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92_HB4357 LRB9212373JSpc 1 AN ACT concerning credit unions. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Credit Union Act is amended by 5 changing Sections 1.1, 7, 13, 16, 20, 23, 27, 30, and 42 and 6 adding Sections 9.1 and 10.1 as follows: 7 (205 ILCS 305/1.1) (from Ch. 17, par. 4402) 8 Sec. 1.1. Definitions. Credit Union - The term "credit 9 union" means a cooperative, non-profit association, 10 incorporated under this Act, under the laws of the United 11 States of America or under the laws of another state, for the 12 purposes of encouraging thrift among its members, creating a 13 source of credit at a reasonable rate of interest, and 14 providing an opportunity for its members to use and control 15 their own money in order to improve their economic and social 16 conditions. The membership of a credit union shall consist of 17 a group or groups each having a common bond as set forth in 18 this Act. 19 Common Bond - The term "common bond" refers to groups of 20 people 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 24 include any relative by blood or marriage or foster and 25 adopted children. 26 (2) Persons who reside in a reasonably compact and well 27 defined neighborhood or community, and members of their 28 immediate families which shall include any relative by blood 29 or marriage or foster and adopted children. 30 (3) Persons who have a common employer or who are 31 members of an organized labor union or an organized -2- LRB9212373JSpc 1 occupational or professional group within a defined 2 geographical area, and members of their immediate families 3 which shall include any relative by blood or marriage or 4 foster and adopted children. 5 Shares - The term "shares" or "share accounts" means any 6 form of shares issued by a credit union and established by a 7 member in accordance with standards specified by a credit 8 union, including but not limited to common shares, share 9 draft accounts, classes of shares, share certificates, 10 special purpose share accounts, shares issued in trust, 11 custodial accounts, and individual retirement accounts or 12 other plans established pursuant to Section 401(d) or (f) or 13 Section 408(a) of the Internal Revenue Code, as now or 14 hereafter amended, or similar provisions of any tax laws of 15 the United States that may hereafter exist. 16 Credit Union Organization - The term "credit union 17 organization" means any organization established to serve the 18 needs of credit unions, the business of which relates to the 19 daily operations of credit unions. 20 Department - The term "Department" means the Illinois 21 Department of Financial Institutions. 22 Director - The term "Director" means the Director of the 23 Illinois Department of Financial Institutions. 24 NCUA - The term "NCUA" means the National Credit Union 25 Administration, an agency of the United States Government 26 charged with the supervision of credit unions chartered under 27 the laws of the United States of America. 28 Central Credit Union - The term "central credit union" 29 means a credit union incorporated primarily to receive shares 30 from and make loans to credit unions and Directors, Officers, 31 committee members and employees of credit unions. A central 32 credit union may also accept as members persons who were 33 members of credit unions which were liquidated and persons 34 from occupational groups not otherwise served by another -3- LRB9212373JSpc 1 credit union. 2 Corporate Credit Union - The term "corporate credit 3 union" means a credit union which is a cooperative, 4 non-profit association, the membership of which is limited 5 primarily to other credit unions. 6 Insolvent - "Insolvent" means the condition that results 7 when the total of all liabilities and shares exceeds net 8 assets of the credit union. 9 Danger of insolvency - The term "Danger of insolvency" as 10 used in Section 61 means when a credit union falls below a 2% 11 capital to asset ratio. 12 Net Worth - "Net worth" means the retained earnings 13 balance of the credit union, as determined under generally 14 accepted accounting principles, and forms of secondary 15 capital approved by the Director pursuant to rulemaking. 16 (Source: P.A. 90-665, eff. 7-30-98.) 17 (205 ILCS 305/7) (from Ch. 17, par. 4408) 18 Sec. 7. Reciprocity - out of state credit unions. 19 (1) A credit union organized and duly chartered as a 20 credit union in another state shall be permitted to conduct 21 business as a credit union in this state if a credit union 22 chartered under the laws of this state is permitted to do 23 business in such other state, provided that:. Regardless of24where it is doing business, a credit union shall be25supervised and regulated by the agency so charged in the26state in which the credit union is chartered.27 (a) The credit union shall register with the 28 Director prior to operating in this State, on a form 29 specified by the Director. 30 (b) The credit union may be required to pay a 31 registration fee in accordance with rules promulgated by 32 the Director. 33 (c) The credit union shall comply with rules -4- LRB9212373JSpc 1 promulgated by the Director concerning the operation of 2 out of state credit unions in this State. 3 (2) It is intended that the legal existence of credit 4 unions chartered under this Act be recognized beyond the 5 limits of this State and that, subject to any reasonable 6 registration requirements, any credit union transacting 7 business outside of this State be granted the protection of 8 full faith and credit under Section 1 of Article IV of the 9 Constitution of the United States. 10 (Source: P.A. 81-329.) 11 (205 ILCS 305/9.1 new) 12 Sec. 9.1. Disclosures of reports of examinations and 13 confidential supervisory information; limitations. 14 (1) Any report of examination, visitation, or 15 investigation prepared by the Director under this Act or by 16 the state regulatory authority charged with enforcing the 17 Electronic Fund Transfer Act or the Corporate Fiduciary Act 18 or by the state regulatory authority of another state that 19 examines an office of an Illinois credit union in that state, 20 any document or record prepared or obtained in connection 21 with or relating to any examination, visitation, or 22 investigation, and any record prepared or obtained by the 23 Director to the extent that the record summarizes or contains 24 information derived from any report, document, or record 25 described in this subsection shall be deemed "confidential 26 supervisory information". Confidential supervisory 27 information shall not include any information or record 28 routinely prepared by a credit union and maintained in the 29 ordinary course of business or any information or record that 30 is required to be made publicly available pursuant to State 31 or federal law or rule. 32 (2) Confidential supervisory information is privileged 33 from discovery and shall only be disclosed under the -5- LRB9212373JSpc 1 circumstances and for the purposes set forth in this Section. 2 (3) Relevant confidential supervisory information may be 3 disclosed under a statute that by its terms or by rules 4 promulgated thereunder requires the disclosure of 5 confidential supervisory information other than by subpoena, 6 summons, warrant, or court order; to other agencies or 7 entities having a legitimate regulatory interest; to the 8 credit union's board, officers, retained professionals, and 9 insurers; and to persons seeking to merge with or purchase 10 all the assets of the credit union or where disclosure is 11 otherwise required for the benefit of the credit union. 12 Disclosure of confidential supervisory information to these 13 persons does not constitute a waiver of the legal privilege 14 otherwise available with respect to the information. 15 (4) A person to whom confidential supervisory 16 information is disclosed shall not further disseminate 17 confidential supervisory information. 18 (5) (a) Any person upon whom a demand for production of 19 confidential supervisory information is made, whether by 20 subpoena, order, or other judicial or administrative 21 process, must withhold production of the confidential 22 supervisory information and must notify the Director of 23 the demand, at which time the Director is authorized to 24 intervene for the purpose of enforcing the limitations of 25 this Section or seeking the withdrawal or termination of 26 the attempt to compel production of the confidential 27 supervisory information. 28 (b) Any request for discovery or disclosure of 29 confidential supervisory information, whether by 30 subpoena, order, or other judicial or administrative 31 process, shall be made to the Director, and the Director 32 shall determine within 15 days whether to disclose the 33 information pursuant to procedures and standards that the 34 Director shall establish by rule. If the Director -6- LRB9212373JSpc 1 determines that such information will not be disclosed, 2 the Director's decision shall be subject to judicial 3 review under the provisions of the Administrative Review 4 Law, and venue shall be in either Sangamon County or Cook 5 County. 6 (c) Any court order that compels disclosure of 7 confidential supervisory information may be immediately 8 appealed by the Director, and the order shall be 9 automatically stayed pending the outcome of the appeal. 10 (205 ILCS 305/10.1 new) 11 Sec. 10.1. Retention of records. Unless a federal law 12 requires otherwise, the Director may by rule prescribe 13 periods of time for which credit unions operating under this 14 Act must retain records and after the expiration of which the 15 credit union may destroy those records. No liability shall 16 accrue against the credit union, the Director, or this State 17 for the destruction of records according to rules of the 18 Director promulgated under the authority of this Section. In 19 any cause or proceeding in which any records may be called in 20 question or be demanded by any credit union, a showing of the 21 expiration of the period so prescribed shall be sufficient 22 excuse for failure to produce them. 23 (205 ILCS 305/13) (from Ch. 17, par. 4414) 24 Sec. 13. General powers. A credit union may: 25 (1) Make contracts; sue and be sued; adopt and use a 26 common seal and alter same; 27 (2) Acquire, lease (either as lessee or lessor), hold, 28 pledge, mortgage, sell and dispose of real property, either 29 in whole or in part, or any interest therein, as may be 30 necessary or incidental to its present or future operations 31 and needs, subject to such limitations as may be imposed 32 thereon in rules and regulations promulgated by the Director; -7- LRB9212373JSpc 1 acquire, lease (either as lessee or lessor), hold, pledge, 2 mortgage, sell and dispose of personal property, either in 3 whole or in part, or any interest therein, as may be 4 necessary or incidental to its present or future operations 5 and needs; 6 (3) At the discretion of the Board of Directors, require 7 the payment of an entrance fee or annual membership fee, or 8 both, of any person admitted to membership; 9 (4) Receive savings from its members in the form of 10 shares of various classes, or special purpose share accounts; 11 act as custodian of its members' accounts; issue shares in 12 trust as provided in this Act; 13 (5) Lend its funds to its members and otherwise as 14 hereinafter provided; 15 (6) Borrow from any source in accordance with policy 16 established by the Board of Directors to a maximum of 50% of 17 capital, surplus and reserves; 18 (7) Discount and sell any obligations owed to the credit 19 union; 20 (8) Honor requests for withdrawals or transfers of all 21 or any part of member share accounts, and any classes 22 thereof, in any manner approved by the credit union Board of 23 Directors; 24 (9) Sell all or substantially all of its assets or 25 purchase all or substantially all of the assets of another 26 credit union, subject to the prior approval of the Director; 27 and sell part of its assets or purchase part of the assets of 28 another credit union in accordance with rules promulgated by 29 the Director; 30 (10) Invest surplus funds as provided in this Act; 31 (11) Make deposits in banks, savings banks, savings and 32 loan associations, trust companies; and invest in shares, 33 classes of shares or share certificates of other credit 34 unions; -8- LRB9212373JSpc 1 (12) Assess charges and fees to members in accordance 2 with board resolution; 3 (13) Hold membership in and pay dues to associations and 4 organizations; to invest in shares, stocks or obligations of 5 any credit union organization; 6 (14) Declare dividends and pay interest refunds to 7 borrowers as provided in this Act; 8 (15) Collect, receive and disburse monies in connection 9 with providing negotiable checks, money orders and other 10 money-type instruments, and for such other purposes as may 11 provide benefit or convenience to its members, and charge a 12 reasonable fee for such services; 13 (16) Act as fiscal agent for and receive deposits from 14 the federal government, this state or any agency or political 15 subdivision thereof; 16 (17) Receive savings from nonmembers in the form of 17 shares or share accounts in the case of credit unions serving 18 predominantly low-income members. The term "low income 19 members" shall mean those members whose annual income falls 20 at or below an amount defined by the Director pursuant to 21 rulemakingthe lower level standard of living classification22as established by the Bureau of Labor Statistics and updated23by the Employment and Training Administration of the U.S.24Department of Labor. The term "predominantly" is defined as a 25 simple majority; 26 (18) To establish, maintain, and operate terminals as 27 authorized by the Electronic Fund Transfer Act; and 28 (19) Subject to Article XLIV of the Illinois Insurance 29 Code, to act as the agent for any fire, life, or other 30 insurance company authorized by the State of Illinois, by 31 soliciting and selling insurance and collecting premiums on 32 policies issued by such company; and may receive for services 33 so rendered such fees or commissions as may be agreed upon 34 between the said credit union and the insurance company for -9- LRB9212373JSpc 1 which it may act as agent; provided, however, that no such 2 credit union shall in any case assume or guarantee the 3 payment of any premium on insurance policies issued through 4 its agency by its principal; and provided further, that the 5 credit union shall not guarantee the truth of any statement 6 made by an assured in filing his application for insurance. 7 (Source: P.A. 89-310, eff. 1-1-96; 90-41, eff. 10-1-97; 8 90-655, eff. 7-30-98.) 9 (205 ILCS 305/16) (from Ch. 17, par. 4417) 10 Sec. 16. Societies, associations. Societies, 11 associations, clubs,andpartnerships, corporations, limited 12 liability companies, and other organizations in which the 13 majority of the members, partners, shareholders, or employees 14 are individuals who are eligible for credit union membership,15and corporations, the majority of whose stockholders are16individuals, who are eligible for credit union membership,17 may be admitted to membership in a credit union in the same 18 manner and under the same conditions as individuals, subject 19 to such rules as the Director may promulgate hereunder. 20 (Source: P.A. 85-249.) 21 (205 ILCS 305/20) (from Ch. 17, par. 4421) 22 Sec. 20. Election or appointment of officials. 23 (1) The credit union shall be directed by a Board of 24 Directors consisting of no less than 7 in number, to be 25 elected at the annual meeting by and from the members. 26 Directors shall hold office until the next annual meeting, 27 unless their terms are staggered. Upon amendment of its 28 bylaws, a credit union may divide the Directors into 2 or 3 29 classes with each class as nearly equal in number as 30 possible. The term of office of the directors of the first 31 class shall expire at the first annual meeting after their 32 election, that of the second class shall expire at the second -10- LRB9212373JSpc 1 annual meeting after their election, and that of the third 2 class, if any, shall expire at the third annual meeting after 3 their election. At each annual meeting after the 4 classification, the number of directors equal to the number 5 of directors whose terms expire at the time of the meeting 6 shall be elected to hold office until the second succeeding 7 annual meeting if there are 2 classes or until the third 8 succeeding annual meeting if there are 3 classes. A Director 9 shall hold office for the term for which he or she is elected 10 and until his or her successor is elected and qualified. In 11 all elections for Directors, every member has the right to 12 vote, in person or by proxy, the number of shares owned by 13 him, or in the case of a member other than a natural person, 14 the member's one vote, for as many persons as there are 15 Directors to be elected, or to cumulate such shares, and give 16 one candidate as many votes as the number of Directors 17 multiplied by the number of his shares equals, or to 18 distribute them on the same principle among as many 19 candidates as he may desire and the Directors shall not be 20 elected in any other manner. Shares held in a joint account 21 owned by more than one member may be voted by any one of the 22 members, however, the number of cumulative votes cast may not 23 exceed a total equal to the number of shares multiplied by 24 the number of directors to be elected. A majority of the 25 shares entitled to vote shall be represented either in person 26 or by proxy for the election of Directors. Each Director 27 shall wholly take and subscribe to an oath that he will 28 diligently and honestly perform his duties in administering 29 the affairs of the credit union, that while he may delegate 30 to another the performance of those administrative duties he 31 is not thereby relieved from his responsibility for their 32 performance, that he will not knowingly violate or willingly 33 permit to be violated any law applicable to the credit union, 34 and that he is the owner of at least one share of the credit -11- LRB9212373JSpc 1 union. 2 (2) The Board of Directors shall appoint from among the 3 members of the credit union, a Supervisory Committee of not 4 less than 3 members at the organization meeting and within 30 5 days following each annual meeting of the members for such 6 terms as the bylaws provide. Members of the Supervisory 7 Committee may, but need not be, on the Board of Directors, 8 but shall not be officers of the credit union, members of the 9 Credit Committee, or the credit manager if no Credit 10 Committee has been appointed. 11 (3) The Board of Directors may appoint, from among the 12 members of the credit union, a Credit Committee consisting of 13 an odd number, not less than 3 for such terms as the bylaws 14 provide. Members of the Credit Committee may, but need not 15 be, Directors or officers of the credit union, but shall not 16 be members of the Supervisory Committee. 17 (4) The Board of Directors mayshallappoint from among 18 the members of the credit union a Membership Committee of one 19 or more persons. If appointed, the CommitteeItshall act 20 upon all applications for membership and submit a report of 21 its actions to the Board of Directors at the next regular 22monthlymeeting for review. If no Membership Committee is 23 appointed, credit union management shall act upon all 24 applications for membership and submit a report of its 25 actions to the Board of Directors at the next regular meeting 26 for review. 27 (Source: P.A. 91-929, eff. 12-15-00.) 28 (205 ILCS 305/23) (from Ch. 17, par. 4424) 29 Sec. 23. Compensation of officials. 30 (1) No director or committee member may receive 31 compensationbe compensatedfor his service as such.,32 "Compensation" as used in this subsection (1) refers to 33 remuneration expense to the credit union for services -12- LRB9212373JSpc 1 provided by a director or committee member in his or her 2 capacity as director or committee member. "Compensation" as 3 used in this subsection (1) does not include the expense of 4butproviding reasonable life, health, accident, and similar 5 insurance protection benefits for a director or committee 6 membershall not be considered compensation. 7 (2) Directors, committee members and employees, while on 8 official business of the credit union, may be reimbursed for 9 reasonable and necessary expenses. 10 (3) The Board of Directors may establish compensation 11 and benefits for officers of the credit union. 12 (Source: P.A. 81-329.) 13 (205 ILCS 305/27) (from Ch. 17, par. 4428) 14 Sec. 27. Authority of directors. 15 (1) The Board of Directors shall be charged with and 16 have control over the general management of the operations, 17 funds and records of the credit union. 18 (2) In discharging the duties of their respective 19 positions, the board of directors, committees of the board, 20 and individual directors shall be entitled to rely on advice, 21 information, opinions, reports or statements, including 22 financial statements and financial data, prepared or 23 presented by: (i) one or more officers or employees of the 24 credit union whom the director believes to be reliable and 25 competent in the matter presented; (ii) one or more counsel, 26 accountants, or other consultants as to matters that the 27 Director believes to be within that person's professional or 28 expert competence; or (iii) a committee of the board upon 29 which the Director does not serve, as to matters within that 30 committee's designated authority; provided that the 31 Director's reliance under this subsection (2) is placed in 32 good faith, after reasonable inquiry if the need for such 33 inquiry is apparent under the circumstances and without -13- LRB9212373JSpc 1 knowledge that would cause such reliance to be unreasonable. 2 (Source: P.A. 81-329.) 3 (205 ILCS 305/30) (from Ch. 17, par. 4431) 4 Sec. 30. Duties of directors. It shall be the duty of 5 the directors to: 6 (1) Reviewthe Membership Committee'sactions on 7 applications for membership. A record of the Membership 8 Committee's approval or denial of membership or management's 9 approval or denial of membership if no Membership Committee 10 has been appointed shall be available to the Board of 11 Directors for inspection. A person denied membership by the 12 Membership Committee or credit union management may appeal 13 the denial to the Board; 14 (2) Provide adequate fidelity bond coverage for 15 officers, employees, directors and committee members, and for 16 losses caused by persons outside of the credit union, subject 17 to rules and regulations promulgated by the Director; 18 (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 22 in proportion to the interest paid by them on such classes of 23 loans and under such conditions as the Board prescribes. The 24 Directors may establish different interest rates to be 25 charged on different classes of loans; 26 (4) Within any limitations set forth in the credit 27 union's bylaws, fix the maximum amount which may be loaned 28 with and without security to a member; 29 (5) Declare dividends on various classes of shares in 30 the manner and form as provided in the bylaws; 31 (6) Limit the number of shares which may be owned by a 32 member; such limitations to apply alike to all members; 33 (7) Have charge of the investment of funds, except that -14- LRB9212373JSpc 1 the Board of Directors may designate an Investment Committee 2 or any qualified individual or entity to have charge of 3 making investments under policies established by the Board of 4 Directors; 5 (8) Authorize the employment of or contracting with such 6 persons or organizations as may be necessary to carry on the 7 operations of the credit union, provided that prior approval8is received from the Department before becoming involved with9a credit union organization by loaning to, investing in, or10delegating substantially all managerial duties and11responsibilities to such credit union organization;and fix 12 the compensation, if any, of the officers and provide for 13 compensation for other employees within policies established 14 by the Board of Directors; 15 (9) Authorize the conveyance of property; 16 (10) Borrow or lend money consistent with the provisions 17 of this Act; 18 (11) Designate a depository or depositories for the 19 funds of the credit union and supervise the investment of 20 funds; 21 (12) Suspend or remove, or both, for cause, any or all 22 officers or any or all members of the Membership, Credit, 23 Supervisory or other committees for failure to perform their 24 duties; 25 (13) Appoint any special committees deemed necessary; 26 and;,27 (14) Perform such other duties as the members may 28 direct, and perform or authorize any action not inconsistent 29 with this Act and not specifically reserved by the bylaws to 30 the members. 31 (Source: P.A. 84-1390.) 32 (205 ILCS 305/42) (from Ch. 17, par. 4443) 33 Sec. 42. Shares in trust. -15- LRB9212373JSpc 1 (1) Shares may be issued in trust to a member as trustee 2 or to an individual or corporate trustee. If a corporate 3 trustee is a bank or trust company, shares may be issued to 4 the corporate trustee only if such bank or trust company is 5 organized under the laws of the State of Illinois or is a 6 nationally chartered bank located principally in the State of 7 Illinois. An individual trustee shall be a member of the 8 credit union unless the person establishing the trust in 9 respect to which such shares are issued or each beneficiary 10 of the trust is a member of the credit union and the name of 11 each beneficiary is disclosed to the credit union. Shares 12 may also be issued in the name of an individual or corporate 13 representative under the Illinois Probate Act of 1975 for or 14 in respect to a member of a credit union. Shares may also be 15 issued in trust under the Illinois Funeral or Burial Funds 16 Act, for or in respect to a member of a credit union, to a 17 trustee licensed under said Act. Any credit union which 18 issues shares in trust as provided in this Section must be 19 insured by the NCUA or another approved insurer.No trustee20or beneficiary, unless a member in his own right, shall be21permitted to vote, obtain loans, hold office or be required22to pay an entrance or membership fee.Payment of part or all 23 of such shares to such trustee or member shall, to the extent 24 of such payment, discharge the liability of the credit union 25 to the member and the beneficiary and the credit union shall 26 be under no obligation to see to the application of such 27 payment. 28 (2) If a credit union's shares are insured as provided 29 for in this Act, such credit union shall have power to act as 30 trustee or custodian under individual retirement accounts or 31 plans established pursuant to the Internal Revenue Code for 32 its members or groups or organizations of its members 33 provided the funds of such accounts or plans are invested 34 solely in (1) share accounts of, or (2) share accounts and -16- LRB9212373JSpc 1 obligations issued by such credit union. All funds held in 2 such fiduciary capacity shall be maintained in accordance 3 with applicable statutes and regulations promulgated 4 thereunder by any authority exercising jurisdiction over such 5 trusts or custodial accounts. 6 (3) Notwithstanding any language to the contrary in this 7 Section 42, a credit union may act as trustee or custodian of 8 individual retirement plans of its members established 9 pursuant to the Employee Retirement Income Security Act of 10 1974 or self-employed retirement plans established pursuant 11 to the Self-Employed Individuals Retirement Act of 1962, and 12 any laws amendatory or supplementary to such Acts, provided 13 that: 14 (a) All contributions of funds are initially made 15 to a share account in the credit union; 16 (b) Any subsequent transfer of funds to other 17 assets is solely at the direction of the member and the 18 credit union performs only custodial duties, exercises no 19 investment discretion and provides no investment advice 20 with respect to plan assets; 21 (c) The member is notified of the fact that share 22 insurance coverage is limited to funds held in share 23 accounts; and 24 (d) The credit union complies with all applicable 25 provisions of this Act and applicable laws and 26 regulations as may be promulgated by any authority 27 exercising jurisdiction over such trust or custodial 28 accounts. 29 (4) A credit union may accept and execute trusts upon 30 obtaining a certificate of authority pursuant to the 31 Corporate Fiduciary Act. 32 (Source: P.A. 91-131, eff. 7-16-99.) 33 Section 99. Effective date. This Act takes effect upon -17- LRB9212373JSpc 1 becoming law.