Bill Text: IL SB3346 | 2019-2020 | 101st General Assembly | Introduced

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Bill Title: 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.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2021-01-13 - Session Sine Die [SB3346 Detail]

Download: Illinois-2019-SB3346-Introduced.html

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101ST GENERAL ASSEMBLY State of Illinois 2019 and 2020 SB3346 Introduced 2/11/2020, by Sen. Antonio Muñoz SYNOPSIS AS INTRODUCED:
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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.
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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 Sections 23, 29, 51, 57, 59, and 64.7 and by adding
Section 20.5 as follows:
(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) Prior to 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.

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(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 and nondisclosure 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 its Regulatory Examination
Consistency and Due Process Rule, 38 Ill. Adm. Code 190.25, and
supplemental guidelines to address and resolve the issue. An
enforcement action taken pursuant to the Rule and guidelines
and specified by this Act shall be used to reduce or suspend
the compensation paid to the directors and committee members.

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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).
(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

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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 305/29) (from Ch. 17, par. 4430)
Sec. 29. Meetings of directors.
(1) The board of directors and the executive committee
shall meet as often as necessary, but one body must meet at
least monthly and the other at least quarterly, as prescribed
in the bylaws. A month in which one body meets does not require
the other body to meet, irrespective of the other body's
meeting frequency. Upon prior written approval by the
Secretary, both bodies may hold regular meetings less
frequently than once each month but at least once each calendar
quarter. Unless a greater number is required by the bylaws, a
majority of the whole board of directors shall constitute a
quorum. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the
board of directors unless the act of a greater number is
required by this Act, the credit union's articles of
incorporation or the bylaws.
(2) Unless specifically prohibited by the articles of
incorporation or bylaws, directors and committee members may
participate in and act at any meeting of the board or committee

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

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(Source: P.A. 89-603, eff. 8-2-96.)
(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

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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.
(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

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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

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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

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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

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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 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

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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

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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.

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(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
and nondisclosure 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.
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INDEX
Statutes amended in order of appearance