Public Act 93-0640

HB1516 Re-Enrolled                   LRB093 05054 JLS 07768 b

    AN ACT relating to certain financial institutions.

    Be it enacted by the People of  the  State  of  Illinois,
represented in the General Assembly:

    Section  5.   The Illinois Credit Union Act is amended by
changing Sections 15, 40, 46, 51, and 59 as follows:

    (205 ILCS 305/15) (from Ch. 17, par. 4416)
    Sec. 15.  Membership defined.
    (1)  The membership of a credit union shall be limited to
and  consist  of  the  subscribers   to   the   articles   of
incorporation  and such other persons within the common bond,
as defined in this Act and as set forth in the credit union's
articles  of  incorporation,  as  have  been  duly   admitted
members,  have  paid  the required entrance fee or membership
fee, or both, if any, have subscribed for one or more shares,
and have paid  the  initial  installment  thereon,  and  have
complied  with  such  other  requirements  as the articles of
incorporation or bylaws specify.  Two or more persons  within
the  common  bond who have jointly subscribed for one or more
shares under a joint  account  and  have  complied  with  all
membership  requirements  may each be admitted to membership.
The surviving spouse of a credit union member may,  within  6
months  of  the member's death, become a member of the credit
union by paying the required entrance fee or  membership  fee
or  both,  if  any, by subscribing for one or more shares and
paying the initial installment thereon, and by complying with
such other requirements as the articles of  incorporation  or
bylaws specify.
    (2)  Any  member  may withdraw from a credit union at any
time upon giving notice of  withdrawal  as  required  by  the
bylaws.
    (3)  Any  member  may  be  expelled  by a 2/3 vote of the
members present at any regular or special meeting  called  to
consider  the  matter, but only after an opportunity has been
given to the member to be heard.
    (4)  A member who has caused a loss to the credit  union,
or  who  has  failed  to  maintain  one or more shares at the
credit union, or violated Board policy applicable to  members
may  be  expelled by a majority vote of a quorum of directors
if the board has adopted a  policy  providing  for  expulsion
under  those  circumstances.   In maintaining and enforcing a
policy  based  on  loss,  the  board  may  consider,  without
limitation, a member's failure to pay  amounts  due  under  a
loan, failure to provide collected funds to cover withdrawals
or  personal  share  drafts  or credit union drafts where the
member is a remitter, or failure to pay fees or  charges  due
the  credit  union.   If  a  policy  is  adopted by the board
pursuant to this subsection (4), written notice of the policy
and the effective date of the policy shall be mailed to  each
member  of  the  credit union at the member's current address
appearing on the records of the  credit  union.   The  policy
shall  be  mailed  to members not fewer than 30 days prior to
the effective date of the policy.  In addition,  new  members
shall  be  provided  written notice of the policy prior to or
upon applying for membership.
    (5)  All or any part of the amount paid on  shares  of  a
withdrawing  member  or  expelled  member  with  any declared
dividends or interest on the date of withdrawal or  expulsion
must,  after deducting all amounts due from the member to the
credit union, be paid to him.  The credit union  may  require
not  more  than  60  days'  written  notice  of  intention to
withdraw shares, but a notice of withdrawal does not  entitle
the  member  to  any preferred or prior claim in the event of
liquidation.  Withdrawing or expelled members have no further
rights in the credit union, but are  not,  by  withdrawal  or
expulsion,  released  from  any  obligation  they  owe to the
credit union.
    (6)  A member who has caused a loss to the  credit  union
or  has  violated  Board  policy applicable to members may be
denied any or all credit union services  in  accordance  with
board  policy, however, members who are denied services shall
be allowed to maintain a share account and  to  vote  on  all
issues put to a vote of the membership.
(Source: P.A. 91-929, eff. 12-15-00.)

    (205 ILCS 305/40) (from Ch. 17, par. 4441)
    Sec.  40.  Shares to Minors.  Shares may be issued in the
name of a minor or in the  name  of  a  custodian  under  the
Illinois  Uniform  Transfers  to  Minors Act, as amended.  If
shares are issued in the name of a minor, redemption  of  any
part  or  all  of  the shares by payment to the minor or upon
order of the minor of  the  amount  of  the  shares  and  any
declared   dividends  releases  the  credit  union  from  all
obligations to the minor as to the shares redeemed.  Further,
if shares are issued in the name of a minor, the minor  shall
be  considered  as  being  of  the age of majority and having
contractual capacity.
(Source: P.A. 84-915.)

    (205 ILCS 305/46) (from Ch. 17, par. 4447)
    Sec. 46.  Loans and interest rate.
    (1)  A credit union may make loans  to  its  members  for
such  purpose  and  upon  such  security and terms, including
rates of interest, as the Credit Committee,  credit  manager,
or  loan  officer approves. Notwithstanding the provisions of
any other law in connection  with  extensions  of  credit,  a
credit  union  may elect to contract for and receive interest
and fees and other charges for extensions of  credit  subject
only  to  the  provisions  of  this Act and rules promulgated
under this Act, except that extensions of credit  secured  by
residential   real  estate  shall  be  subject  to  the  laws
applicable thereto. The rates of interest to  be  charged  on
loans  to  members  shall be set by the Board of Directors of
each individual credit union and such rates may be less than,
but may not exceed,  the  maximum  rate  set  forth  in  this
Section.  A borrower may repay his loan prior to maturity, in
whole  or  in  part, without penalty. The credit contract may
provide for the payment by the  member  and  receipt  by  the
credit  union  of  all  costs  and  disbursements,  including
reasonable  attorney's  fees  and  collection agency charges,
incurred by the credit union to collect or enforce  the  debt
in  the event of a delinquency by the member, or in the event
of a breach of any obligation of the member under the  credit
contract.   A  contingency  or hourly arrangement established
under an agreement entered into by a  credit  union  with  an
attorney  or  collection agency to collect a loan of a member
in default shall be presumed prima facie reasonable.
    (2)  Credit unions may make loans based upon the security
of any interest or equity in real estate,  subject  to  rules
and  regulations promulgated by the Director. In any contract
or loan which is secured by a mortgage,  deed  of  trust,  or
conveyance  in  the nature of a mortgage, on residential real
estate, the interest which is computed, calculated,  charged,
or  collected  pursuant to such contract or loan, or pursuant
to any regulation or rule promulgated pursuant to  this  Act,
may not be computed, calculated, charged or collected for any
period  of  time  occurring after the date on which the total
indebtedness, with the exception of late  payment  penalties,
is paid in full.
    For purposes of this subsection (2) of this Section 46, a
prepayment  shall mean the payment of the total indebtedness,
with the exception of late payment penalties if  incurred  or
charged,  on  any  date  before  the  date  specified  in the
contract or loan agreement on which  the  total  indebtedness
shall  be  paid  in  full,  or  before  the date on which all
payments, if timely made, shall have been made.  In the event
of a prepayment of the indebtedness which is made on  a  date
after the date on which interest on the indebtedness was last
computed,  calculated,  charged,  or collected but before the
next date on which interest on the  indebtedness  was  to  be
calculated,  computed,  charged, or collected, the lender may
calculate, charge and collect interest  on  the  indebtedness
for  the  period  which elapsed between the date on which the
prepayment is made and the date  on  which  interest  on  the
indebtedness   was  last  computed,  calculated,  charged  or
collected at a rate equal to 1/360 of  the  annual  rate  for
each day which so elapsed, which rate shall be applied to the
indebtedness  outstanding  as of the date of prepayment.  The
lender shall refund to the borrower any interest  charged  or
collected  which  exceeds that which the lender may charge or
collect pursuant to the preceding sentence.   The  provisions
of  this amendatory Act of 1985 shall apply only to contracts
or loans entered into on or after the effective date of  this
amendatory Act.
    (3)  Notwithstanding  any  other provision of this Act, a
credit union authorized under this Act to make loans  secured
by  an interest or equity in real estate may engage in making
"reverse mortgage" loans to persons for the purpose of making
home improvements or repairs, paying  insurance  premiums  or
paying  real estate taxes on the homestead properties of such
persons.  If made, such loans shall be made on such terms and
conditions as the credit union shall determine and  as  shall
be  consistent  with  the provisions of this Section and such
rules  and  regulations  as  the  Director  shall  promulgate
hereunder.   For  purposes  of  this  Section,   a   "reverse
mortgage"  loan  shall  be  a  loan  extended on the basis of
existing equity  in  homestead  property  and  secured  by  a
mortgage  on  such property.  Such loans shall be repaid upon
the sale of the property or upon the death of the  owner  or,
if  the  property  is in joint tenancy, upon the death of the
last surviving joint tenant who had such an interest  in  the
property  at  the  time  the  loan  was  initiated, provided,
however, that the credit union and its member may  by  mutual
agreement,  establish other repayment terms.  A credit union,
in  making  a  "reverse  mortgage"  loan,  may  add  deferred
interest to principal or otherwise provide for  the  charging
of   interest   or   premiums   on  such  deferred  interest.
"Homestead" property, for purposes of this Section, means the
domicile and contiguous real estate owned and occupied by the
mortgagor.   The  Director   shall   promulgate   rules   and
regulations  under this Section; provided that such rules and
regulations need not be promulgated jointly  with  any  other
administrative agency of this State.
    (4)  Notwithstanding  any other provisions of this Act, a
credit union authorized under this Act to make loans  secured
by  an  interest  or  equity  in  real property may engage in
making revolving credit loans secured by mortgages  or  deeds
of  trust on such real property or by security assignments of
beneficial interests in land trusts.
    For purposes of this Section, "revolving credit" has  the
meaning defined in Section 4.1 of the Interest Act.
    Any mortgage or deed of trust given to secure a revolving
credit  loan may, and when so expressed therein shall, secure
not only the  existing  indebtedness  but  also  such  future
advances,  whether such advances are obligatory or to be made
at the option of the lender, or otherwise, as are made within
twenty years from the date thereof, to the same extent as  if
such  future  advances were made on the date of the execution
of such mortgage or deed of trust, although there may  be  no
advance  made  at  the  time of execution of such mortgage or
other instrument, and although there may be  no  indebtedness
outstanding  at  the  time  any advance is made.  The lien of
such mortgage or deed of trust, as to third  persons  without
actual  notice  thereof,  shall  be  valid  as  to  all  such
indebtedness  and future advances form the time said mortgage
or deed of trust is filed for record in  the  office  of  the
Recorder  of  Deeds  or the Registrar of Titles of the county
where the real property described therein  is  located.   The
total  amount  of  indebtedness  that  may  be so secured may
increase or decrease from time to time, but the total  unpaid
balance so secured at any one time shall not exceed a maximum
principal  amount which must be specified in such mortgage or
deed of trust, plus interest thereon, and  any  disbursements
made  for  the  payment  of  taxes,  special  assessments, or
insurance on  said  real  property,  with  interest  on  such
disbursements.
    Any  such  mortgage  or  deed of trust shall be valid and
have priority over all  subsequent  liens  and  encumbrances,
including  statutory  liens,  except  taxes  and  assessments
levied on said real property.
    (5)  Compliance  with federal or Illinois preemptive laws
or  regulations  governing  loans  made  by  a  credit  union
chartered under this Act  shall  constitute  compliance  with
this Act.
(Source: P.A. 90-222, eff. 7-25-97.)

    (205 ILCS 305/51) (from Ch. 17, par. 4452)
    Sec. 51.  Other Loan Programs.
    (1)  Subject   to  such  rules  and  regulations  as  the
Director may promulgate, a credit union  may  participate  in
loans  to  credit  union  members  jointly  with other credit
unions,  corporations,   or   financial   institutions.    An
originating  credit union may originate loans only to its own
members.  A  participating  credit  union  that  is  not  the
originating  lender  may participate in loans made to its own
members or to members of another participating credit  union.
"Originating  lender"  means  the  participating credit union
with which the  member  contracts.   A  master  participation
agreement  must  be properly executed, and the agreement must
include provisions for identifying, either through  documents
incorporated  by  reference or directly in the agreement, the
participation loan or loans prior to their sale.
    (2)  Any credit union with assets of $500,000 or more may
loan to its members under the State Scholarships Law or other
scholarship programs which are subject to a federal or  state
law providing 100% repayment guarantee.
    (3)  A  credit  union  may purchase the conditional sales
contracts, notes and similar instruments  which  evidence  an
indebtedness of its members.
    (4)  With  approval  of  the Board of Directors, a credit
union may make loans, either on its own or jointly with other
credit unions, corporations  or  financial  institutions,  to
credit  union  organizations;  provided,  that  the aggregate
amount of all such loans outstanding shall not  at  any  time
exceed  the  greater  of  3% 1% of the paid-in and unimpaired
capital and  surplus  of  the  credit  union  or  the  amount
authorized for federal credit unions.
(Source: P.A. 92-293, eff. 8-9-01.)

    (205 ILCS 305/59) (from Ch. 17, par. 4460)
    Sec. 59.  Investment of Funds. Funds not used in loans to
members  may  be  invested,  pursuant  to  subsection  (7) of
Section 30 of this Act, and subject to Departmental rules and
regulations:
    (1)  In securities, obligations or other  instruments  of
or issued by or fully guaranteed as to principal and interest
by  the  United States of America or any agency thereof or in
any trust or trusts established  for  investing  directly  or
collectively in the same;
    (2)  In  obligations  of  any state of the United States,
the District of Columbia, the Commonwealth  of  Puerto  Rico,
and  the  several  territories  organized by Congress, or any
political subdivision thereof; however, a  credit  union  may
not  invest  more  than  10%  of  its  unimpaired capital and
surplus in  the  obligations  of  one  issuer,  exclusive  of
general   obligations  of  the  issuer,  and  investments  in
municipal securities must be limited to securities  rated  in
one  of  the  4  highest  rating  categories  by a nationally
recognized statistical rating organization;
    (3)  In certificates of deposit or passbook type accounts
issued by a state or national bank, mutual  savings  bank  or
savings and loan association; provided that such institutions
have  their accounts insured by the Federal Deposit Insurance
Corporation  or  the  Federal  Savings  and  Loan   Insurance
Corporation;  but  provided,  further,  that a credit union's
investment in an account in any one  institution  may  exceed
the insured limit on accounts;
    (4)  In  shares,  classes of shares or share certificates
of  other  credit  unions,  including,  but  not  limited  to
corporate credit unions; provided  that  such  credit  unions
have  their  members'  accounts  insured by the NCUA or other
approved insurers, and that if the members' accounts  are  so
insured,  a  credit union's investment may exceed the insured
limit on accounts;
    (5)  In shares of a cooperative society  organized  under
the  laws  of  this State or the laws of the United States in
the total amount not exceeding 10% of the unimpaired  capital
and   surplus   of  the  credit  union;  provided  that  such
investment shall first be approved by the Department;
    (6)  In  obligations  of  the   State   of   Israel,   or
obligations  fully  guaranteed  by  the State of Israel as to
payment of principal and interest;
    (7)  In shares, stocks or obligations of other  financial
institutions  in  the  total  amount  not exceeding 5% of the
unimpaired capital and surplus of the credit union;
    (8)  In federal funds and bankers' acceptances;
    (9)  In  shares  or  stocks  of  Credit   Union   Service
Organizations  in  the total amount not exceeding the greater
of 3% 1% of the unimpaired capital and surplus of the  credit
union or the amount authorized for federal credit unions.
    As   used   in   this  Section,  "political  subdivision"
includes, but is not limited to, counties, townships, cities,
villages, incorporated towns, school  districts,  educational
service  regions, special road districts, public water supply
districts, fire  protection  districts,  drainage  districts,
levee  districts,  sewer districts, housing authorities, park
districts, and any agency, corporation, or instrumentality of
a  state  or  its  political  subdivisions,  whether  now  or
hereafter created and whether herein  specifically  mentioned
or not.
(Source: P.A. 92-293, eff. 8-9-01.)

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