credit union.
13    (b) In preparing its examination report, the Department
14shall convey the purpose, scope, identified problems,
15corrective actions, and conclusions reached during the
16examination process. Examiners shall develop a professional
17and concise examination report that communicates all problems
18and risks in an understandable format for the credit union. The
19examination report shall:
20        (i) properly identify all material examination
21    concerns related to the risk areas of credit, interest
22    rate, liquidity, transaction, compliance, strategic, and
23    reputation;
24        (ii) relate the applicable risk areas to the
25    examination ratings;
26        (iii) support all conclusions reached regarding



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1    problems identified;
2        (iv) outline proper corrective actions to ensure
3    problems are resolved in a timely manner, drawing upon the
4    preferred strategies and reasonable solutions provided by
5    the credit union; and
6        (v) establish a documented administrative record to
7    support future administrative action and problem
8    resolution, if necessary.
9    (c) Examiners shall set aside time throughout the
10examination to discuss in a professional and respectful manner
11with management and the board of the credit union any problems
12identified during the examination. Examiners shall provide
13management and the board of the credit union with a draft copy
14of the examination report and any examiner's findings and
15document of resolution, with sufficient time to review the
16draft report before the joint conference or exit meeting with
17the credit union's board of directors. Examiners shall not
18present new information to management or the board of directors
19at the joint conference, at the exit interview, or in the final
20examination report.
21    (d) The Secretary shall adopt rules to administer and carry
22out the standards set forth in this subsection (4), including
23rules that: (i) define the scope of the examination process;
24(ii) clarify examination items to be resolved; and (iii) ensure
25consistency and due process in the examination process. The
26Secretary may also establish guidelines to implement the



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1standards and objectives set forth in this subsection (4). The
2rules, formal guidance, interpretative letters, or opinions
3furnished to credit unions by the Secretary may be relied upon
4by the credit unions.
5    (e) Prior to commencement of the examination and during
6each stage of the examination, the Department shall make a
7reasonable effort to provide prior and reasonable notification
8to management and the board of the credit union of the
9commencement date, the joint conference and the exit interview,
10and the data, information, and documentation deemed necessary
11by the Department to conduct the examination. The Department
12shall submit its final examination report to the credit union
13in a timely manner after the exit meeting. In addition to the
14time period referenced in subsection (5) of this Section for
15replying to review comment letters, the credit union shall be
16afforded a reasonable period in which to implement corrective
17action in response to a finding, document of resolution, or
18other administrative request.
19    (5) (4) A copy of the completed report of examination and a
20review comment letter, if any, citing exceptions revealed
21during the examination, shall be submitted to the credit union
22by the Department. A detailed report stating the corrective
23actions taken by the board of directors on each exception set
24forth in the review comment letter shall be filed with the
25Department within 40 days after the date of the review comment
26letter, or as otherwise directed by the Department. Any credit



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1union through its officers, directors, committee members or
2employees, which willfully provides fraudulent or misleading
3information regarding the corrective actions taken on
4exceptions appearing in a review comment letter may have its
5operations restricted to the collection of principal and
6interest on loans outstanding and the payment of normal
7expenses and salaries until all exceptions are corrected and
8accepted by the Department.
9(Source: P.A. 97-133, eff. 1-1-12.)
10    (205 ILCS 305/30)  (from Ch. 17, par. 4431)
11    Sec. 30. Duties of directors.
12    (a) It shall be the duty of the directors to:
13        (1) Review actions on applications for membership. A
14    record of the membership committee's approval or denial of
15    membership or management's approval or denial of
16    membership if no membership committee has been appointed
17    shall be available to the board of directors for
18    inspection. A person denied membership by the membership
19    committee or credit union management may appeal the denial
20    to the board;
21        (2) Provide adequate fidelity bond coverage for
22    officers, employees, directors and committee members, and
23    for losses caused by persons outside of the credit union,
24    subject to rules and regulations promulgated by the
25    Secretary;



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1        (3) Determine from time to time the interest rates, not
2    in excess of that allowed under this Act, which shall be
3    charged on loans to members and to authorize interest
4    refunds, if any, to members from income earned and received
5    in proportion to the interest paid by them on such classes
6    of loans and under such conditions as the board prescribes.
7    The directors may establish different interest rates to be
8    charged on different classes of loans;
9        (4) Within any limitations set forth in the credit
10    union's bylaws, fix the maximum amount which may be loaned
11    with and without security to a member;
12        (5) Declare dividends on various classes of shares in
13    the manner and form as provided in the bylaws;
14        (6) Limit the number of shares which may be owned by a
15    member; such limitations to apply alike to all members;
16        (7) Have charge of the investment of funds, except that
17    the board of directors may designate an investment
18    committee or any qualified individual or entity to have
19    charge of making investments under policies established by
20    the board of directors;
21        (8) Authorize the employment of or contracting with
22    such persons or organizations as may be necessary to carry
23    on the operations of the credit union, provided that prior
24    approval is received from the Department before delegating
25    substantially all managerial duties and responsibilities
26    to a credit union organization, and fix the compensation,



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1    if any, of the officers and provide for compensation for
2    other employees within policies established by the board of
3    directors;
4        (9) Authorize the conveyance of property;
5        (10) Borrow or lend money consistent with the
6    provisions of this Act;
7        (11) Designate a depository or depositories for the
8    funds of the credit union and supervise the investment of
9    funds;
10        (12) Suspend or remove, or both, any or all officers or
11    any or all members of the membership, credit, or other
12    committees whenever, in the judgment of the board of
13    directors, the best interests of the credit union will be
14    served thereby; provided that members of the supervisory
15    committee may not be suspended or removed except for
16    failure to perform their duties; and provided that removal
17    of any officer shall be without prejudice to the contract
18    rights, if any, of the person so removed;
19        (13) Appoint any special committees deemed necessary;
20    and
21        (14) Perform such other duties as the members may
22    direct, and perform or authorize any action not
23    inconsistent with this Act and not specifically reserved by
24    the bylaws to the members.
25    (b) The board of directors may delegate to the chief
26management official, according to guidelines established by



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1the board that may include the authority to further delegate
2one or more duties, all of the following duties:
3        (1) determining the interest rates on loans;
4        (2) determining the dividend rates on share accounts;
5    and
6        (3) hiring employees other than the chief management
7    official and fixing their compensation.
8    (c) Each director shall have a working familiarity with
9basic finance and accounting practices consistent with the size
10and complexity of the credit union operation they serve,
11including the ability to read and understand the credit union's
12balance sheet and income and expense statements and the ability
13to ask, when appropriate, substantive questions of management
14and auditors. For the purposes of this subsection (c),
15substantive questions include queries concerning financial
16services and products offered to the membership; how those
17activities generate revenue for the credit union; the credit,
18liquidity, interest rate, compliance, strategic, transaction,
19and reputation risks associated with those activities; and the
20internal control structures maintained by the credit union that
21limit and manage those risks.
22    A director who was elected or appointed on or after January
231, 2015 and who comes to the position without the requisite
24financial skills shall have until 6 months after the date of
25election or appointment to acquire the enumerated skills.
26    An incumbent director who was elected or appointed before



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1January 1, 2015 and does not possess the requisite financial
2skills shall have until July 1, 2015 to acquire the enumerated
4    An incumbent director or a director who is elected or
5appointed on or after January 1, 2015 who already understands
6his or her credit union's financial statements shall not be
7required to do anything further to satisfy the financial skills
8requirement set forth in subsection (c).
9    It is the intent of the Department that all credit union
10directors possess a basic understanding of their credit union's
11financial condition. It is not the intent of the Department to
12subject credit union directors to examiner scrutiny of their
13financial skills. Rather, the Department shall evaluate
14whether the credit union has in place a policy to make
15available to their directors appropriate training to enhance
16their financial knowledge of the credit union. Directors may
17receive the training through internal credit union training,
18external training offered by the credit union's retained
19auditors, trade associations, vendors, regulatory agencies, or
20any other sources or on-the-job experience, or a combination of
21those activities. The training may be received through any
22medium, including, but not limited to, conferences, workshops,
23audit closing meetings, seminars, teleconferences, webinars,
24and other internet based delivery channels.
25(Source: P.A. 97-133, eff. 1-1-12.)



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1    (205 ILCS 305/34)  (from Ch. 17, par. 4435)
2    Sec. 34. Duties of supervisory committee.
3    (1) The supervisory committee shall make or cause to be
4made an annual internal audit of the books and affairs of the
5credit union to determine that the credit union's accounting
6records and reports are prepared promptly and accurately
7reflect operations and results, that internal controls are
8established and effectively maintained to safeguard the assets
9of the credit union, and that the policies, procedures and
10practices established by the board of directors and management
11of the credit union are being properly administered. The
12supervisory committee shall submit a report of that audit to
13the board of directors and a summary of that report to the
14members at the next annual meeting of the credit union. It
15shall make or cause to be made such supplementary audits as it
16deems necessary or as are required by the Secretary or by the
17board of directors, and submit reports of these supplementary
18audits to the Secretary or board of directors as applicable. If
19the supervisory committee has not engaged a public accountant
20registered by the Department of Financial and Professional
21Regulation to make the internal audit, the supervisory
22committee or other officials of the credit union shall not
23indicate or in any manner imply that such audit has been
24performed by a public accountant or that the audit represents
25the independent opinion of a public accountant. The supervisory
26committee must retain its tapes and working papers of each



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1internal audit for inspection by the Department. The report of
2this audit must be made on a form approved by the Secretary. A
3copy of the report must be promptly mailed to the Secretary.
4    (2) The supervisory committee shall make or cause to be
5made at least once each year a reasonable percentage
6verification of members' share and loan accounts, consistent
7with rules promulgated by the Secretary.
8    (3) The supervisory committee of a credit union with assets
9of $5,000,000 or more shall engage a public accountant
10registered by the Department of Financial and Professional
11Regulation to perform an annual external independent audit of
12the credit union's financial statements in accordance with
13generally accepted auditing standards. The supervisory
14committee of a credit union with assets of $3,000,000 or more,
15but less than $5,000,000, shall engage a public accountant
16registered by the Department of Financial and Professional
17Regulation to perform an external independent audit of the
18credit union's financial statements in accordance with
19generally accepted auditing standards at least once every 3
20years. A copy of an external independent audit shall be
21completed and mailed to the Secretary no later than 90 days
22after December 31 of each year; provided that a credit union or
23group of credit unions may obtain an extension of the due date
24upon application to and receipt of written approval from the
25Secretary. If the annual internal audit of such a credit union
26is conducted by a public accountant registered by the



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1Department of Financial and Professional Regulation and the
2annual internal audit is done in conjunction with the credit
3union's annual external audit, the requirements of subsection
4(1) of this Section shall be deemed met.
5    (4) In determining the appropriate balance in the allowance
6for loan losses account, a credit union may determine its
7historical loss rate using a defined period of time of less
8than 5 years, provided that:
9        (A) the methodology used to determine the defined
10    period of time is formally documented in the credit union's
11    policies and procedures and is appropriate to the credit
12    union's size, business strategy, and loan portfolio
13    characteristics and the economic environment of the areas
14    and employers served by the credit union;
15        (B) supporting documentation is maintained for the
16    technique used to develop the credit union loss rates,
17    including the period of time used to accumulate historical
18    loss data and the factors considered in establishing the
19    time frames; and
20        (C) the external auditor conducting the credit union's
21    financial statement audit has analyzed the methodology
22    employed by the credit union and concludes that the
23    financial statements, including the allowance for loan
24    losses, are fairly stated in all material respects in
25    accordance with U.S. Generally Accepted Accounting
26    Principles, as promulgated by the Financial Accounting



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1    Standards Board.
2    (5) A majority of the members of the supervisory committee
3shall constitute a quorum.
4    (6) On an annual basis commencing January 1, 2015, the
5members of the supervisory committee shall receive training
6related to their statutory duties. Supervisory committee
7members may receive the training through internal credit union
8training, external training offered by the credit union's
9retained auditors, trade associations, vendors, regulatory
10agencies, or any other sources or on-the-job experience, or a
11combination of those activities. The training may be received
12through any medium, including, but not limited to, conferences,
13workshops, audit closing meetings, seminars, teleconferences,
14webinars, and other Internet-based delivery channels.
15(Source: P.A. 96-141, eff. 8-7-09; 96-963, eff. 7-2-10; 97-133,
16eff. 1-1-12.)
17    (205 ILCS 305/39)  (from Ch. 17, par. 4440)
18    Sec. 39. Special purpose share accounts; charitable
19donation accounts.
20    (1) If provided for in and consistent with the bylaws,
21Christmas clubs, vacation clubs and other special purpose share
22accounts may be established and offered under conditions and
23restrictions established by the board of directors.
24    (2) Pursuant to a policy adopted by the board of directors,
25which may be amended from time to time, a credit union may



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1establish one or more charitable donation accounts. The
2investments and purchases to fund a charitable donation account
3are not subject to the investment limitations of this Act,
4provided the charitable donation account is structured in
5accordance with this Act. At their time of purchase, the book
6value of the investments in all charitable donation accounts,
7in the aggregate, shall not exceed 5% of the credit union's net
9        (a) If a credit union chooses to establish a charitable
10    donation account using a trust vehicle, the trustee must be
11    an entity regulated by the Office of the Comptroller of the
12    Currency, the U.S. Securities and Exchange Commission or
13    another federal regulatory agency. A regulated trustee or
14    other person who is authorized to make investment decisions
15    for a charitable donation account, other than the credit
16    union itself, shall be registered with the U.S. Securities
17    and Exchange Commission as an investment advisor.
18        (b) If the credit union utilizes a third party to
19    establish or administer a charitable donation account, the
20    parties, typically the charitable donation account trustee
21    or other manager, shall document the terms and conditions
22    controlling the account in a written operating agreement,
23    trust agreement, or similar instrument. The terms of the
24    agreement shall be consistent with the requirements and
25    conditions set forth in this Section. The agreement, if
26    applicable, and policies must document the investment



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1    strategies of the charitable donation account trustee or
2    other manager in administering the charitable donation
3    account and provide for the accounting of all aspects of
4    the account, including its distributions and liquidation,
5    in accordance with generally accepted accounting
6    principles.
7        (c) A credit union's charitable donation account
8    agreement, if applicable, and policies shall provide that
9    the charitable organization or non-profit entity
10    recipients of any charitable donation account funds must be
11    identified in the policy and be exempt from taxation under
12    Section 501(c)(3) of the Internal Revenue Code.
13        (d) Upon termination of a charitable donation account,
14    the credit union may receive a distribution of the
15    remaining assets in cash, or a distribution in kind of the
16    remaining assets, but only if those assets are permissible
17    investments for credit unions pursuant to this Act.
18(Source: P.A. 97-133, eff. 1-1-12.)
19    (205 ILCS 305/46)  (from Ch. 17, par. 4447)
20    Sec. 46. Loans and interest rate.
21    (1) A credit union may make loans to its members for such
22purpose and upon such security and terms, including rates of
23interest, as the credit committee, credit manager, or loan
24officer approves. Notwithstanding the provisions of any other
25law in connection with extensions of credit, a credit union may



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1elect to contract for and receive interest and fees and other
2charges for extensions of credit subject only to the provisions
3of this Act and rules promulgated under this Act, except that
4extensions of credit secured by residential real estate shall
5be subject to the laws applicable thereto. The rates of
6interest to be charged on loans to members shall be set by the
7board of directors of each individual credit union in
8accordance with Section 30 of this Act and such rates may be
9less than, but may not exceed, the maximum rate set forth in
10this Section. A borrower may repay his loan prior to maturity,
11in whole or in part, without penalty. The credit contract may
12provide for the payment by the member and receipt by the credit
13union of all costs and disbursements, including reasonable
14attorney's fees and collection agency charges, incurred by the
15credit union to collect or enforce the debt in the event of a
16delinquency by the member, or in the event of a breach of any
17obligation of the member under the credit contract. A
18contingency or hourly arrangement established under an
19agreement entered into by a credit union with an attorney or
20collection agency to collect a loan of a member in default
21shall be presumed prima facie reasonable.
22    (2) Credit unions may make loans based upon the security of
23any interest or equity in real estate, subject to rules and
24regulations promulgated by the Secretary. In any contract or
25loan which is secured by a mortgage, deed of trust, or
26conveyance in the nature of a mortgage, on residential real



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1estate, the interest which is computed, calculated, charged, or
2collected pursuant to such contract or loan, or pursuant to any
3regulation or rule promulgated pursuant to this Act, may not be
4computed, calculated, charged or collected for any period of
5time occurring after the date on which the total indebtedness,
6with the exception of late payment penalties, is paid in full.
7    For purposes of this subsection (2) of this Section 46, a
8prepayment shall mean the payment of the total indebtedness,
9with the exception of late payment penalties if incurred or
10charged, on any date before the date specified in the contract
11or loan agreement on which the total indebtedness shall be paid
12in full, or before the date on which all payments, if timely
13made, shall have been made. In the event of a prepayment of the
14indebtedness which is made on a date after the date on which
15interest on the indebtedness was last computed, calculated,
16charged, or collected but before the next date on which
17interest on the indebtedness was to be calculated, computed,
18charged, or collected, the lender may calculate, charge and
19collect interest on the indebtedness for the period which
20elapsed between the date on which the prepayment is made and
21the date on which interest on the indebtedness was last
22computed, calculated, charged or collected at a rate equal to
231/360 of the annual rate for each day which so elapsed, which
24rate shall be applied to the indebtedness outstanding as of the
25date of prepayment. The lender shall refund to the borrower any
26interest charged or collected which exceeds that which the



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1lender may charge or collect pursuant to the preceding
2sentence. The provisions of this amendatory Act of 1985 shall
3apply only to contracts or loans entered into on or after the
4effective date of this amendatory Act.
5    (3) Notwithstanding any other provision of this Act, a
6credit union authorized under this Act to make loans secured by
7an interest or equity in real estate may engage in making
8"reverse mortgage" loans to persons for the purpose of making
9home improvements or repairs, paying insurance premiums or
10paying real estate taxes on the homestead properties of such
11persons. If made, such loans shall be made on such terms and
12conditions as the credit union shall determine and as shall be
13consistent with the provisions of this Section and such rules
14and regulations as the Secretary shall promulgate hereunder.
15For purposes of this Section, a "reverse mortgage" loan shall
16be a loan extended on the basis of existing equity in homestead
17property and secured by a mortgage on such property. Such loans
18shall be repaid upon the sale of the property or upon the death
19of the owner or, if the property is in joint tenancy, upon the
20death of the last surviving joint tenant who had such an
21interest in the property at the time the loan was initiated,
22provided, however, that the credit union and its member may by
23mutual agreement, establish other repayment terms. A credit
24union, in making a "reverse mortgage" loan, may add deferred
25interest to principal or otherwise provide for the charging of
26interest or premiums on such deferred interest. "Homestead"



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1property, for purposes of this Section, means the domicile and
2contiguous real estate owned and occupied by the mortgagor.
3    (4) Notwithstanding any other provisions of this Act, a
4credit union authorized under this Act to make loans secured by
5an interest or equity in real property may engage in making
6revolving credit loans secured by mortgages or deeds of trust
7on such real property or by security assignments of beneficial
8interests in land trusts.
9    For purposes of this Section, "revolving credit" has the
10meaning defined in Section 4.1 of the Interest Act.
11    Any mortgage or deed of trust given to secure a revolving
12credit loan may, and when so expressed therein shall, secure
13not only the existing indebtedness but also such future
14advances, whether such advances are obligatory or to be made at
15the option of the lender, or otherwise, as are made within
16twenty years from the date thereof, to the same extent as if
17such future advances were made on the date of the execution of
18such mortgage or deed of trust, although there may be no
19advance made at the time of execution of such mortgage or other
20instrument, and although there may be no indebtedness
21outstanding at the time any advance is made. The lien of such
22mortgage or deed of trust, as to third persons without actual
23notice thereof, shall be valid as to all such indebtedness and
24future advances form the time said mortgage or deed of trust is
25filed for record in the office of the recorder of deeds or the
26registrar of titles of the county where the real property



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1described therein is located. The total amount of indebtedness
2that may be so secured may increase or decrease from time to
3time, but the total unpaid balance so secured at any one time
4shall not exceed a maximum principal amount which must be
5specified in such mortgage or deed of trust, plus interest
6thereon, and any disbursements made for the payment of taxes,
7special assessments, or insurance on said real property, with
8interest on such disbursements.
9    Any such mortgage or deed of trust shall be valid and have
10priority over all subsequent liens and encumbrances, including
11statutory liens, except taxes and assessments levied on said
12real property.
13    (5) Compliance with federal or Illinois preemptive laws or
14regulations governing loans made by a credit union chartered
15under this Act shall constitute compliance with this Act.
16    (6) Credit unions may make residential real estate mortgage
17loans on terms and conditions established by the United States
18Department of Agriculture through its Rural Development
19Housing and Community Facilities Program. The portion of any
20loan in excess of the appraised value of the real estate shall
21be allocable only to the guarantee fee required under the
23    (7) For a renewal, refinancing, or restructuring of an
24existing loan that is secured by an interest or equity in real
25estate, a new appraisal of the collateral shall not be required
26when the transaction involves an existing extension of credit



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1at the credit union, no new moneys are advanced other than
2funds necessary to cover reasonable closing costs, and there
3has been no obvious or material change in market conditions or
4physical aspects of the real estate that threatens the adequacy
5of the credit union's real estate collateral protection after
6the transaction.
7(Source: P.A. 96-141, eff. 8-7-09; 97-133, eff. 1-1-12.)
8    (205 ILCS 305/57.1 new)
9    Sec. 57.1. Services to other credit unions.
10    (a) A credit union may act as a representative of and enter
11into an agreement with credit unions or other organizations for
12the purpose of:
13        (1) sharing, utilizing, renting, leasing, purchasing,
14    selling, and joint ownership of fixed assets or engaging in
15    activities and services that relate to the daily operations
16    of credit unions; and
17        (2) providing correspondent services to other credit
18    unions that the service provider credit union is authorized
19    to perform for its own members or as part of its
20    operations, including, but not limited to, loan
21    processing, loan servicing, member check cashing services,
22    disbursing share withdrawals and loan proceeds, cashing
23    and selling money orders, ACH and wire transfer services,
24    coin and currency services, performing internal audits,
25    and automated teller machine deposit services.



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1    Section 99. Effective date. This Act takes effect upon
2becoming law, except that the changes to Section 9 and
3subsection (6) of Section 34 of the Illinois Credit Union Act
4take effect January 1, 2015.