Bill Text: IL HB1572 | 2013-2014 | 98th General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Amends the Illinois Credit Union Act. Provides that the Department of Financial and Professional Regulation may assess a civil penalty against credit unions only when the Secretary of Financial and Professional Regulation reasonably determines, based on objective facts and an accurate assessment of applicable legal standards, that the credit union has committed a violation of the Act, any rule adopted in accordance with the Act, or any order of the Secretary issued pursuant to his or her authority under the Act or has engaged or participated in any unsafe or unsound practice, and that the violation or unsafe or unsound practice has directly resulted in a substantial and material financial loss or created a reasonable probability that a substantial and material financial loss will directly result, or that violation or unsafe or unsound practice constituted willful misconduct and a material breach of fiduciary duty of any director, officer, or committee member of the credit union. Provides that civil penalty orders are confidential supervisory information and shall be prohibited from disclosure to any person, except that once such an order is a final administrative decision of the Department and has been adjudicated to finality, a concise syllabus of the order may be posted on the Department's official website. Effective immediately.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Passed) 2013-08-16 - Public Act . . . . . . . . . 98-0400 [HB1572 Detail]

Download: Illinois-2013-HB1572-Introduced.html

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98TH GENERAL ASSEMBLY State of Illinois 2013 and 2014 HB1572 Introduced , by Rep. Lou Lang SYNOPSIS AS INTRODUCED:
205 ILCS 305/8 from Ch. 17, par. 4409
Amends the Illinois Credit Union Act. Provides that the Department of Financial and Professional Regulation may assess a civil penalty against credit unions only when the Secretary of Financial and Professional Regulation reasonably determines, based on objective facts and an accurate assessment of applicable legal standards, that the credit union has committed a violation of the Act, any rule adopted in accordance with the Act, or any order of the Secretary issued pursuant to his or her authority under the Act or has engaged or participated in any unsafe or unsound practice, and that the violation or unsafe or unsound practice has directly resulted in a substantial and material financial loss or created a reasonable probability that a substantial and material financial loss will directly result, or that violation or unsafe or unsound practice constituted willful misconduct and a material breach of fiduciary duty of any director, officer, or committee member of the credit union. Provides that civil penalty orders are confidential supervisory information and shall be prohibited from disclosure to any person, except that once such an order is a final administrative decision of the Department and has been adjudicated to finality, a concise syllabus of the order may be posted on the Department's official website. Effective immediately.
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FISCAL NOTE ACT MAY APPLY
A BILL FOR
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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 Section 8 as follows:
(205 ILCS 305/8) (from Ch. 17, par. 4409)
Sec. 8. Secretary's powers and duties. Credit unions are
regulated by the Department. The Secretary in executing the
powers and discharging the duties vested by law in the
Department has the following powers and duties:
(1) To exercise the rights, powers and duties set forth
in this Act or any related Act. The Director shall oversee
the functions of the Division and report to the Secretary,
with respect to the Director's exercise of any of the
rights, powers, and duties vested by law in the Secretary
under this Act. All references in this Act to the Secretary
shall be deemed to include the Director, as a person
authorized by the Secretary or this Act to assume
responsibility for the oversight of the functions of the
Department relating to the regulatory supervision of
credit unions under this Act.
(2) To prescribe rules and regulations for the
administration of this Act. The provisions of the Illinois

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Administrative Procedure Act are hereby expressly adopted
and incorporated herein as though a part of this Act, and
shall apply to all administrative rules and procedures of
the Department under this Act.
(3) To direct and supervise all the administrative and
technical activities of the Department including the
employment of a Credit Union Supervisor who shall have
knowledge in the theory and practice of, or experience in,
the operations or supervision of financial institutions,
preferably credit unions, and such other persons as are
necessary to carry out his functions. The Secretary shall
ensure that all examiners appointed or assigned to examine
the affairs of State-chartered credit unions possess the
necessary training and continuing education to effectively
execute their jobs.
(4) To issue cease and desist orders when in the
opinion of the Secretary, a credit union is engaged or has
engaged, or the Secretary has reasonable cause to believe
the credit union is about to engage, in an unsafe or
unsound practice, or is violating or has violated or the
Secretary has reasonable cause to believe is about to
violate a law, rule or regulation or any condition imposed
in writing by the Department.
(5) To suspend from office and to prohibit from further
participation in any manner in the conduct of the affairs
of his credit union any director, officer or committee

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member who has committed any violation of a law, rule,
regulation or of a cease and desist order or who has
engaged or participated in any unsafe or unsound practice
in connection with the credit union or who has committed or
engaged in any act, omission, or practice which constitutes
a breach of his fiduciary duty as such director, officer or
committee member, when the Secretary has determined that
such action or actions have resulted or will result in
substantial financial loss or other damage that seriously
prejudices the interests of the members.
(6) To assess a civil penalty against a credit union
for a violation of this Act, any rule adopted in accordance
with this Act, any order of the Secretary issued under his
or her authority under this Act, or any other action that
in the Secretary's discretion is an unsafe or unsound
practice provided that:
(A) the Secretary reasonably determines, based on
objective facts and an accurate assessment of
applicable legal standards, that the credit union has:
(i) committed a violation of this Act, any rule
adopted in accordance with this Act, or any order
of the Secretary issued pursuant to his or her
authority under this Act; or
(ii) engaged or participated in any unsafe or
unsound practice;
(B) before a civil penalty is assessed under this

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item (6), the Secretary must make the further
reasonable determination, based on objective facts and
an accurate assessment of applicable legal standards,
that the credit union's action constituting a
violation under subparagraph (i) of paragraph (A) of
item (6) or an unsafe and unsound practice under
subparagraph (ii) of paragraph (A) of item (6):
(i) directly resulted in a substantial and
material financial loss or created a reasonable
probability that a substantial and material
financial loss will directly result; or
(ii) constituted willful misconduct and a
material breach of fiduciary duty of any director,
officer, or committee member of the credit union;
Material financial loss, as referenced in this
paragraph (B), shall be assessed in light of
surrounding circumstances and the relative size and
nature of the financial loss or probable financial
loss. Certain benchmarks shall be used in determining
whether financial loss is material, such as a
percentage of total assets or total gross income for
the immediately preceding 12-month period. Absent
compelling and extraordinary circumstances, no civil
penalty shall be assessed, unless the financial loss or
probable financial loss is equal to or greater than
either 1% of the credit union's total assets for the

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immediately preceding 12-month period, or 1% of the
credit union's total gross income for the immediately
preceding 12-month period, whichever is less;
(C) (A) before a civil penalty is assessed under
this item (6), the credit union must be expressly
advised in writing of the:
(i) specific violation that could subject it
to a penalty under this item (6); and
(ii) the specific remedial action to be taken
within a specific and reasonable time frame to
avoid imposition of the penalty; .
(D) Civil penalties assessed under this item (6)
shall be remedial, not punitive, and reasonably
tailored to ensure future compliance by the credit
union with the provisions of this Act and any rules
adopted pursuant to this Act;
(E) (B) a credit union's failure to take timely
remedial action with respect to the specific violation
may result in the issuance of an order assessing a
civil penalty up to the following maximum amount, based
upon the total assets of the credit union:
(i) Credit unions with assets of less than $10
million................................................$1,000
(ii) Credit unions with assets of at least $10
million and less than $50 million......................$2,500
(iii) Credit unions with assets of at least $50

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million and less than $100 million.....................$5,000
(iv) Credit unions with assets of at least $100
million and less than $500 million....................$10,000
(v) Credit unions with assets of at least $500
million and less than $1 billion......................$25,000
(vi) Credit unions with assets of $1 billion
and greater......................................$50,000; and
(F) (C) an order assessing a civil penalty under
this item (6) shall take effect upon service of the
order, unless the credit union makes a written request
for a hearing under 38 IL. Adm. Code 190.20 of the
Department's rules for credit unions within 90 days
after issuance of the order; in . In that event, the
order shall be stayed until a final administrative
order is entered; notwithstanding any other provision
of this Act or any other law to the contrary, civil
penalty orders are confidential supervisory
information pursuant to Section 9.1 of this Act and
shall be prohibited from disclosure to any person,
except that once such an order is a final
administrative decision of the Department and has been
adjudicated to finality, a concise syllabus of the
order may be posted on the Department's official
website. ; and
(D) in the event a credit union commits a
subsequent violation that is substantially similar to

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the initial violation for which a cure period under
paragraph (A) of this item (6) was provided the credit
union, no additional cure period shall be required
before another order is issued assessing a civil
penalty for the subsequent violation. Any such order
shall take effect upon service of the order, subject to
the credit union's right to request a hearing as
described in paragraph (C) of this item (6). If a
hearing is requested, the order shall be stayed until a
final administrative order is entered.
This item (6) shall not apply to violations separately
addressed in rules as authorized under item (7) of this
Section.
(7) Except for the fees established in this Act, to
prescribe, by rule and regulation, fees and penalties for
preparing, approving, and filing reports and other
documents; furnishing transcripts; holding hearings;
investigating applications for permission to organize,
merge, or convert; failure to maintain accurate books and
records to enable the Department to conduct an examination;
and taking supervisory actions.
(8) To destroy, in his discretion, any or all books and
records of any credit union in his possession or under his
control after the expiration of three years from the date
of cancellation of the charter of such credit unions.
(9) To make investigations and to conduct research and

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studies and to publish some of the problems of persons in
obtaining credit at reasonable rates of interest and of the
methods and benefits of cooperative saving and lending for
such persons.
(10) To authorize, foster or establish experimental,
developmental, demonstration or pilot projects by public
or private organizations including credit unions which:
(a) promote more effective operation of credit
unions so as to provide members an opportunity to use
and control their own money to improve their economic
and social conditions; or
(b) are in the best interests of credit unions,
their members and the people of the State of Illinois.
(11) To cooperate in studies, training or other
administrative activities with, but not limited to, the
NCUA, other state credit union regulatory agencies and
industry trade associations in order to promote more
effective and efficient supervision of Illinois chartered
credit unions.
(Source: P.A. 97-133, eff. 1-1-12.)
Section 99. Effective date. This Act takes effect upon
becoming law.