Public Act 102-0496
 
HB3698 EnrolledLRB102 10352 BMS 22230 b

    AN ACT concerning regulation.
 
    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 19, 23, 34, 51, 57, 59, and 64.7 and by
adding Section 20.5 as follows:
 
    (205 ILCS 305/19)  (from Ch. 17, par. 4420)
    Sec. 19. Meeting of members.
    (1)(a) The annual meeting shall be held each year during
the months of January, February or March or such other month as
may be approved by the Department. The meeting shall be held at
the time, place and in the manner set forth in the bylaws. Any
special meetings of the members of the credit union shall be
held at the time, place and in the manner set forth in the
bylaws. Unless otherwise set forth in this Act, quorum
requirements for meetings of members shall be established by a
credit union in its bylaws. Notice of all meetings must be
given by the secretary of the credit union at least 7 days
before the date of such meeting, either by handing a written or
printed notice to each member of the credit union, by mailing
the notice to the member at his address as listed on the books
and records of the credit union, or by posting a notice of the
meeting in three conspicuous places, including the office of
the credit union, by posting the notice of the meeting on the
credit union's website, or by disclosing the notice of the
meeting in membership newsletters or account statements.
    (b) Unless expressly prohibited by the articles of
incorporation or bylaws and subject to applicable requirements
of this Act, the board of directors may provide by resolution
that members may attend, participate in, act in, and vote at
any annual meeting or special meeting through the use of a
conference telephone or interactive technology, including, but
not limited to, electronic transmission, internet usage, or
remote communication, by means of which all persons
participating in the meeting can communicate with each other.
Participation through the use of a conference telephone or
interactive technology shall constitute attendance, presence,
and representation in person at the annual meeting or special
meeting of the person or persons so participating and count
towards the quorum required to conduct business at the
meeting. The following conditions shall apply to any virtual
meeting of the members:
        (i) the credit union must internally possess or retain
    the technological capacity to facilitate virtual meeting
    attendance, participation, communication, and voting; and
        (ii) the members must receive notice of the use of a
    virtual meeting format and appropriate instructions for
    joining, participating, and voting during the virtual
    meeting at least 7 days before the virtual meeting.
    (2) On all questions and at all elections, except election
of directors, each member has one vote regardless of the
number of his shares. There shall be no voting by proxy except
on the election of directors, proposals for merger or
voluntary dissolution. Members may vote on questions,
including, without limitation, the approval of mergers and
voluntary dissolutions under this Act, and in elections by
secure electronic record if approved by the board of
directors. All voting on the election of directors shall be by
ballot, but when there is no contest, written or electronic
ballots need not be cast. The record date to be used for the
purpose of determining which members are entitled to notice of
or to vote at any meeting of members, may be fixed in advance
by the directors on a date not more than 90 days nor less than
10 days prior to the date of the meeting. If no record date is
fixed by the directors, the first day on which notice of the
meeting is given, mailed or posted is the record date.
    (3) Regardless of the number of shares owned by a society,
association, club, partnership, other credit union or
corporation, having membership in the credit union, it shall
be entitled to only one vote and it may be represented and have
its vote cast by its designated agent acting on its behalf
pursuant to a resolution adopted by the organization's board
of directors or similar governing authority; provided that the
credit union shall obtain a certified copy of such resolution
before such vote may be cast.
    (4) A member may revoke a proxy by delivery to the credit
union of a written statement to that effect, by execution of a
subsequently dated proxy, by execution of a secure electronic
record, or by attendance at a meeting and voting in person.
    (5) As used in this Section, "electronic" and "electronic
record" have the meanings ascribed to those terms in the
Electronic Commerce Security Act. As used in this Section,
"secured electronic record" means an electronic record that
meets the criteria set forth in Section 10-105 of the
Electronic Commerce Security Act.
(Source: P.A. 100-361, eff. 8-25-17.)
 
    (205 ILCS 305/20.5 new)
    Sec. 20.5. Appointment of associate directors.
    (a) The board of directors of a credit union may, in its
discretion, appoint one or more associate directors to serve
in an advisory capacity. The board shall prescribe the duties
of an associate director and the manner in which associate
directors are appointed and removed. The board shall not
delegate to associate directors any of the duties or
responsibilities prescribed by this Act or other applicable
law to be performed by directors duly elected by their
members. An associate director shall not be deemed or
considered to be a director for any purpose under this Act.
    (b) Before appointing an associate director, the board
shall confirm that the person meets all of the requirements to
serve as a director, including, without limitation, a working
familiarity with the financial and accounting practices of the
credit union as set forth in subsection (c) of Section 30.
    (c) An associate director may participate in meetings of
the board but may not vote or otherwise act as a director. With
respect to any issue that comes before the board for
deliberation, the board may request that all associate
directors excuse themselves from the meeting of the board and
the associate directors shall immediately comply with the
request.
    (d) The board shall require each associate director to
sign a confidentiality or non-disclosure agreement to ensure
that information concerning the credit union remains
confidential.
 
    (205 ILCS 305/23)  (from Ch. 17, par. 4424)
    Sec. 23. Compensation of officials.
    (1) Directors and committee members may receive reasonable
compensation for their service as such, the amount of which
shall be set by the board of directors, in accordance with
written policies and procedures established by the board of
directors. If the Department determines the payment of
director or committee member compensation, or both, creates a
safety and soundness issue for a credit union, the Department
shall utilize the standards set forth in 38 Ill. Adm. Code
190.25 and supplemental guidelines to address and resolve the
issue. An enforcement action taken pursuant to 38 Ill. Adm.
Code 190.25 and guidelines and specified by the Act shall be
used to reduce or suspend the compensation paid to the
directors and committee members. The Department shall, by
rule, establish maximum rates of reasonable compensation that
are generally applicable to credit unions considering factors
the Department may establish from time to time, including, but
not limited to, total assets, nonprofit cooperative structure,
and the best interests of members. "Compensation" as used in
this subsection (1) refers to remuneration expense to the
credit union for services provided by a director or committee
member in his or her capacity as director or committee member.
The remuneration expense is in the form of monetary payments
and shall be disclosed on an annual basis to the membership in
the financial statement that is part of the annual membership
meeting materials. The disclosure shall contain: (i) the
amount paid to each director and (ii) the amount paid to the
directors as a group. "Compensation" does not include any of
the expenses described in subsections (2) and (3) of this
Section.
    (2) The credit union may incur the expense of providing
reasonable life, health, accident, and similar insurance
protection benefits for directors and committee members.
    (3) Directors, committee members and employees, while on
official business of the credit union, may be reimbursed for
reasonable and necessary expenses. Alternatively, the credit
union may make direct payment to a third party for such
business expenses. Reasonable and necessary expenses may
include the payment of travel costs for the foregoing
officials and one guest per official. All payment of costs
shall be made in accordance with written policies and
procedures established by the board of directors.
    (4) The board of directors may establish compensation for
officers of the credit union.
(Source: P.A. 101-567, eff. 8-23-19.)
 
    (205 ILCS 305/34)  (from Ch. 17, par. 4435)
    Sec. 34. Duties of supervisory committee.
    (1) The supervisory committee shall make or cause to be
made an annual internal audit of the books and affairs of the
credit union to determine that the credit union's accounting
records and reports are prepared promptly and accurately
reflect operations and results, that internal controls are
established and effectively maintained to safeguard the assets
of the credit union, and that the policies, procedures and
practices established by the board of directors and management
of the credit union are being properly administered. The
supervisory committee shall submit a report of that audit to
the board of directors and a summary of that report to the
members at the next annual meeting of the credit union. It
shall make or cause to be made such supplementary audits as it
deems necessary or as are required by the Secretary or by the
board of directors, and submit reports of these supplementary
audits to the Secretary or board of directors as applicable.
If the supervisory committee has not engaged a licensed
certified public accountant or licensed certified public
accounting firm to make the internal audit, the supervisory
committee or other officials of the credit union shall not
indicate or in any manner imply that such audit has been
performed by a licensed certified public accountant or
licensed certified public accounting firm or that the audit
represents the independent opinion of a licensed certified
public accountant or licensed certified public accounting
firm. The supervisory committee must retain its tapes and
working papers of each internal audit for inspection by the
Department. The report of this audit must be made on a form
approved by the Secretary. A copy of the report must be
promptly delivered to the Secretary as set forth in paragraph
(C) of subsection (3).
    (2) The supervisory committee shall make or cause to be
made at least once each year a reasonable percentage
verification of members' share and loan accounts, consistent
with rules promulgated by the Secretary.
    (3) (A) The supervisory committee of a credit union with
assets of $10,000,000 or more shall engage a licensed
certified public accountant or licensed certified public
accounting firm to perform an annual external independent
audit of the credit union's financial statements in accordance
with generally accepted auditing standards and the financial
statements shall be issued in accordance with accounting
principles generally accepted in the United States of America.
    (B) The supervisory committee of a credit union with
assets of $5,000,000 or more, but less than $10,000,000, shall
engage a licensed certified public accountant or licensed
certified public accounting firm to perform on an annual
basis: (i) an agreed-upon procedures engagement under
attestation standards established by the American Institute of
Certified Public Accountants to minimally satisfy the
supervisory committee internal audit standards set forth in
subsection (1); or (ii) an external independent audit of the
credit union's financial statements pursuant to the standards
set forth in paragraph (A) of subsection (3).
    (C) Notwithstanding anything to the contrary in Section 6,
each credit union organized under this Act shall select the
annual period it desires to use for purposes of performing the
external independent audit, agreed-upon procedures engagement,
or internal audit described in this Section. The annual period
may end on the final day of any month and shall be construed to
mean once every calendar year and not once every 12-month
period. Irrespective of the annual period selected, the credit
union shall complete its external independent audit report,
agreed-upon procedures report, or internal audit report and
deliver a copy to the Secretary no later than 120 days after
the effective date of the audit or engagement, which shall
mean the last day of the selected annual period. The external
independent audit report or agreed-upon procedures report
shall be completed and a copy thereof delivered to the
Secretary no later than 120 days after the end of the calendar
or fiscal year under audit or fiscal period for which the
agreed-upon procedures are performed. A credit union or group
of credit unions may obtain an extension of the due date upon
application to and receipt of written approval from the
Secretary.
    (D) If the credit union engages a licensed certified
public accountant or licensed certified public accounting firm
to perform an annual external independent audit of the credit
union's financial statements pursuant to the standards in
paragraph (A) of subsection (3) or an annual agreed-upon
procedures engagement pursuant to the standards in paragraph
(B) of subsection (3), then the annual internal audit
requirements of subsection (1) shall be deemed satisfied and
met in all respects.
    (4) In determining the appropriate balance in the
allowance for loan losses account, a credit union may
determine its historical loss rate using a defined period of
time of less than 5 years, provided that:
        (A) the methodology used to determine the defined
    period of time is formally documented in the credit
    union's policies and procedures and is appropriate to the
    credit union's size, business strategy, and loan portfolio
    characteristics and the economic environment of the areas
    and employers served by the credit union;
        (B) supporting documentation is maintained for the
    technique used to develop the credit union loss rates,
    including the period of time used to accumulate historical
    loss data and the factors considered in establishing the
    time frames; and
        (C) the external auditor conducting the credit union's
    financial statement audit has analyzed the methodology
    employed by the credit union and concludes that the
    financial statements, including the allowance for loan
    losses, are fairly stated in all material respects in
    accordance with U.S. Generally Accepted Accounting
    Principles, as promulgated by the Financial Accounting
    Standards Board.
    (5) A majority of the members of the supervisory committee
shall constitute a quorum.
    (6) On an annual basis commencing January 1, 2015, the
members of the supervisory committee shall receive training
related to their statutory duties. Supervisory committee
members may receive the training through internal credit union
training, external training offered by the credit union's
retained auditors, trade associations, vendors, regulatory
agencies, or any other sources or on-the-job experience, or a
combination of those activities. The training may be received
through any medium, including, but not limited to,
conferences, workshops, audit closing meetings, seminars,
teleconferences, webinars, and other Internet-based delivery
channels.
(Source: P.A. 100-778, eff. 8-10-18; 101-81, eff. 7-12-19.)
 
    (205 ILCS 305/51)  (from Ch. 17, par. 4452)
    Sec. 51. Other loan programs.
    (1) Subject to such rules and regulations as the Secretary
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 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. In the management of its assets,
liabilities, and liquidity, a credit union may purchase the
conditional sales contracts, notes, and other similar
instruments that evidence the consumer indebtedness of the
members of another credit union. "Consumer indebtedness" means
indebtedness incurred for personal, family, or household
purposes.
    (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 6% 3% of the paid-in and unimpaired
capital and surplus of the credit union or the amount
authorized for federal credit unions.
    (5) With the 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
community development financial institutions as defined in
regulations issued by the U.S. Department of the Treasury and
minority depository institutions as defined by the National
Credit Union Administration. The aggregate amount of all such
loans outstanding shall not at any time exceed 5% of the
paid-in and unimpaired capital and surplus of the credit
union.
(Source: P.A. 97-133, eff. 1-1-12.)
 
    (205 ILCS 305/57)  (from Ch. 17, par. 4458)
    Sec. 57. Group purchasing and marketing.
    (a) A credit union may, consistent with rules and
regulations promulgated by the Secretary, enter into
cooperative marketing arrangements to facilitate its members'
voluntary purchase of such goods and services as are in the
interest of improving economic and social conditions of the
members.
    (b) A credit union may create and use descriptive and
brand references to promote and market its identity, services,
and products to its members. In the case of a merger pursuant
to Section 63, the surviving credit union may identify the
merging credit union as a division, branch, unit, or other
descriptive reference that ensures the members understand they
are dealing with one credit union rather than multiple credit
unions, as of the effective date of the merger.
(Source: P.A. 100-361, eff. 8-25-17.)
 
    (205 ILCS 305/59)  (from Ch. 17, par. 4460)
    Sec. 59. Investment of funds.
    (a) 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 6% 3% of the unimpaired capital and surplus of
    the credit union or the amount authorized for federal
    credit unions;
        (10) In corporate bonds identified as investment grade
    by at least one nationally recognized statistical rating
    organization, provided that:
            (i) the board of directors has established a
        written policy that addresses corporate bond
        investment procedures and how the credit union will
        manage credit risk, interest rate risk, liquidity
        risk, and concentration risk; and
            (ii) the credit union has documented in its
        records that a credit analysis of a particular
        investment and the issuing entity was conducted by the
        credit union, a third party on behalf of the credit
        union qualified by education or experience to assess
        the risk characteristics of corporate bonds, or a
        nationally recognized statistical rating agency before
        purchasing the investment and the analysis is updated
        at least annually for as long as it holds the
        investment;
        (11) To aid in the credit union's management of its
    assets, liabilities, and liquidity in the purchase of an
    investment interest in a pool of loans, in whole or in part
    and without regard to the membership of the borrowers,
    from other depository institutions and financial type
    institutions, including mortgage banks, finance companies,
    insurance companies, and other loan sellers, subject to
    such safety and soundness standards, limitations, and
    qualifications as the Department may establish by rule or
    guidance from time to time;
        (12) To aid in the credit union's management of its
    assets, liabilities, and liquidity by receiving funds from
    another financial institution as evidenced by certificates
    of deposit, share certificates, or other classes of shares
    issued by the credit union to the financial institution;
    and
        (13) In the purchase and assumption of assets held by
    other financial institutions, with approval of the
    Secretary and subject to any safety and soundness
    standards, limitations, and qualifications as the
    Department may establish by rule or guidance from time to
    time; and .
        (14) In the shares, stocks, or obligations of
    community development financial institutions as defined in
    regulations issued by the U.S. Department of the Treasury
    and minority depository institutions as defined by the
    National Credit Union Administration; however the
    aggregate amount of all such investments shall not at any
    time exceed 5% of the paid-in and unimpaired capital and
    surplus of the credit union.
    (b) 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.
    "Financial institution" includes any bank, savings bank,
savings and loan association, or credit union established
under the laws of the United States, this State, or any other
state.
    (c) A credit union investing to fund an employee benefit
plan obligation is not subject to the investment limitations
of this Act and this Section and may purchase an investment
that would otherwise be impermissible if the investment is
directly related to the credit union's obligation under the
employee benefit plan and the credit union holds the
investment only for so long as it has an actual or potential
obligation under the employee benefit plan.
    (d) If a credit union acquires loans from another
financial institution or financial-type institution pursuant
to this Section, the credit union shall be authorized to
provide loan servicing and collection services in connection
with those loans.
(Source: P.A. 100-361, eff. 8-25-17; 100-778, eff. 8-10-18;
101-567, eff. 8-23-19.)
 
    (205 ILCS 305/64.7)
    Sec. 64.7. Network credit unions.
    (a) Two or more credit unions merging pursuant to Section
63 of this Act may elect to request a network credit union
designation for the surviving credit union from the Secretary.
The request shall be set forth in the plan of merger and
certificate of merger executed by the credit unions and
submitted to the Secretary pursuant to subsection (4) of
Section 63. The Secretary's approval of a certificate of
merger containing a network credit union designation request
shall constitute approval of the use of the network
designation as a brand or other identifier of the surviving
credit union. If the surviving credit union desires to include
the network designation in its legal name, make any other
change to its legal name, or both, it shall proceed with an
amendment to the articles of incorporation and bylaws of the
surviving credit union pursuant to Section 4 of this Act.
    (b) A network credit union is a cooperative business
structure comprised of 2 or more merging credit unions with a
collective goal of efficiently serving their combined
membership and gaining economies of scale through common
vision, strategy and initiative. The merging credit unions
shall be identified as divisional credit unions, branches, or
units of the network credit union or by other descriptive
references that ensure the members understand they are dealing
with one credit union rather than multiple credit unions.
Descriptive and brand references may also be created and used
to promote the identity, services, and products of the network
credit union to its members.
    (c) Each divisional credit union may have an advisory
board of directors and a chief management official to assist
in maintaining and leveraging its respective local identity
for the benefit of the surviving credit union. The divisional
credit union advisory boards shall be appointed by the network
credit union board of directors. Each divisional credit
union's advisory board of directors may appoint a divisional
credit union chief management official and may also appoint
one of its directors to serve on the network credit union's
nominating committee. A divisional credit union may determine
to identify its advisory board as a committee and its
divisional chief management official with a title it deems
reasonable and appropriate. The network credit union board of
directors shall require each advisory board member to sign a
confidentiality or non-disclosure agreement to ensure that
information concerning the credit union remains confidential.
    (d) The network credit union is the surviving legal entity
in the merger and supervision, examination, audit, reporting,
governance, and management shall be conducted or performed at
the network credit union level. All share insurance, safety
and soundness, and statutory and regulatory requirements and
limitations shall be evaluated at the network credit union
level.
(Source: P.A. 99-614, eff. 7-22-16; 100-361, eff. 8-25-17.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/20/2021