101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB4887

 

Introduced 2/18/2020, by Rep. Jay Hoffman

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Illinois Credit Union Act. Allows the board of directors of a credit union to appoint one or more associate directors to serve in an advisory capacity. Provides that an associate director shall not be deemed or considered to be a director for any purpose under the Act, and that the board of directors shall not delegate to associate directors any of the duties or responsibilities required to be performed by directors duly elected by members of a credit union. Provides that prior to appointing an associate director, the board of directors shall confirm that the person meets all of the requirements to serve as a director. Provides that the board of directors of a credit union or a network credit union shall require each associate director to sign a confidentiality and nondisclosure agreement. Makes changes concerning compensation for directors and committee members. Provides that upon prior written approval by the Secretary of Financial and Professional Regulation, the board of directors and the executive committee of a credit union may hold regular meetings less frequently than once each month but at least once each calendar quarter. Allows a surviving credit union to identify the merging credit union as a division, branch, unit, or other descriptive reference in the case of a merger. Changes the maximum percentage of the unimpaired capital and surplus of a credit union that may be loaned to credit union organizations, and the maximum percentage of the unimpaired capital and surplus of a credit union that may be invested in shares or stocks of a credit union service organization. Makes other changes. Effective immediately.


LRB101 18452 BMS 67900 b

 

 

A BILL FOR

 

HB4887LRB101 18452 BMS 67900 b

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 23, 29, 51, 57, 59, and 64.7 and by adding
6Section 20.5 as follows:
 
7    (205 ILCS 305/20.5 new)
8    Sec. 20.5. Appointment of associate directors.
9    (a) The board of directors of a credit union may, in its
10discretion, appoint one or more associate directors to serve in
11an advisory capacity. The board shall prescribe the duties of
12an associate director and the manner in which associate
13directors are appointed and removed. The board shall not
14delegate to associate directors any of the duties or
15responsibilities prescribed by this Act or other applicable law
16to be performed by directors duly elected by their members. An
17associate director shall not be deemed or considered to be a
18director for any purpose under this Act.
19    (b) Prior to appointing an associate director, the board
20shall confirm that the person meets all of the requirements to
21serve as a director, including, without limitation, a working
22familiarity with the financial and accounting practices of the
23credit union as set forth in subsection (c) of Section 30.

 

 

HB4887- 2 -LRB101 18452 BMS 67900 b

1    (c) An associate director may participate in meetings of
2the board but may not vote or otherwise act as a director. With
3respect to any issue that comes before the board for
4deliberation, the board may request that all associate
5directors excuse themselves from the meeting of the board and
6the associate directors shall immediately comply with the
7request.
8    (d) The board shall require each associate director to sign
9a confidentiality and nondisclosure agreement to ensure that
10information concerning the credit union remains confidential.
 
11    (205 ILCS 305/23)  (from Ch. 17, par. 4424)
12    Sec. 23. Compensation of officials.
13    (1) Directors and committee members may receive reasonable
14compensation for their service as such, the amount of which
15shall be set by the board of directors, in accordance with
16written policies and procedures established by the board of
17directors. If the Department determines the payment of director
18or committee member compensation, or both, creates a safety and
19soundness issue for a credit union, the Department shall
20utilize the standards set forth in its Regulatory Examination
21Consistency and Due Process Rule, 38 Ill. Adm. Code 190.25, and
22supplemental guidelines to address and resolve the issue. An
23enforcement action taken pursuant to the Rule and guidelines
24and specified by this Act shall be used to reduce or suspend
25the compensation paid to the directors and committee members.

 

 

HB4887- 3 -LRB101 18452 BMS 67900 b

1The Department shall, by rule, establish maximum rates of
2reasonable compensation that are generally applicable to
3credit unions considering factors the Department may establish
4from time to time, including, but not limited to, total assets,
5nonprofit cooperative structure, and the best interests of
6members. "Compensation" as used in this subsection (1) refers
7to remuneration expense to the credit union for services
8provided by a director or committee member in his or her
9capacity as director or committee member. The remuneration
10expense is in the form of monetary payments and shall be
11disclosed on an annual basis to the membership in the financial
12statement that is part of the annual membership meeting
13materials. The disclosure shall contain: (i) the amount paid to
14each director and (ii) the amount paid to the directors as a
15group. "Compensation" does not include any of the expenses
16described in subsections (2) and (3).
17    (2) The credit union may incur the expense of providing
18reasonable life, health, accident, and similar insurance
19protection benefits for directors and committee members.
20    (3) Directors, committee members and employees, while on
21official business of the credit union, may be reimbursed for
22reasonable and necessary expenses. Alternatively, the credit
23union may make direct payment to a third party for such
24business expenses. Reasonable and necessary expenses may
25include the payment of travel costs for the foregoing officials
26and one guest per official. All payment of costs shall be made

 

 

HB4887- 4 -LRB101 18452 BMS 67900 b

1in accordance with written policies and procedures established
2by the board of directors.
3    (4) The board of directors may establish compensation for
4officers of the credit union.
5(Source: P.A. 101-567, eff. 8-23-19.)
 
6    (205 ILCS 305/29)  (from Ch. 17, par. 4430)
7    Sec. 29. Meetings of directors.
8    (1) The board of directors and the executive committee
9shall meet as often as necessary, but one body must meet at
10least monthly and the other at least quarterly, as prescribed
11in the bylaws. A month in which one body meets does not require
12the other body to meet, irrespective of the other body's
13meeting frequency. Upon prior written approval by the
14Secretary, both bodies may hold regular meetings less
15frequently than once each month but at least once each calendar
16quarter. Unless a greater number is required by the bylaws, a
17majority of the whole board of directors shall constitute a
18quorum. The act of a majority of the directors present at a
19meeting at which a quorum is present shall be the act of the
20board of directors unless the act of a greater number is
21required by this Act, the credit union's articles of
22incorporation or the bylaws.
23    (2) Unless specifically prohibited by the articles of
24incorporation or bylaws, directors and committee members may
25participate in and act at any meeting of the board or committee

 

 

HB4887- 5 -LRB101 18452 BMS 67900 b

1through the use of a conference telephone or other
2communications equipment by means of which all persons
3participating in the meeting can communicate with each other.
4Participation in the meeting shall constitute attendance and
5presence in person at the meeting of the person or persons so
6participating.
7    (3) Unless specifically prohibited by the articles of
8incorporation or bylaws, any action required by this Act to be
9taken at a meeting of the board of directors or a committee and
10any other action that may be taken at a meeting of the board of
11directors or a committee may be taken without a meeting if a
12consent in writing setting forth the action taken is signed by
13all the directors entitled to vote with respect to the subject
14matter thereof, or by all members of the committee, as the case
15may be. The consent shall be evidenced by one or more written
16approvals, each of which sets forth the action taken and bears
17the signatures of one or more directors or committee members.
18All the approvals evidencing the consent shall be delivered to
19the secretary to be filed in the corporate records of the
20credit union. The action taken shall be effective when all the
21directors or committee members have approved the consent unless
22the consent specifies a different effective date. A consent
23signed by all the directors or all the members of a committee
24shall have the same effect as a unanimous vote, and may be
25stated as such in any document filed with the director under
26this Act.

 

 

HB4887- 6 -LRB101 18452 BMS 67900 b

1(Source: P.A. 89-603, eff. 8-2-96.)
 
2    (205 ILCS 305/51)  (from Ch. 17, par. 4452)
3    Sec. 51. Other loan programs.
4    (1) Subject to such rules and regulations as the Secretary
5may promulgate, a credit union may participate in loans to
6credit union members jointly with other credit unions,
7corporations, or financial institutions. An originating credit
8union may originate loans only to its own members. A
9participating credit union that is not the originating lender
10may participate in loans made to its own members or to members
11of another participating credit union. "Originating lender"
12means the participating credit union with which the member
13contracts. A master participation agreement must be properly
14executed, and the agreement must include provisions for
15identifying, either through documents incorporated by
16reference or directly in the agreement, the participation loan
17or loans prior to their sale.
18    (2) Any credit union with assets of $500,000 or more may
19loan to its members under scholarship programs which are
20subject to a federal or state law providing 100% repayment
21guarantee.
22    (3) A credit union may purchase the conditional sales
23contracts, notes and similar instruments which evidence an
24indebtedness of its members. In the management of its assets,
25liabilities, and liquidity, a credit union may purchase the

 

 

HB4887- 7 -LRB101 18452 BMS 67900 b

1conditional sales contracts, notes, and other similar
2instruments that evidence the consumer indebtedness of the
3members of another credit union. "Consumer indebtedness" means
4indebtedness incurred for personal, family, or household
5purposes.
6    (4) With approval of the board of directors, a credit union
7may make loans, either on its own or jointly with other credit
8unions, corporations or financial institutions, to credit
9union organizations; provided, that the aggregate amount of all
10such loans outstanding shall not at any time exceed the greater
11of 6% 3% of the paid-in and unimpaired capital and surplus of
12the credit union or the amount authorized for federal credit
13unions.
14(Source: P.A. 97-133, eff. 1-1-12.)
 
15    (205 ILCS 305/57)  (from Ch. 17, par. 4458)
16    Sec. 57. Group purchasing and marketing.
17    (a) A credit union may, consistent with rules and
18regulations promulgated by the Secretary, enter into
19cooperative marketing arrangements to facilitate its members'
20voluntary purchase of such goods and services as are in the
21interest of improving economic and social conditions of the
22members.
23    (b) A credit union may create and use descriptive and brand
24references to promote and market its identity, services, and
25products to its members. In the case of a merger pursuant to

 

 

HB4887- 8 -LRB101 18452 BMS 67900 b

1Section 63, the surviving credit union may identify the merging
2credit union as a division, branch, unit, or other descriptive
3reference that ensures the members understand they are dealing
4with one credit union rather than multiple credit unions as of
5the effective date of the merger.
6(Source: P.A. 100-361, eff. 8-25-17.)
 
7    (205 ILCS 305/59)  (from Ch. 17, par. 4460)
8    Sec. 59. Investment of funds.
9    (a) Funds not used in loans to members may be invested,
10pursuant to subsection (7) of Section 30 of this Act, and
11subject to Departmental rules and regulations:
12        (1) In securities, obligations or other instruments of
13    or issued by or fully guaranteed as to principal and
14    interest by the United States of America or any agency
15    thereof or in any trust or trusts established for investing
16    directly or collectively in the same;
17        (2) In obligations of any state of the United States,
18    the District of Columbia, the Commonwealth of Puerto Rico,
19    and the several territories organized by Congress, or any
20    political subdivision thereof; however, a credit union may
21    not invest more than 10% of its unimpaired capital and
22    surplus in the obligations of one issuer, exclusive of
23    general obligations of the issuer, and investments in
24    municipal securities must be limited to securities rated in
25    one of the 4 highest rating categories by a nationally

 

 

HB4887- 9 -LRB101 18452 BMS 67900 b

1    recognized statistical rating organization;
2        (3) In certificates of deposit or passbook type
3    accounts issued by a state or national bank, mutual savings
4    bank or savings and loan association; provided that such
5    institutions have their accounts insured by the Federal
6    Deposit Insurance Corporation or the Federal Savings and
7    Loan Insurance Corporation; but provided, further, that a
8    credit union's investment in an account in any one
9    institution may exceed the insured limit on accounts;
10        (4) In shares, classes of shares or share certificates
11    of other credit unions, including, but not limited to
12    corporate credit unions; provided that such credit unions
13    have their members' accounts insured by the NCUA or other
14    approved insurers, and that if the members' accounts are so
15    insured, a credit union's investment may exceed the insured
16    limit on accounts;
17        (5) In shares of a cooperative society organized under
18    the laws of this State or the laws of the United States in
19    the total amount not exceeding 10% of the unimpaired
20    capital and surplus of the credit union; provided that such
21    investment shall first be approved by the Department;
22        (6) In obligations of the State of Israel, or
23    obligations fully guaranteed by the State of Israel as to
24    payment of principal and interest;
25        (7) In shares, stocks or obligations of other financial
26    institutions in the total amount not exceeding 5% of the

 

 

HB4887- 10 -LRB101 18452 BMS 67900 b

1    unimpaired capital and surplus of the credit union;
2        (8) In federal funds and bankers' acceptances;
3        (9) In shares or stocks of Credit Union Service
4    Organizations in the total amount not exceeding the greater
5    of 6% 3% of the unimpaired capital and surplus of the
6    credit union or the amount authorized for federal credit
7    unions;
8        (10) In corporate bonds identified as investment grade
9    by at least one nationally recognized statistical rating
10    organization, provided that:
11            (i) the board of directors has established a
12        written policy that addresses corporate bond
13        investment procedures and how the credit union will
14        manage credit risk, interest rate risk, liquidity
15        risk, and concentration risk; and
16            (ii) the credit union has documented in its records
17        that a credit analysis of a particular investment and
18        the issuing entity was conducted by the credit union, a
19        third party on behalf of the credit union qualified by
20        education or experience to assess the risk
21        characteristics of corporate bonds, or a nationally
22        recognized statistical rating agency before purchasing
23        the investment and the analysis is updated at least
24        annually for as long as it holds the investment;
25        (11) To aid in the credit union's management of its
26    assets, liabilities, and liquidity in the purchase of an

 

 

HB4887- 11 -LRB101 18452 BMS 67900 b

1    investment interest in a pool of loans, in whole or in part
2    and without regard to the membership of the borrowers, from
3    other depository institutions and financial type
4    institutions, including mortgage banks, finance companies,
5    insurance companies, and other loan sellers, subject to
6    such safety and soundness standards, limitations, and
7    qualifications as the Department may establish by rule or
8    guidance from time to time;
9        (12) To aid in the credit union's management of its
10    assets, liabilities, and liquidity by receiving funds from
11    another financial institution as evidenced by certificates
12    of deposit, share certificates, or other classes of shares
13    issued by the credit union to the financial institution;
14    and
15        (13) In the purchase and assumption of assets held by
16    other financial institutions, with approval of the
17    Secretary and subject to any safety and soundness
18    standards, limitations, and qualifications as the
19    Department may establish by rule or guidance from time to
20    time.
21    (b) As used in this Section:
22    "Political subdivision" includes, but is not limited to,
23counties, townships, cities, villages, incorporated towns,
24school districts, educational service regions, special road
25districts, public water supply districts, fire protection
26districts, drainage districts, levee districts, sewer

 

 

HB4887- 12 -LRB101 18452 BMS 67900 b

1districts, housing authorities, park districts, and any
2agency, corporation, or instrumentality of a state or its
3political subdivisions, whether now or hereafter created and
4whether herein specifically mentioned or not.
5    "Financial institution" includes any bank, savings bank,
6savings and loan association, or credit union established under
7the laws of the United States, this State, or any other state.
8    (c) A credit union investing to fund an employee benefit
9plan obligation is not subject to the investment limitations of
10this Act and this Section and may purchase an investment that
11would otherwise be impermissible if the investment is directly
12related to the credit union's obligation under the employee
13benefit plan and the credit union holds the investment only for
14so long as it has an actual or potential obligation under the
15employee benefit plan.
16    (d) If a credit union acquires loans from another financial
17institution or financial-type institution pursuant to this
18Section, the credit union shall be authorized to provide loan
19servicing and collection services in connection with those
20loans.
21(Source: P.A. 100-361, eff. 8-25-17; 100-778, eff. 8-10-18;
22101-567, eff. 8-23-19.)
 
23    (205 ILCS 305/64.7)
24    Sec. 64.7. Network credit unions.
25    (a) Two or more credit unions merging pursuant to Section

 

 

HB4887- 13 -LRB101 18452 BMS 67900 b

163 of this Act may elect to request a network credit union
2designation for the surviving credit union from the Secretary.
3The request shall be set forth in the plan of merger and
4certificate of merger executed by the credit unions and
5submitted to the Secretary pursuant to subsection (4) of
6Section 63. The Secretary's approval of a certificate of merger
7containing a network credit union designation request shall
8constitute approval of the use of the network designation as a
9brand or other identifier of the surviving credit union. If the
10surviving credit union desires to include the network
11designation in its legal name, make any other change to its
12legal name, or both, it shall proceed with an amendment to the
13articles of incorporation and bylaws of the surviving credit
14union pursuant to Section 4 of this Act.
15    (b) A network credit union is a cooperative business
16structure comprised of 2 or more merging credit unions with a
17collective goal of efficiently serving their combined
18membership and gaining economies of scale through common
19vision, strategy and initiative. The merging credit unions
20shall be identified as divisional credit unions, branches, or
21units of the network credit union or by other descriptive
22references that ensure the members understand they are dealing
23with one credit union rather than multiple credit unions.
24Descriptive and brand references may also be created and used
25to promote the identity, services, and products of the network
26credit union to its members.

 

 

HB4887- 14 -LRB101 18452 BMS 67900 b

1    (c) Each divisional credit union may have an advisory board
2of directors and a chief management official to assist in
3maintaining and leveraging its respective local identity for
4the benefit of the surviving credit union. The divisional
5credit union advisory boards shall be appointed by the network
6credit union board of directors. Each divisional credit union's
7advisory board of directors may appoint a divisional credit
8union chief management official and may also appoint one of its
9directors to serve on the network credit union's nominating
10committee. A divisional credit union may determine to identify
11its advisory board as a committee and its divisional chief
12management official with a title it deems reasonable and
13appropriate. The network credit union board of directors shall
14require each advisory board member to sign a confidentiality
15and nondisclosure agreement to ensure that information
16concerning the credit union remains confidential.
17    (d) The network credit union is the surviving legal entity
18in the merger and supervision, examination, audit, reporting,
19governance, and management shall be conducted or performed at
20the network credit union level. All share insurance, safety and
21soundness, and statutory and regulatory requirements and
22limitations shall be evaluated at the network credit union
23level.
24(Source: P.A. 99-614, eff. 7-22-16; 100-361, eff. 8-25-17.)
 
25    Section 99. Effective date. This Act takes effect upon
26becoming law.

 

 

HB4887- 15 -LRB101 18452 BMS 67900 b

1 INDEX
2 Statutes amended in order of appearance
3    205 ILCS 305/20.5 new
4    205 ILCS 305/23from Ch. 17, par. 4424
5    205 ILCS 305/29from Ch. 17, par. 4430
6    205 ILCS 305/51from Ch. 17, par. 4452
7    205 ILCS 305/57from Ch. 17, par. 4458
8    205 ILCS 305/59from Ch. 17, par. 4460
9    205 ILCS 305/64.7