[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5621 Introduced in House (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.''.
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