Bill Text: IL HB5497 | 2017-2018 | 100th General Assembly | Chaptered


Bill Title: Amends the Illinois Credit Union Act. Provides that a credit union may furnish the financial records of a member to an appropriate law enforcement authority upon written request from the law enforcement authority explaining a reasonable suspicion of an imminent threat to the personal security and safety of a member exists. Provides that a supervisory committee of a credit union with assets of $10,000,000 or more shall engage a certified public accountant or certified public accounting firm licensed by the Department of Financial and Professional Regulation to perform an annual external independent audit. Provides that a supervisory committee of a credit union with assets of $5,000,000 or more but less than $10,000,000 shall engage a certified public accountant or certified public accounting firm licensed by the Department to perform an annual external independent audit or an agreed-upon procedures report. Provides that the external independent audit report or agreed upon procedures report shall be delivered to the Secretary of Financial and Professional Regulation no later than 120 days after the end of the calendar or fiscal year. Provides that funds not used in loans to the credit union's members may be invested to aid in the credit union's management or in the purchase and assumption of assets held by other financial institutions. Makes other changes. Effective immediately.

Spectrum: Slight Partisan Bill (Democrat 4-2)

Status: (Passed) 2018-08-10 - Public Act . . . . . . . . . 100-0778 [HB5497 Detail]

Download: Illinois-2017-HB5497-Chaptered.html



Public Act 100-0778
HB5497 EnrolledLRB100 20610 LNS 36026 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 10, 34, and 59 as follows:
(205 ILCS 305/10) (from Ch. 17, par. 4411)
Sec. 10. Credit union records; member financial records.
(1) A credit union shall establish and maintain books,
records, accounting systems and procedures which accurately
reflect its operations and which enable the Department to
readily ascertain the true financial condition of the credit
union and whether it is complying with this Act.
(2) A photostatic or photographic reproduction of any
credit union records shall be admissible as evidence of
transactions with the credit union.
(3)(a) For the purpose of this Section, the term "financial
records" means any original, any copy, or any summary of (1) a
document granting signature authority over an account, (2) a
statement, ledger card or other record on any account which
shows each transaction in or with respect to that account, (3)
a check, draft or money order drawn on a financial institution
or other entity or issued and payable by or through a financial
institution or other entity, or (4) any other item containing
information pertaining to any relationship established in the
ordinary course of business between a credit union and its
member, including financial statements or other financial
information provided by the member.
(b) This Section does not prohibit:
(1) The preparation, examination, handling or
maintenance of any financial records by any officer,
employee or agent of a credit union having custody of such
records, or the examination of such records by a certified
public accountant engaged by the credit union to perform an
independent audit.
(2) The examination of any financial records by or the
furnishing of financial records by a credit union to any
officer, employee or agent of the Department, the National
Credit Union Administration, Federal Reserve board or any
insurer of share accounts for use solely in the exercise of
his duties as an officer, employee or agent.
(3) The publication of data furnished from financial
records relating to members where the data cannot be
identified to any particular customer of account.
(4) The making of reports or returns required under
Chapter 61 of the Internal Revenue Code of 1954.
(5) Furnishing information concerning the dishonor of
any negotiable instrument permitted to be disclosed under
the Uniform Commercial Code.
(6) The exchange in the regular course of business of
(i) credit information between a credit union and other
credit unions or financial institutions or commercial
enterprises, directly or through a consumer reporting
agency or (ii) financial records or information derived
from financial records between a credit union and other
credit unions or financial institutions or commercial
enterprises for the purpose of conducting due diligence
pursuant to a merger or a purchase or sale of assets or
liabilities of the credit union.
(7) The furnishing of information to the appropriate
law enforcement authorities where the credit union
reasonably believes it has been the victim of a crime.
(8) The furnishing of information pursuant to the
Revised Uniform Unclaimed Property Act.
(9) The furnishing of information pursuant to the
Illinois Income Tax Act and the Illinois Estate and
Generation-Skipping Transfer Tax Act.
(10) The furnishing of information pursuant to the
federal "Currency and Foreign Transactions Reporting Act",
Title 31, United States Code, Section 1051 et sequentia.
(11) The furnishing of information pursuant to any
other statute which by its terms or by regulations
promulgated thereunder requires the disclosure of
financial records other than by subpoena, summons, warrant
or court order.
(12) The furnishing of information in accordance with
the federal Personal Responsibility and Work Opportunity
Reconciliation Act of 1996. Any credit union governed by
this Act shall enter into an agreement for data exchanges
with a State agency provided the State agency pays to the
credit union a reasonable fee not to exceed its actual cost
incurred. A credit union providing information in
accordance with this item shall not be liable to any
account holder or other person for any disclosure of
information to a State agency, for encumbering or
surrendering any assets held by the credit union in
response to a lien or order to withhold and deliver issued
by a State agency, or for any other action taken pursuant
to this item, including individual or mechanical errors,
provided the action does not constitute gross negligence or
willful misconduct. A credit union shall have no obligation
to hold, encumber, or surrender assets until it has been
served with a subpoena, summons, warrant, court or
administrative order, lien, or levy.
(13) The furnishing of information to law enforcement
authorities, the Illinois Department on Aging and its
regional administrative and provider agencies, the
Department of Human Services Office of Inspector General,
or public guardians: (i) upon subpoena by the investigatory
entity or the guardian, or (ii) if there is suspicion by
the credit union that a member who is an elderly person or
person with a disability has been or may become the victim
of financial exploitation. For the purposes of this item
(13), the term: (i) "elderly person" means a person who is
60 or more years of age, (ii) "person with a disability"
means a person who has or reasonably appears to the credit
union to have a physical or mental disability that impairs
his or her ability to seek or obtain protection from or
prevent financial exploitation, and (iii) "financial
exploitation" means tortious or illegal use of the assets
or resources of an elderly person or person with a
disability, and includes, without limitation,
misappropriation of the elderly or disabled person's
assets or resources by undue influence, breach of fiduciary
relationship, intimidation, fraud, deception, extortion,
or the use of assets or resources in any manner contrary to
law. A credit union or person furnishing information
pursuant to this item (13) shall be entitled to the same
rights and protections as a person furnishing information
under the Adult Protective Services Act and the Illinois
Domestic Violence Act of 1986.
(14) The disclosure of financial records or
information as necessary to effect, administer, or enforce
a transaction requested or authorized by the member, or in
connection with:
(A) servicing or processing a financial product or
service requested or authorized by the member;
(B) maintaining or servicing a member's account
with the credit union; or
(C) a proposed or actual securitization or
secondary market sale (including sales of servicing
rights) related to a transaction of a member.
Nothing in this item (14), however, authorizes the sale
of the financial records or information of a member without
the consent of the member.
(15) The disclosure of financial records or
information as necessary to protect against or prevent
actual or potential fraud, unauthorized transactions,
claims, or other liability.
(16)(a) The disclosure of financial records or
information related to a private label credit program
between a financial institution and a private label party
in connection with that private label credit program. Such
information is limited to outstanding balance, available
credit, payment and performance and account history,
product references, purchase information, and information
related to the identity of the customer.
(b)(1) For purposes of this paragraph (16) of
subsection (b) of Section 10, a "private label credit
program" means a credit program involving a financial
institution and a private label party that is used by a
customer of the financial institution and the private label
party primarily for payment for goods or services sold,
manufactured, or distributed by a private label party.
(2) For purposes of this paragraph (16) of subsection
(b) of Section 10, a "private label party" means, with
respect to a private label credit program, any of the
following: a retailer, a merchant, a manufacturer, a trade
group, or any such person's affiliate, subsidiary, member,
agent, or service provider.
(17) The furnishing of the financial records of a
member to an appropriate law enforcement authority,
without prior notice to or consent of the member, upon
written request of the law enforcement authority, when
reasonable suspicion of an imminent threat to the personal
security and safety of the member exists that necessitates
an expedited release of the member's financial records, as
determined by the law enforcement authority. The law
enforcement authority shall include a brief explanation of
the imminent threat to the member in its written request to
the credit union. The written request shall reflect that it
has been authorized by a supervisory or managerial official
of the law enforcement authority. The decision to furnish
the financial records of a member to a law enforcement
authority shall be made by a supervisory or managerial
official of the credit union. A credit union providing
information in accordance with this item (17) shall not be
liable to the member or any other person for the disclosure
of the information to the law enforcement authority.
(c) Except as otherwise provided by this Act, a credit
union may not disclose to any person, except to the member or
his duly authorized agent, any financial records relating to
that member of the credit union unless:
(1) the member has authorized disclosure to the person;
(2) the financial records are disclosed in response to
a lawful subpoena, summons, warrant, citation to discover
assets, or court order that meets the requirements of
subparagraph (d) of this Section; or
(3) the credit union is attempting to collect an
obligation owed to the credit union and the credit union
complies with the provisions of Section 2I of the Consumer
Fraud and Deceptive Business Practices Act.
(d) A credit union shall disclose financial records under
subparagraph (c)(2) of this Section pursuant to a lawful
subpoena, summons, warrant, citation to discover assets, or
court order only after the credit union mails a copy of the
subpoena, summons, warrant, citation to discover assets, or
court order to the person establishing the relationship with
the credit union, if living, and otherwise his personal
representative, if known, at his last known address by first
class mail, postage prepaid unless the credit union is
specifically prohibited from notifying the person by order of
court or by applicable State or federal law. In the case of a
grand jury subpoena, a credit union shall not mail a copy of a
subpoena to any person pursuant to this subsection if the
subpoena was issued by a grand jury under the Statewide Grand
Jury Act or notifying the person would constitute a violation
of the federal Right to Financial Privacy Act of 1978.
(e)(1) Any officer or employee of a credit union who
knowingly and wilfully furnishes financial records in
violation of this Section is guilty of a business offense and
upon conviction thereof shall be fined not more than $1,000.
(2) Any person who knowingly and wilfully induces or
attempts to induce any officer or employee of a credit union to
disclose financial records in violation of this Section is
guilty of a business offense and upon conviction thereof shall
be fined not more than $1,000.
(f) A credit union shall be reimbursed for costs which are
reasonably necessary and which have been directly incurred in
searching for, reproducing or transporting books, papers,
records or other data of a member required or requested to be
produced pursuant to a lawful subpoena, summons, warrant,
citation to discover assets, or court order. The Secretary and
the Director may determine, by rule, the rates and conditions
under which payment shall be made. Delivery of requested
documents may be delayed until final reimbursement of all costs
is received.
(Source: P.A. 99-143, eff. 7-27-15; 100-22, eff. 1-1-18.)
(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
registered by the Department of Financial and Professional
Regulation 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
mailed to the Secretary.
(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 $5,000,000 or more shall engage a
licensed certified public accountant or licensed certified
public accounting firm registered by the Department of
Financial and Professional Regulation 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 $3,000,000 or more, but less than $10,000,000
$5,000,000, shall engage a licensed certified public
accountant or licensed certified public accounting firm
registered by the Department of Financial and Professional
Regulation 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) an external independent audit of the credit
union's financial statements in accordance with generally
accepted auditing standards at least once every 3 years. A copy
of an external independent audit shall be completed and mailed
to the Secretary no later than 90 days after December 31 of
each year; provided that 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. If the
annual internal audit of such a credit union is conducted by a
public accountant registered by the Department of Financial and
Professional Regulation and the annual internal audit is done
in conjunction with the credit union's annual external audit,
the requirements of subsection (1) of this Section shall be
deemed met.
(C) 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. 97-133, eff. 1-1-12; 98-784, eff. 7-24-14.)
(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 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; and
(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.
(b) As used in this Section: ,
"Political 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.
(Source: P.A. 100-361, eff. 8-25-17.)
Section 99. Effective date. This Act takes effect upon
becoming law.
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