110 HR 5519 IH: Credit Union Regulatory Relief U.S. House of Representatives 2008-03-03 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 110th CONGRESS 2d Session H. R. 5519 IN THE HOUSE OF REPRESENTATIVES March 3, 2008 Mr. Kanjorski (for himself and Mr. Royce) introduced the following bill; which was referred to the Committee on Financial Services A BILL To advance credit union efforts to promote economic growth, modify credit union regulatory standards and reduce burdens, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Credit Union Regulatory Relief Act of 2008. (b)

Table of contents

The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Investments in securities by Federal credit unions. Sec. 3. Increase in investment limit in credit union service organizations. Sec. 4. Member business loan exclusion for loans to nonprofit religious organizations. Sec. 5. Authority of NCUA to establish longer maturities for certain credit union loans. Sec. 6. Providing the National Credit Union Administration with greater flexibility in responding to market conditions. Sec. 7. Conversions of certain credit unions to a community charter. Sec. 8. Credit union participation in the SBA section 504 program. Sec. 9. Amendments relating to credit union service to underserved areas. Sec. 10. Short-term payday loan alternatives within field of membership. Sec. 11. Credit union governance. Sec. 12. Encouraging small business development in underserved urban and rural communities. Sec. 13. Exemption from pre-merger notification requirement of the Clayton Act.

2.

Investments in securities by Federal credit unions

Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is amended— (1)by striking A Federal credit union and inserting (a) In general.—A 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

In addition to the investments authorized in subsection (a), 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. .

3.

Increase in investment limit in credit union service organizations

Section 107(a)(7)(I) of the Federal Credit Union Act (12 U.S.C. 1757(7)(I)) (as so redesignated by section 2(1)) is amended by striking up to 1 per centum of the total paid and inserting up to 3 percent of the total paid.

4.

Member business loan exclusion for loans to nonprofit religious organizations

Section 107A(a) of the Federal Credit Union Act (12 U.S.C. 1757a(a)) is amended by inserting , excluding loans made to nonprofit religious organizations, after total amount of such loans.

5.

Authority of NCUA to establish longer maturities for certain credit union loans

Section 107(a)(5) of the Federal Credit Union Act (12 U.S.C. 1757(5)) (as so redesignated by section 2(1)) is amended in the matter preceding subparagraph (A), by striking except as otherwise provided herein and inserting or any longer maturity as the Board may allow, in regulations, except as otherwise provided in this Act.

6.

Providing the National Credit Union Administration with greater flexibility in responding to market conditions

Section 107(a)(5)(A)(vi)(I) of the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(vi)(I)) (as so redesignated by section 2(1)) is amended by striking six-month period and that prevailing interest rate levels and inserting 6-month period or that prevailing interest rate levels.

7.

Conversions of certain credit unions to a community charter

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. .

8.

Credit union participation in the SBA section 504 program

Section 107(a)(5)(A)(iii) of the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(iii)) (as so redesignated by section 2(1)) is amended by inserting , and applicable regulations, after specified in the law.

9.

Amendments relating to credit union service to underserved areas

(a)

In general

Paragraph (2) of section 109(c) of the Federal Credit Union Act (12 U.S.C. 1759(c)(2)) is amended to read as follows: (2)

Exception for underserved areas

(A)

In general

Notwithstanding subsection (b), the Board may approve an application by a Federal credit union to allow the membership of such credit union to include any person or organization whose principal residence or place of business is located within a local community, neighborhood, or rural district if— (i)the Board determines— (I)at any time after August 7, 1998, that all of the local community, neighborhood, or rural district taken into account for purposes of this paragraph is an underserved area (as defined in section 101(10)); and (II)at the time of such approval, that the credit union is well capitalized or adequately capitalized (as defined in section 216(c)(1)); and (ii)before the end of the 24-month period beginning on the date of such approval, the credit union has established and maintains an office or facility in the local community, neighborhood, or rural district at which credit union services are available. (B)

Termination of approval

Any failure of a Federal credit union to meet the requirement of clause (ii) of subparagraph (A) by the end of the 24-month period referred to in such clause shall constitute a termination, as a matter of law, of any approval of an application under this paragraph by the Board with respect to the membership of such credit union. (C)

Annual credit union reporting requirement

Any Federal credit union which has an application approved under this paragraph shall submit an annual report to the Administration on the number of members of the credit union who are members by reason of such application and the number of offices or facilities maintained by the credit union in the local community, neighborhood, or rural district taken into account by the Board in approving such application. (D)

Publication by administration

The Administration shall publish annually a report containing— (i)a list of all the applications approved under this paragraph prior to the publication of the report; (ii)the number and locations of the underserved areas taken into account in approving such applications; and (iii)the total number of members of credit unions who are members by reason of the approval of such applications. . (b)

Underserved area defined

Section 101 of the Federal Credit Union Act (12 U.S.C. 1752) is amended— (1)by striking and at the end of paragraph (8); (2)by striking the period at the end of paragraph (9) and inserting ; and; and (3)by adding at the end the following new paragraph: (10)the term underserved area means a geographic area consisting of a single census tract or a group of census tracts, each of which meets the criteria for— (A)a low income community, as defined in section 45D(e) of the Internal Revenue Code of 1986; or (B)an investment area, as defined and designated under section 103(16) of the Community Development Banking and Financial Institutions Act of 1994. .

10.

Short-term payday loan alternatives within field of membership

Section 107(a)(12)(B) of the Federal Credit Union Act (12 U.S.C. 1757(12)(B)) (as so redesignated by section 2(1)) is amended by inserting and provide short-term loans as an alternative to payday loans after domestic electronic fund transfers.

11.

Credit union governance

(a)

Expulsion of members for just cause

Subsection (b) of section 118 of the Federal Credit Union Act (12 U.S.C. 1764(b)) is amended to read as follows: (b)

Policy and actions of boards of directors of Federal credit unions

(1)

Expulsion of members for nonparticipation or for just cause

The board of directors of a Federal credit union may, by majority vote of a quorum of directors, adopt and enforce a policy with respect to expulsion from membership, by a majority vote of such board of directors, based on just cause, including disruption of credit union operations, or on nonparticipation by a member in the affairs of the credit union. (2)

Written notice of policy to members

If a policy described in paragraph (1) is adopted, written notice of the policy as adopted and the effective date of such policy shall be provided to— (A)each existing member of the credit union not less than 30 days prior to the effective date of such policy; and (B)each new member prior to or upon applying for membership. . (b)

Term limits authorized for Board members of Federal credit unions

Section 111(a) of the Federal Credit Union Act (12 U.S.C. 1761(a)) is amended by adding at the end the following new sentence: The bylaws of a Federal credit union may limit the number of consecutive terms any person may serve on the board of directors of such credit union..

12.

Encouraging small business development in underserved urban and rural communities

Section 107A(c)(1)(B) of the Federal Credit Union Act (12 U.S.C. 1757a(c)(1)(B)) is amended— (1)by striking or after the semicolon at the end of clause (iv); (2)by redesignating clause (v) as clause (vi); and (3)by inserting after clause (iv) the following new clause: (v)that is made to a member, the proceeds of which are to be used for commercial, corporate, business, farm or agricultural purposes in an underserved area if such extension of credit— (I)is made to a person or organization whose principal residence or place of business is located within an underserved area (as defined in section 101(10)) served by the credit union; or (II)is secured by real property located within, or is intended to operate as part of a business located within, such underserved area; or .

13.

Exemption from pre-merger notification requirement of the Clayton Act

Section 7A(c)(7) of the Clayton Act (15 U.S.C. 18a(c)(7)) is amended by inserting section 205(b)(3) of the Federal Credit Union Act (12 U.S.C. 1785(b)(3)), before or section 3.