< Back to H.R. 5621 (107th Congress, 2001–2002)

Text of the Federal Credit Union Services Expansion Act of 2002

This bill was introduced on October 10, 2002, in a previous session of Congress, but was not enacted. The text of the bill below is as of Oct 10, 2002 (Introduced).

Source: GPO

HR 5621 IH

107th CONGRESS

2d Session

H. R. 5621

To amend the Federal Credit Union Act to expand membership, service, and investment opportunities for credit unions, to expand credit union services within financially underserved communities, to enhance member protections in certain credit union conversions, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 10, 2002

Mr. LAFALCE introduced the following bill; which was referred to the Committee on Financial Services


A BILL

To amend the Federal Credit Union Act to expand membership, service, and investment opportunities for credit unions, to expand credit union services within financially underserved communities, to enhance member protections in certain credit union conversions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Federal Credit Union Services Expansion Act of 2002’.

SEC. 2. EXPANSION OF CREDIT UNION MEMBERSHIP.

    (a) VOLUNTARY MERGERS INVOLVING MULTIPLE COMMON-BOND CREDIT UNIONS- Section 109(d)(2) of the Federal Credit Union Act (12 U.S.C. 1759(d)(2)) is amended--

      (1) by striking ‘or’ at the end of clause (ii) of subparagraph (B);

      (2) by striking the period at the end of subparagraph (C) and inserting ‘; or’; and

      (3) by adding at the end the following new subparagraph:

        ‘(D) a merger involving any such Federal credit union approved by the Board on or after August 7, 1998.’.

    (b) EXPANSION OF SERVICES TO STUDENTS- Section 109(d) of the Federal Credit Union Act (12 U.S.C. 1759(d)) (as amended by subsection (a) of this section) is amended--

      (1) by redesignating paragraph (3) as paragraph (4); and

      (2) by inserting after paragraph (2) the following new paragraph:

      ‘(3) EXCEPTION FOR STUDENT GROUPS-

        ‘(A) IN GENERAL- In the case of a common-bond credit union described in paragraph (1) or (2) of subsection (b), the numerical limitation contained in paragraph (1) (of this subsection) shall not apply with respect to any group of students, whether the identifiable student group comprises all or part of an institution of higher education, elementary school, secondary school, or school district, subject to the conditions of subparagraph (B).

        ‘(B) CONDITIONS- Subparagraph (A) shall apply with respect to a Federal credit union only if the credit union--

          ‘(i) establishes a program to provide appropriate financial education materials and counseling services for members of a student group referred to in such subparagraph, as determined by the Board; and

          ‘(ii) does not provide financial products or services to members of any such student group at a higher cost or under less favorable terms than the costs and terms generally available to other members of the credit union.

        ‘(C) DEFINITIONS- For purposes of this paragraph, the following definitions shall apply:

          ‘(i) ELEMENTARY AND SECONDARY SCHOOL- The terms ‘elementary school’ and ‘secondary school’ have the same meanings as in section 14101 of the Elementary and Secondary Education Act of 1965.

          ‘(ii) INSTITUTION OF HIGHER EDUCATION- The term ‘institution of higher education’ has the same meaning as in section 101(a) of the Higher Education Act of 1965.

    (c) RETENTION OF CERTAIN MEMBER GROUPS IN COMMUNITY CREDIT UNION CHARTER CONVERSIONS- Section 109(g) of the Federal Credit Union Act (12 U.S.C. 1759(g)) is amended by inserting after paragraph (2) the following new paragraph:

      ‘(3) CRITERIA FOR CONTINUED MEMBERSHIP OF CERTAIN MEMBER GROUPS IN COMMUNITY CHARTER CONVERSIONS- In the case of a voluntary conversion of a common-bond credit union described in paragraph (1) or (2) of subsection (b) into a community credit union described in subsection (b)(3), the Board shall prescribe, by regulation, the criteria under which the Board may determine that a member group or other portion of a credit union’s existing membership, that is located outside the well-defined local community, neighborhood, or rural district that shall constitute the community charter, can be satisfactorily served by the credit union and remain within the community credit union’s field of membership.’.

SEC. 3. EXPANSION OF AFFORDABLE SERVICES TO NONMEMBERS.

    Paragraph (12) of section 107(a) of the Federal Credit Union Act (12 U.S.C. 1757(12)) (as so designated by section 303 of this title) is amended to read as follows:

      ‘(12) in accordance with regulations prescribed by the Board--

        ‘(A) to sell, to persons in the field of membership, negotiable checks (including travelers checks), money orders, and other similar money transfer instruments (including electronic fund transfers); and

        ‘(B) to cash checks and money orders and receive electronic fund transfers for persons in the field of membership for a fee;’.

SEC. 4. EXPANSION OF CREDIT UNION BUSINESS LENDING.

    (a) EXPANSION OF BUSINESS LOANS TO CREDIT UNION MEMBERS- Paragraphs (1) and (2) of section 107A(a) of the Federal Credit Union Act (12 U.S.C. 1757a(a)) are each amended by striking ‘1.75’ and inserting ‘2.5’.

    (b) PROVIDING FOR CREDIT UNION PARTICIPATION IN SBA GUARANTEED LOAN PROGRAMS- Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended--

      (1) in paragraph (17), by adding at the end the following new sentence: ‘In administering this subsection, the Administration shall not include in any regulation prescribed, or policy or procedure established and maintained, by the Administration under this paragraph any condition that would exclude, or cause to be excluded, any Federal credit union (as defined in section 101 of the Federal Credit Union Act) from other financial institutions, or types of financial institutions, which the Administration is authorizing to make loans under this subsection.’; and

      (2) in paragraph (20), by adding at the end the following new subparagraph:

        ‘(D) In administering this paragraph, the Administration shall not include in any regulation prescribed, or policy or procedure established and maintained, by the Administration any condition that would exclude, or cause to be excluded, any Federal credit union (as defined in section 101 of the Federal Credit Union Act) from other financial institutions with whom the Administration is cooperating under this paragraph.’.

SEC. 5. EXPANSION OF CREDIT UNION SERVICES TO UNDERSERVED COMMUNITIES.

    (a) EXPANDED AUTHORITY TO SERVE MEMBERS IN UNDERSERVED COMMUNITIES- Section 109(c)(2) of the Federal Credit Union Act (12 U.S.C. 1759(c)(2)) is amended by striking ‘subsection (b)(2)’ and inserting ‘subsection (b)’.

    (b) EXPANDED DEFINITION OF UNDERSERVED AREA- Section 109(c)(2) of the Federal Credit Union Act (12 U.S.C. 1759(c)(2)) (as amended by subsection (a) of this section) is amended--

      (1) in subparagraph (A)(ii), by inserting ‘or has significant unmet needs for affordable short-term credit from depository institutions, based on data of the Board, such Federal banking agencies, and the Federal Trade Commission, showing a high concentration of noninsured commercial credit facilities offering high-cost credit and money transfer services and products’ before the semicolon at the end; and

      (2) in subparagraph (B), by inserting ‘, and provides debt management and counseling services,’ after ‘office or facility’.

SEC. 6. EXPANSION OF CREDIT UNION ELIGIBILITY FOR CDFI ASSISTANCE.

    Section 103(14) of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4702(14)) is amended by inserting ‘and includes a nonprofit organization owned collectively by insured credit unions pursuant to section 107(7)(I) of such Act’ before the period at the end.

SEC. 7. EXPANSION OF CREDIT UNION INVESTMENT AUTHORITY.

    Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended--

      (1) in the matter preceding paragraph (1) by striking ‘A Federal credit union’ and inserting ‘(a) IN GENERAL- Any Federal credit union’; and

      (2) by adding at the end the following new subsection:

    ‘(b) INVESTMENT FOR THE CREDIT UNION’S OWN ACCOUNT-

      ‘(1) IN GENERAL- A Federal credit union may purchase and hold for its own account such investment securities of investment grade as the Board may authorize by regulation, subject to such limitations and restrictions as the Board may prescribe in the regulations.

      ‘(2) PERCENTAGE LIMITATIONS-

        ‘(A) SINGLE OBLIGOR- In no event may the total amount of investment securities of any single obligor or maker held by a Federal credit union for the credit union’s own account exceed at any time an amount equal to 10 percent of the net worth of the credit union.

        ‘(B) AGGREGATE INVESTMENTS- In no event may the aggregate amount of investment securities held by a Federal credit union for the credit union’s own account exceed at any time an amount equal to 10 percent of the assets of the credit union.

      ‘(3) INVESTMENT SECURITY DEFINED-

        ‘(A) IN GENERAL- For purposes of this subsection, the term ‘investment security’ means marketable obligations evidencing the indebtedness of any person in the form of bonds, notes, or debentures and other instruments commonly referred to as investment securities.

        ‘(B) FURTHER DEFINITION BY BOARD- The Board may further define the term ‘investment security’.

      ‘(4) INVESTMENT GRADE DEFINED- The term ‘investment grade’ means with respect to an investment security purchased by a credit union for its own account, an investment security that at the time of such purchase is rated in one of the 4 highest rating categories by at least 1 nationally recognized statistical rating organization.

      ‘(5) CLARIFICATION OF PROHIBITION ON STOCK OWNERSHIP- No provision of this subsection shall be construed as authorizing a Federal credit union to purchase shares of stock of any corporation for the credit union’s own account, except as otherwise permitted by law.’.

SEC. 8. ASSURING MEMBERSHIP PARTICIPATION AND INDEPENDENT DECISION MAKING IN CONNECTION WITH CERTAIN CREDIT UNION CONVERSIONS TO MUTUAL SAVINGS INSTITUTIONS.

    (a) CONVERSION OF INSURED CREDIT UNIONS TO MUTUAL SAVINGS BANKS- Section 205(b)(2) of the Federal Credit Union Act (12 U.S.C. 1785(b)(2)) is amended--

      (1) in subparagraph (A), by striking ‘approval of the Board, subject to’ and inserting ‘approval of the Board, subject to any requirements and procedures the Board may prescribe in regulations and subject to’;

      (2) in the 2nd sentence of subparagraph (B), by inserting ‘in a member vote on such proposal in which not less than a majority of the members of the insured credit union who are eligible to vote on the matter participate in such member vote’ before the period at the end;

      (3) in subparagraph (C)--

        (A) by striking ‘PROPOSAL TO MEMBERS- An insured credit union’ and inserting ‘PROPOSAL TO MEMBERS-

          ‘(i) IN GENERAL- An insured credit union’;

        (B) by redesignating clauses (i), (ii), and (iii) as subclauses (I), (II), and (III) and moving the left margin of such subclauses (as so redesignated) 2 ems to the right; and

        (C) by adding at the end the following new clause:

          ‘(ii) REGULATIONS- The Board shall prescribe regulations specifying the format and wording of such notices, as necessary, to assure that notice of the vote on the conversion is provided clearly and conspicuously and in a manner that is easily read and understood by members.’; and

      (4) in subparagraph (D) by striking ‘during the 90-day period preceding the date of the completion of the conversion’ and inserting ‘before the beginning of the 90-day period for notice to members of the date of the member vote on the conversion’.

    (b) CONVERSIONS OF FORMER CREDIT UNIONS- Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following new subsection:

    ‘(x) CONVERSIONS INVOLVING FORMER CREDIT UNIONS-

      ‘(1) IN GENERAL- Notwithstanding any other provision of law--

        ‘(A) an insured credit union may not convert into an insured depository institution; and

        ‘(B) an insured depository institution which results from a prior conversion of an insured credit union into such insured depository institution may not convert from the mutual form to the stock form of depository institution and may not convert from 1 form of depository institution into another,

    unless the appropriate Federal banking agency for the insured depository institution which would result from any such conversion reviews the conversion and determines that the requirements of paragraphs (2) and (3) have been met.

      ‘(2) PROHIBITION ON ECONOMIC BENEFIT FROM CONVERSION FOR CREDIT UNION OFFICERS, DIRECTORS, AND COMMITTEE MEMBERS- An individual who is or, at any time during the 5-year period preceding any conversion described in paragraph (1), was a director, committee member, or senior management official of an insured credit union described in subparagraph (A) or (B) of such paragraph (in connection with such conversion) may not receive any economic benefit as a result of the conversion with regard to the shares or interests of such director, member, or officer in the former insured credit union or in any resulting insured depository institution.

      ‘(3) ACKNOWLEDGEMENT AND ATTESTATION BY OFFICERS, DIRECTORS, AND COMMITTEE MEMBERS- Any insured credit union or insured depository institution which is seeking to engage in a conversion which is subject to this subsection shall submit--

        ‘(A) a written acknowledgement, in such form and manner as the appropriate Federal banking agency may prescribe, by every individual who is subject to the prohibition contained in paragraph (2), that such individual is aware of such prohibition; and

        ‘(B) an attestation that the conversion under review will not result in a violation of such prohibition.

      ‘(4) DEFINITIONS- For purposes of this section, the following definitions shall apply:

        ‘(A) INSURED CREDIT UNION- The term ‘insured credit union’ has the meaning given to such term in section 101(7) of the Federal Credit Union Act.

        ‘(B) SENIOR MANAGEMENT OFFICIAL- The term ‘senior management official’ means a chief executive officer, an assistant chief executive officer, a chief financial officer, and any other senior executive officer (as defined by the appropriate Federal banking agency pursuant to section 32(f)).’.

SEC. 9. ASSURING APPROPRIATE MEMBERSHIP PARTICIPATION AND DISCLOSURE IN CONNECTION WITH THE TERMINATION OF FEDERAL SHARE INSURANCE.

    (a) ENHANCING MEMBER PARTICIPATION IN CREDIT UNION DECISIONS TO TERMINATE SHARE INSURANCE- Section 206(d)(2) of the Federal Credit Union Act (12 U.S.C. 1786(d)(2) is amended by striking ‘at least 20 per centum of the total membership of the credit union participates’ and inserting ‘not less than a majority of the members of the insured credit union who are eligible to vote on the matter participate in such vote’.

    (b) PROVIDING PROMPT AND CONSPICUOUS NOTICE TO CREDIT UNION MEMBERS OF TERMINATION OF FEDERAL SHARE INSURANCE- Section 206(d) of the Federal Credit Union Act (12 U.S.C. 1786(d)) is amended--

      (1) by striking the fourth sentence in paragraph (2);

      (2) by redesignating paragraph (3) as paragraph (4); and

      (3) by inserting after paragraph (2) the following new paragraph:

      ‘(3) In the event a proposition for the conversion of a credit union from status as an insured credit union is approved by the membership, the credit union shall provide prompt and reasonable notice of insurance conversion to all members and shall, at a time and in such manner as the Board shall determine by regulation, shall--

        ‘(A) include conspicuously in all advertising and at each place where share deposits

are normally received a notice that the credit union is not federally insured;

        ‘(B) include conspicuously in all periodic statements of account, on each signature card, and on each certificate of deposit or other instrument indicating a share deposit, a notice that the credit union is not federally insured and that if the credit union fails the National Credit Union Administration or any other agency of the Federal Government does not guarantee that the depositor will get back their money; and

        ‘(C) receive deposits only for the account of members who have signed a written acknowledgment that the credit union is not federally insured, and that if the institution fails, the National Credit Union Administration or any other agency of the Federal Government does not guarantee that they will get back their money.’.

    (c) ASSURING INDEPENDENT DECISION MAKING IN CONNECTION WITH TERMINATION OF FEDERAL SHARE INSURANCE- Section 206(a) of the Federal Credit Union Act (12 U.S.C. 1786) is amended by adding at the end the following new paragraph:

      ‘(3) ASSURING INDEPENDENT DECISION MAKING-

        ‘(A) IN GENERAL- An individual who is or, at any time during the 1-year period proceeding any conversion described in paragraph (2), was a director, committee member, or senior management official of an insured credit union may not receive any economic benefit from the insuring corporation described in such paragraph for a period of 5 years following such conversion.

        ‘(B) SENIOR MANAGEMENT OFFICIAL DEFINED- For purposes of this paragraph, the term ‘senior management official’ means a chief executive officer, an assistant chief executive officer, a chief financial officer, and any other senior executive officer as defined by the Board.’.

SEC. 10. PROVIDING FOR PARITY IN REQUIREMENTS GOVERNING FEDERAL AND STATE CHARTERED INSURED CREDIT UNIONS.

    Section 205 of the Federal Credit Union Act (12 U.S.C. 1785) is amended by inserting at the end the following new subsection:

    ‘(h) MEMBERSHIP AND ACTIVITIES OF INSURED STATE-CHARTERED CREDIT UNIONS-

      ‘(1) IN GENERAL- Beginning on the date of the enactment of the Federal Credit Union Services Expansion Act of 2002, a State chartered insured credit union may not--

        ‘(A) include within the membership of the credit union any person or organization that is not permissible for Federal credit unions; or

        ‘(B) exercise any asset powers of a type, or in an amount, not authorized for Federal credit unions, nor engage in any type of activity, or in any activity in any amount, that is not permissible for Federal credit unions unless the Board has determined that--

          ‘(i) the asset power or activity would pose no significant risk to the Fund;

          ‘(ii) the asset power or activity is consistent with the mission and purpose of Federal credit unions, as defined in title I of this Act, and is consistent with all powers and limitations conferred and imposed on Federal credit unions under title I of this Act; and

          ‘(iii) the State chartered insured credit union is and continues to be in compliance with applicable capital standards as prescribed pursuant to section 216 of this Act.

      ‘(2) CONTINUED RULEMAKING AUTHORITY- No provision of paragraph (1) shall be construed as restricting or limiting in any way the general rulemaking authority of the Board.’.