[House Report 114-58]
[From the U.S. Government Publishing Office]


114th Congress    }                                       {      Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                       {      114-58

======================================================================



 
 CAPITAL ACCESS FOR SMALL COMMUNITY FINANCIAL INSTITUTIONS ACT OF 2015

                                _______
                                

 April 13, 2015.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

       Mr. Hensarling, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 299]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 299) to amend the Federal Home Loan Bank Act to 
authorize privately insured credit unions to become members of 
a Federal home loan bank, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose and Summary

    H.R. 299, the Capital Access for Small Community Financial 
Institutions Act of 2015, would amend Section 4(a) of the 
Federal Home Loan Bank Act (12 U.S.C. 1424(a)) to treat certain 
privately insured credit unions as insured depository 
institutions for purposes of determining eligibility for 
membership in a Federal Home Loan Bank (FHLB). In order to be 
eligible for membership, a privately insured credit union would 
need to receive a certification from its state supervisor 
stating that it is eligible to apply for federal deposit 
insurance. Additionally, the private insurer of the credit 
union would be required to provide a copy of the credit union's 
annual audit report to the National Credit Union Administration 
(NCUA) and the Federal Housing Finance Agency (FHFA). Moreover, 
within 18 months of the bill's enactment, the Comptroller 
General of the United States is required to report to Congress 
on the adequacy of insurance reserves held by a private deposit 
insurer and provide information on the level of compliance with 
federal regulations relating to the disclosure of a lack of 
federal deposit insurance.

                  Background and Need for Legislation

    The FHLB System was created in 1932 to improve the 
availability of funds to support homeownership. Its broader 
mission now is ``to provide financial products and services to 
[FHLB System] members and eligible non-members, including but 
not limited to advances, that assist and enhance their 
financing of: (1) housing, including single-family and 
multifamily housing serving consumers at all income levels; and 
(2) community lending.''\1\ According to the FHLB System, its 
banks provide ``liquidity to members through secured loans 
(advances), thereby increasing the availability of credit for 
residential mortgages, community investments, and other 
services for housing and community development.''\2\ Some of 
the FHLBs also help to enhance liquidity by purchasing mortgage 
loans from, and funding mortgage loans through, participating 
member institutions and housing associates.\3\
---------------------------------------------------------------------------
    \1\http://www.fhlbanks.com/fhlbanks-mission.html.
    \2\http://www.fhlbanks.com/fhlbanks-mission.html.
    \3\http://www.fhlbanks.com/funding-and-liquidity-for-members.html.
---------------------------------------------------------------------------
    The FHLB System currently limits its membership to building 
and loan associations, savings and loan associations, 
cooperative banks, homestead associations, savings banks, 
insurance companies, community development financial 
institutions, federally insured banks and savings associations, 
and federally insured credit unions.\4\ As of year-end 2014, 
7,361 lenders were members of the FHLB System, which consisted 
of 4,850 commercial banks, 1,269 credit unions, 906 thrifts, 
303 insurance companies and 29 community development financial 
institutions.\5\
---------------------------------------------------------------------------
    \4\http://www.fhfa.gov/DataTools/Downloads/Pages/Federal-Home-Loan-
Bank-Member-Data.aspx. In 1989 the FHLB System was opened up to 
commercial banks and credit unions. However, the authorizing 
legislation only applied to an ``insured credit union'' as defined by 
12 U.S.C. 1752 of the Federal Credit Union Act. Privately insured 
credit unions were not originally included in this definition.
    \5\http://www.fhfa.gov/DataTools/Downloads/Pages/Federal-Home-Loan-
Bank-Member-Data.aspx.
---------------------------------------------------------------------------
    Currently, there are 128 privately insured credit unions 
that operate in nine states: Alabama, California, Idaho, 
Illinois, Indiana, Maryland, Nevada, Ohio, and Texas.\6\ 
Permitting these credit unions to apply for membership to the 
FHLB System would help them serve the financial needs of their 
members, and it would not expose the FHLB System to any 
appreciable additional risk. All advances made by the FHLB 
System must be fully collateralized and subject to strong 
underwriting standards. While privately insured credit unions 
are not currently eligible for membership, other non-federally 
insured entities are permitted to join the FHLB System, and 
under current law, state-chartered, privately insured credit 
unions which also have obtained Community Development Financial 
Institution status are eligible.\7\
---------------------------------------------------------------------------
    \6\CUNA-provided data.
    \7\12 U.S.C. 4703.
---------------------------------------------------------------------------
    As part of written testimony before the House Committee on 
Financial Services at a March 18, 2015 hearing entitled 
``Preserving Consumer Choice and Financial Independence,'' 
Patrick Miller, President and CEO of CBC Federal Credit Union, 
said:

          We also support H.R. 299, the ``Capital Access for 
        Small Community Financial Institutions Act of 2015'', 
        legislation introduced by Representatives Steve Stivers 
        and Joyce Beatty which corrects a drafting oversight in 
        the Federal Home Loan Bank Act that has resulted in a 
        small number of privately insured credit unions being 
        ineligible to join a FHLB. In 1989, in the wake of the 
        savings and loan crisis, the FHLB System was opened up 
        for the first time to commercial banks and credit 
        unions. Unfortunately, the bill was drafted in such a 
        way to apply only to an ``insured credit union'' as 
        defined under the Federal Credit Union Act. If the 
        legislation had used a broader term in the 12 USC 1752 
        of the Federal Credit Union Act--such as ``state credit 
        union'' or ``state-chartered credit union'', terms that 
        are clearly defined, then privately insured credit 
        unions would have the same opportunity for membership 
        as other financial institutions. This is why, for many 
        years, we have suggested that this was likely an 
        oversight in drafting. Unfortunately, it has meant for 
        over two decades, a small group of credit unions have 
        been denied the right to even apply for membership in 
        the FHLB System. The House of Representatives has 
        continuously recognized this as a problem. In 2004, 
        2006 and 2014, the full House passed corrective 
        legislation. In 2008, as part of the Housing and 
        Economic Recovery Act of 2008, Congress made a small 
        change to permit privately-insured, state-chartered 
        credit unions designated as a Community Development 
        Financial Institution (CDFI) to apply for membership to 
        the FHLBs; however, of the 127 privately insured credit 
        unions, only two are CDFI certified. We understand some 
        policymakers have concerns regarding the existence of 
        the private insurance option; however, this legislation 
        would not expand that option for credit unions nor 
        would it present an increased risk to the FHLB System, 
        since this legislation only allows privately insured 
        credit unions the option to apply for membership. If 
        enacted, privately insured credit unions would not be 
        the only non-Federally insured institutions eligible 
        for membership in the FHLB System. Currently, insurance 
        companies, which are not federally insured, are members 
        of the System. In fact, in terms of current outstanding 
        advancements, 119 insurance companies are borrowing 
        almost twice as much as 427 federally insured credit 
        unions.\8\ It has never seemed reasonable to our small 
        institutions that some of the largest banks in the 
        world, insurance companies (which are not Federally 
        insured) or a foreign bank's U.S. subsidiary can borrow 
        billions of dollars from the FHLB System, but credit 
        unions serving teachers in Ohio and Texas, firefighters 
        in California, postal and county workers in Illinois 
        and farmers in Indiana cannot.

    \8\Combined Financial Report of the Federal Home Loan Bank System 
for the Quarter ending on September 30, 2013.
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    Credit union representatives from several of the nine 
states where privately insured credit unions operate submitted 
letters supporting H.R. 299. In a joint letter of support dated 
March 23, 2015, the California Credit Union League and the 
Nevada Credit Union League stated:

          On behalf of the 10.5 million credit union members in 
        California and Nevada, I am writing in support of H.R. 
        299, which allows privately insured credit unions 
        access to the Federal Home Loan Banks. As you know, 
        currently credit unions that chose private insurance 
        are limited in their options for liquidity sources. In 
        our two states 19 credit unions are privately insured. 
        We supported this legislation in the 113th session, 
        where this bill passed the House by a vote of 395-0. 
        Credit unions, as not-for-profit cooperatives exist to 
        serve the needs of our members. In order for credit 
        unions to continue to meet the demands of the 
        communities we serve, credit unions require new and 
        reliable sources of liquidity that can meet our growing 
        necessities. H.R. 299 enables us to do just that. In 
        California, the two largest privately insured credit 
        unions primarily serve firefighters and first 
        responders. Your legislation will create new lending 
        opportunities for the memberships served by these 
        credit unions. In Nevada, 7 of the states' 18 credit 
        unions are privately insured, which is why your 
        legislation is crucial to the state's success. After 
        the financial crisis of the last few years, credit 
        unions have worked tirelessly to provide new and 
        innovative ways to serve our members. H.R. 299 is 
        another tool in credit union belt.

    The Ohio Credit Union League also expressed its support for 
the legislation in a letter dated March 23, 2015, stating:

          On behalf of the Ohio Credit Union League and Ohio's 
        57 privately-insured credit unions, I am writing to 
        offer full support for the markup of H.R. 299, the 
        Capital Access for Small Community Financial 
        Institutions Act. Ohio's privately-insured credit 
        unions serve more than 333,000 members, many of which 
        rely on their credit union for access to home mortgage 
        products. The unintentional barring of financially-
        strong, well-regulated credit unions from a government-
        sponsored entity designed to facilitate credit for home 
        buyers should be corrected. The Federal Home Loan Bank 
        (FHLB) Act was amended in 1989 to allow commercial 
        banks and credit unions the right to seek membership in 
        the system. However, the definition of a credit union 
        was worded incorrectly, mistakenly omitting privately-
        insured credit unions from applying for membership to 
        the FHLB. We support upcoming efforts by the U.S. House 
        Financial Services Committee to correct this language 
        and grant privately-insured credit unions the option to 
        apply. Credit unions play an important part in consumer 
        lending and home ownership. In a very tangible way, 
        providing privately-insured credit unions with access 
        to the FHLB system will increase credit union lending 
        and strengthen Ohio's economy. It also increases 
        competition, generating more affordable housing options 
        for qualified buyers. The Ohio Credit Union League, the 
        trade association representing Ohio's 330 state- and 
        federally-chartered credit unions, strongly supports a 
        credit union's ability to choose optimum business 
        strategies, including its charter (federal or state) 
        and deposit insurer (federal or private/American Share 
        Insurance). This essence of choice enhances a healthy 
        competitive environment that spurs innovation and 
        improved service among regulators, insurers, and credit 
        unions.

    The Indiana Credit Union League sent a letter of support 
dated March 23, 2015, stating:

          On behalf of Indiana's credit unions, we are writing 
        to support H.R. 299, the Capital Access for Small 
        Community Financial Institutions Act of 2015, which you 
        and Indiana Representative Andre Carson introduced 
        again this year that would allow privately-insured 
        credit unions to become members of the Federal Home 
        Loan Bank (FHLB). We understand that H.R. 299 will be 
        marked up in the Financial Services Committee this 
        week. We strongly support the legislation and urge the 
        Committee to pass this important bill. Under current 
        law, privately-insured credit unions are not permitted 
        to become members of a FHLB. This legislation would 
        allow these credit unions to join a FHLB, providing a 
        new source of mortgage funding for these financial 
        institutions and their members. Passage of this 
        legislation would advance home ownership options for 
        members of privately-insured credit unions. In Indiana, 
        17 state-chartered credit unions with more than 140,000 
        members and more than $2 billion in assets are 
        privately-insured.

                                Hearings

    The Committee on Financial Services held no hearings on 
H.R. 299 in the 114th Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
March 25, 2015 and March 26, 2015, and ordered H.R. 299 to be 
reported favorably to the House without amendment by a recorded 
vote of 56 yeas to 1 nays (Record vote no. FC-13), a quorum 
being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole vote in committee was a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 56 yeas to 1 nays 
(Record vote no. FC-13), a quorum being present. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 299 
will permit certain privately insured credit unions to become 
eligible for membership in the Federal Home Loan Bank System.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 8, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 299, the Capital 
Access for Small Community Financial Institutions Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Martin von 
Gnechten.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 299--Capital Access for Small Community Financial Institutions Act 
        of 2015

    H.R. 299 would allow privately insured credit unions to 
become members of the Federal Home Loan Bank (FHLB) system. The 
bill also would direct the Government Accountability Office 
(GAO) to report to the Congress on privately insured 
institutions and their insurers. CBO estimates that 
implementing this legislation would have no significant effect 
on the federal budget. Enacting H.R. 299 would not affect 
direct spending or revenues; therefore, pay-as-you-go 
procedures do not apply.
    The FHLB system is a cooperative, government-sponsored 
enterprise made up of 12 regional banks that offer financing to 
almost 7,400 members (banks, thrift institutions, insurance 
companies, and credit unions). FHLBs make loans (known as 
``advances'') and provide other credit services that members 
use to fund mortgages and other loans. Consolidated assets of 
the FHLBs totaled $913 billion at the end of calendar year 
2014, including about $570 billion in advances.
    H.R. 299 would permit state-chartered, privately insured 
credit unions to become members of the FHLB system. Under 
current law, such credit unions may only gain membership if 
they are also community development financial institutions. 
Based on information provided by the National Credit Union 
Administration, there are about 130 privately insured credit 
unions holding about $14 billion in assets that would become 
eligible for membership under the bill. CBO believes that it is 
unlikely that any advances made to these institutions would 
alter the financial condition of the FHLBs given the relative 
size of the credit unions to the FHLB system and the 
requirement that all advances be fully secured. Because these 
credit unions are privately insured, spending by the Federal 
Deposit Insurance Corporation would not be affected if an 
institution ultimately failed.
    The bill also would direct GAO to report to the Congress on 
the adequacy of insurance reserves held by private deposit 
insurers and whether privately insured institutions comply with 
federal disclosure regulations. The cost of the study would be 
less than $500,000, CBO estimates, and would be subject to the 
availability of appropriated funds.
    H.R. 299 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA) because it would 
preempt state laws that allow liquidators to void specific 
types of contracts. However, the preemption would impose no 
duty on state governments that would result in additional 
spending, and the threshold established by UMRA for costs of 
intergovernmental mandates ($77 million in 2015, adjusted 
annually for inflation) would not be exceeded.
    H.R. 299 would impose a private-sector mandate, as defined 
in UMRA, on private insurers of deposits at credit unions that 
are members of the FHLB system. It would require such insurers 
to submit a copy of their annual independent audit to the 
Federal Housing Finance Agency. Based on information from the 
National Credit Union Administration, CBO estimates that the 
cost of complying with the mandate would be small and would 
fall well below the annual threshold for private-sector 
mandates established in UMRA ($154 million in 2015, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Martin von 
Gnechten (for federal costs), J'nell L. Blanco (for the 
intergovernmental mandate), and Paige Piper/Bach (for the 
private-sector mandate). The estimate was approved by Theresa 
Gullo, Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 299 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 299 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 299 does not require any 
directed rulemakings.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 299 as the ``Capital Access for 
Small Community Financial Institutions Act of 2015.''

Section 2. Privately insured credit unions authorized to become members 
        of a Federal Home Loan Bank

    This section amends the Federal Home Loan Bank Act to treat 
certain privately insured credit unions as insured depository 
institutions for purposes of determining eligibility for 
membership in a federal home loan bank. This section also 
permits a credit union which lacks federal deposit insurance 
and has applied for membership in a federal home loan bank to 
be treated as meeting all the eligibility requirements for 
federal deposit insurance if the supervisor of the chartering 
state has determined that it meets all federal deposit 
insurance eligibility requirements. If the supervisor fails to 
make an eligibility determination within six months of the 
credit union's application, the credit union is deemed to have 
met the eligibility requirements.
    Additionally, this section prohibits the application of a 
state law authorizing a conservator or liquidating agent of a 
credit union to repudiate contracts to any extension of credit 
from a federal home loan bank to a credit union which is a 
member of that bank or security interest in the assets of the 
credit union securing such extension of credit. This section 
also requires, notwithstanding any state law to the contrary, 
that if a home loan bank's interest in any collateral securing 
an advance to a state-chartered credit union that is not 
federally insured has the same priority and is afforded the 
same standing and rights that the security interest would have 
had if the advance had been made to a federally insured credit 
union, and the bank has the same right to access such 
collateral that it would have had if the advance had been made 
to a federally insured credit union.
    Finally, this section amends the Federal Deposit Insurance 
Act to require private deposit insurers of credit unions that 
are members of a federal home loan bank to submit copies of 
their audit reports to the Federal Housing Finance Agency 
within seven days after the audit is completed.

Section 3. GAO report

    This section directs the Comptroller General to study the 
adequacy of insurance reserves held by a private deposit 
insurer that insures deposits in an insured credit union, and 
such credit union's level of compliance with federal 
regulations relating to the disclosure of a lack of federal 
deposit insurance.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

FEDERAL HOME LOAN BANK ACT

           *       *       *       *       *       *       *


             eligibility of members and nonmember borrowers

  Sec. 4. (a) Criteria for Eligibility.--
          (1) In general.--Any building and loan association, 
        savings and loan association, cooperative bank, 
        homestead association, insurance company, savings bank, 
        community development financial institution, or any 
        insured depository institution (as defined in section 2 
        of this Act), shall be eligible to become a member of a 
        Federal Home Loan Bank if such institution--
                  (A) is duly organized under the laws of any 
                State or of the United States;
                  (B) is subject to inspection and regulation 
                under the banking laws, or under similar laws, 
                of the State or of the United States or, in the 
                case of a community development financial 
                institution, is certified as a community 
                development financial institution under the 
                Community Development Banking and Financial 
                Institutions Act of 1994; and
                  (C) makes such home mortgage loans as, in the 
                judgment of the Director, are long-term loans 
                (except that in the case of a savings bank, 
                this subparagraph applies only if, in the 
                judgment of the Director, its time deposits, as 
                defined in section 19 of the Federal Reserve 
                Act, warrant its making such loans).
          (2) Qualified thrift lender.--An insured depository 
        institution that is not a member on January 1, 1989, 
        may become a member of a Federal Home Loan Bank only 
        if--
                  (A) the insured depository institution (other 
                than a community financial institution) has at 
                least 10 percent of its total assets in 
                residential mortgage loans;
                  (B) the insured depository institution's 
                financial condition is such that advances may 
                be safely made to such institution; and
                  (C) the character of its management and its 
                home-financing policy are consistent with sound 
                and economical home financing.
          (3) Certain institutions.--An insured depository 
        institution commencing its initial business operations 
        after January 1, 1989, may become a member of a Federal 
        Home Loan Bank if it complies with regulations and 
        orders prescribed by the Director for the 10 percent 
        asset requirement (described in the paragraph (2)) 
        within one year after the commencement of its 
        operations.
          (4) Limited exemption for community financial 
        institutions.--A community financial institution that 
        otherwise meets the requirements of paragraph (2) may 
        become a member without regard to the percentage of its 
        total assets that is represented by residential 
        mortgage loans, as described in subparagraph (A) of 
        paragraph (2).
          (5) Certain privately insured credit unions.--
                  (A) In general.--Subject to the requirements 
                of subparagraph (B), a credit union shall be 
                treated as an insured depository institution 
                for purposes of determining the eligibility of 
                such credit union for membership in a Federal 
                home loan bank under paragraphs (1), (2), and 
                (3).
                  (B) Certification by appropriate 
                supervisor.--
                          (i) In general.--For purposes of this 
                        paragraph and subject to clause (ii), a 
                        credit union which lacks Federal 
                        deposit insurance and which has applied 
                        for membership in a Federal home loan 
                        bank may be treated as meeting all the 
                        eligibility requirements for Federal 
                        deposit insurance only if the 
                        appropriate supervisor of the State in 
                        which the credit union is chartered has 
                        determined that the credit union meets 
                        all the eligibility requirements for 
                        Federal deposit insurance as of the 
                        date of the application for membership.
                          (ii) Certification deemed valid.--If, 
                        in the case of any credit union to 
                        which clause (i) applies, the 
                        appropriate supervisor of the State in 
                        which such credit union is chartered 
                        fails to make a determination pursuant 
                        to such clause by the end of the 6-
                        month period beginning on the date of 
                        the application, the credit union shall 
                        be deemed to have met the requirements 
                        of clause (i).
                  (C) Security interests of federal home loan 
                bank not avoidable.--Notwithstanding any 
                provision of State law authorizing a 
                conservator or liquidating agent of a credit 
                union to repudiate contracts, no such provision 
                shall apply with respect to--
                          (i) any extension of credit from any 
                        Federal home loan bank to any credit 
                        union which is a member of any such 
                        bank pursuant to this paragraph; or
                          (ii) any security interest in the 
                        assets of such credit union securing 
                        any such extension of credit.
                  (D) Protection for certain federal home loan 
                bank advances.--Notwithstanding any State law 
                to the contrary, if a Bank makes an advance 
                under section 10 to a State-chartered credit 
                union that is not federally insured--
                          (i) the Bank's interest in any 
                        collateral securing such advance has 
                        the same priority and is afforded the 
                        same standing and rights that the 
                        security interest would have had if the 
                        advance had been made to a federally 
                        insured credit union; and
                          (ii) the Bank has the same right to 
                        access such collateral that the Bank 
                        would have had if the advance had been 
                        made to a federally insured credit 
                        union.
  (b) An institution eligible to become a member under this 
section may become a member only of, or secure advances from, 
the Federal Home Loan Bank of the district in which is located 
the institution's principal place of business, or of the bank 
of a district adjoining such district, if demanded by 
convenience and then only with the approval of the Director.
  (c) Notwithstanding the provisions of clause (2) of 
subsection (a) of this section requiring inspection and 
regulation under law as a condition with respect to eligibility 
for membership, any building and loan association which would 
be eligible to become a member of a Federal Home Loan Bank 
except for the fact that it is not subject to inspection and 
regulation under the banking laws or similar laws of the State 
in which such association is organized shall, upon subjecting 
itself to such inspection and regulation as the Director shall 
prescribe, be eligible to become a member.

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


SEC. 43. DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE.

  (a) Annual Independent Audit of Private Deposit Insurers.--
          (1) Audit required.--Any private deposit insurer 
        shall obtain an annual audit from an independent 
        auditor using generally accepted auditing standards. 
        The audit shall include a determination of whether the 
        private deposit insurer follows generally accepted 
        accounting principles and has set aside sufficient 
        reserves for losses.
          (2) Providing copies of audit report.--
                  (A) Private deposit insurer.--The private 
                deposit insurer shall provide a copy of the 
                audit report--
                          (i) to each depository institution 
                        the deposits of which are insured by 
                        the private deposit insurer, not later 
                        than 14 days after the audit is 
                        completed; [and]
                          (ii) to the appropriate supervisory 
                        agency of each State in which such an 
                        institution receives deposits, not 
                        later than 7 days after the audit is 
                        completed[.]; and
                          (iii) in the case of depository 
                        institutions described in subsection 
                        (e)(2)(A) the deposits of which are 
                        insured by the private insurer which 
                        are members of a Federal home loan 
                        bank, to the Federal Housing Finance 
                        Agency, not later than 7 days after the 
                        audit is completed.
                  (B) Depository institution.--Any depository 
                institution the deposits of which are insured 
                by the private deposit insurer shall provide a 
                copy of the audit report, upon request, to any 
                current or prospective customer of the 
                institution.
          (3) Enforcement by appropriate state supervisor.--Any 
        appropriate State supervisor of a private deposit 
        insurer, and any appropriate State supervisor of a 
        depository institution which receives deposits that are 
        insured by a private deposit insurer, may examine and 
        enforce compliance with this subsection under the 
        applicable regulatory authority of such supervisor.
  (b) Disclosure Required.--Any depository institution lacking 
Federal deposit insurance shall, within the United States, do 
the following:
          (1) Periodic statements; account records.--Include 
        conspicuously in all periodic statements of account, on 
        each signature card, and on each passbook, certificate 
        of deposit, or share certificate. a notice that the 
        institution is not federally insured, and that if the 
        institution fails, the Federal Government does not 
        guarantee that depositors will get back their money.
          (2) Advertising; premises.--
                  (A) In general.--Include clearly and 
                conspicuously in all advertising, except as 
                provided in subparagraph (B); and at each 
                station or window where deposits are normally 
                received, its principal place of business and 
                all its branches where it accepts deposits or 
                opens accounts (excluding automated teller 
                machines or point of sale terminals), and on 
                its main Internet page, a notice that the 
                institution is not federally insured.
                  (B) Exceptions.--The following need not 
                include a notice that the institution is not 
                federally insured:
                          (i) Any sign, document, or other item 
                        that contains the name of the 
                        depository institution, its logo, or 
                        its contact information, but only if 
                        the sign, document, or item does not 
                        include any information about the 
                        institution's products or services or 
                        information otherwise promoting the 
                        institution.
                          (ii) Small utilitarian items that do 
                        not mention deposit products or 
                        insurance if inclusion of the notice 
                        would be impractical.
          (3) Acknowledgment of disclosure.--
                  (A) New depositors obtained other than 
                through a conversion or merger.--With respect 
                to any depositor who was not a depositor at the 
                depository institution before the effective 
                date of the Financial Services Regulatory 
                Relief Act of 2006, and who is not a depositor 
                as described in subparagraph (B), receive any 
                deposit for the account of such depositor only 
                if the depositor has signed a written 
                acknowledgement that--
                          (i) the institution is not federally 
                        insured; and
                          (ii) if the institution fails, the 
                        Federal Government does not guarantee 
                        that the depositor will get back the 
                        depositor's money.
                  (B) New depositors obtained through a 
                conversion or merger.--With respect to a 
                depositor at a federally insured depository 
                institution that converts to, or merges into, a 
                depository institution lacking federal 
                insurance after the effective date of the 
                Financial Services Regulatory Relief Act of 
                2006, receive any deposit for the account of 
                such depositor only if--
                          (i) the depositor has signed a 
                        written acknowledgement described in 
                        subparagraph (A); or
                          (ii) the institution makes an 
                        attempt, as described in subparagraph 
                        (D) and sent by mail no later than 45 
                        days after the effective date of the 
                        conversion or merger, to obtain the 
                        acknowledgment.
                  (C) Current depositors.--Receive any deposit 
                after the effective date of the Financial 
                Services Regulatory Relief Act of 2006 for the 
                account of any depositor who was a depositor on 
                that date only if--
                          (i) the depositor has signed a 
                        written acknowledgement described in 
                        subparagraph (A); or
                          (ii) the institution has complied 
                        with the provisions of subparagraph (E) 
                        which are applicable as of the date of 
                        the deposit.
                  (D) Alternative provision of notice to new 
                depositors obtained through a conversion or 
                merger.--
                          (i) In general.--Transmit to each 
                        depositor who has not signed a written 
                        acknowledgement described in 
                        subparagraph (A)--
                                  (I) a conspicuous card 
                                containing the information 
                                described in clauses (i) and 
                                (ii) of subparagraph (A), and a 
                                line for the signature of the 
                                depositor; and
                                  (II) accompanying materials 
                                requesting the depositor to 
                                sign the card, and return the 
                                signed card to the institution.
                  (E) Alternative provision of notice to 
                current depositors.--
                          (i) In general.--Transmit to each 
                        depositor who was a depositor before 
                        the effective date of the Financial 
                        Services Regulatory Relief Act of 2006, 
                        and has not signed a written 
                        acknowledgement described in 
                        subparagraph (A)--
                                  (I) a conspicuous card 
                                containing the information 
                                described in clauses (i) and 
                                (ii) of subparagraph (A), and a 
                                line for the signature of the 
                                depositor; and
                                  (II) accompanying materials 
                                requesting the depositor to 
                                sign the card, and return the 
                                signed card to the institution.
                          (ii) Manner and timing of notice.--
                                  (I) First notice.--Make the 
                                transmission described in 
                                clause (i) via mail not later 
                                than three months after the 
                                effective date of the Financial 
                                Services Regulatory Relief Act 
                                of 2006.
                                  (II) Second notice.--Make a 
                                second transmission described 
                                in clause (i) via mail not less 
                                than 30 days and not more than 
                                three months after a 
                                transmission to the depositor 
                                in accordance with subclause 
                                (I), if the institution has 
                                not, by the date of such 
                                mailing, received from the 
                                depositor a card referred to in 
                                clause (i) which has been 
                                signed by the depositor.
  (c) Manner and Content of Disclosure.--To ensure that current 
and prospective customers understand the risks involved in 
foregoing Federal deposit insurance, the Bureau, by regulation 
or order, shall prescribe the manner and content of disclosure 
required under this section, which shall be presented in such 
format and in such type size and manner as to be simple and 
easy to understand.
  (d) Exceptions for Institutions Not Receiving Retail 
Deposits.--The Bureau may, by regulation or order, make 
exceptions to subsection (b) for any depository institution 
that, within the United States, does not receive initial 
deposits of less than an amount equal to the standard maximum 
deposit insurance amount from individuals who are citizens or 
residents of the United States, other than money received in 
connection with any draft or similar instrument issued to 
transmit money.
  (e) Definitions.--For purposes of this section:
          (1) Appropriate supervisor.--The ``appropriate 
        supervisor'' of a depository institution means the 
        agency primarily responsible for supervising the 
        institution.
          (2) Depository institution.--The term ``depository 
        institution'' includes--
                  (A) any entity described in section 
                19(b)(1)(A)(iv) of the Federal Reserve Act; and
                  (B) any entity that, as determined by the 
                Bureau--
                          (i) is engaged in the business of 
                        receiving deposits; and
                          (ii) could reasonably be mistaken for 
                        a depository institution by the 
                        entity's current or prospective 
                        customers.
          (3) Lacking federal deposit insurance.--A depository 
        institution lacks Federal deposit insurance if the 
        institution is not either--
                  (A) an insured depository institution; or
                  (B) an insured credit union, as defined in 
                section 101 of the Federal Credit Union Act.
          (4) Private deposit insurer.--The term ``private 
        deposit insurer'' means any entity insuring the 
        deposits of any depository institution lacking Federal 
        deposit insurance.
          (5) Bureau.--The term ``Bureau'' means the Bureau of 
        Consumer Financial Protection.
  (f) Enforcement.--
          (1) Limited enforcement authority.--Compliance with 
        the requirements of subsections (b), (c), and (e), and 
        any regulation prescribed or order issued under such 
        subsection, shall be enforced under the Consumer 
        Financial Protection Act of 2010, by the Bureau, 
        subject to subtitle B of the Consumer Financial 
        Protection Act of 2010, and under the Federal Trade 
        Commission Act (15 U.S.C. 41 et seq.) by the Federal 
        Trade Commission.
          (2) Broad state enforcement authority.--
                  (A) In general.--Subject to subparagraph (C), 
                an appropriate State supervisor of a depository 
                institution lacking Federal deposit insurance 
                may examine and enforce compliance with the 
                requirements of this section, and any 
                regulation prescribed under this section.
                  (B) State powers.--For purposes of bringing 
                any action to enforce compliance with this 
                section, no provision of this section shall be 
                construed as preventing an appropriate State 
                supervisor of a depository institution lacking 
                Federal deposit insurance from exercising any 
                powers conferred on such official by the laws 
                of such State.
                  (C) Limitation on state action while federal 
                action pending.--If the Bureau or Federal Trade 
                Commission has instituted an enforcement action 
                for a violation of this section, no appropriate 
                State supervisory agency may, during the 
                pendency of such action, bring an action under 
                this section against any defendant named in the 
                complaint of the Bureau or Federal Trade 
                Commission for any violation of this section 
                that is alleged in that complaint.

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