PRIOR PRINTER'S NO. 1559 PRINTER'S NO. 1938
No. 1222 Session of 2001
INTRODUCED BY GREENLEAF, COSTA, MOWERY, SCHWARTZ, TARTAGLIONE,
MELLOW, BOSCOLA, EARLL, ERICKSON, KUKOVICH, LAVALLE, LEMMOND,
O'PAKE, STOUT, WAUGH, M. WHITE, THOMPSON, MURPHY AND WAGNER,
DECEMBER 3, 2001
SENATOR HOLL, BANKING AND INSURANCE, AS AMENDED, APRIL 24, 2002
AN ACT
1 Amending Title 17 (Credit Unions) of the Pennsylvania
2 Consolidated Statutes, relating to credit unions; making
3 revisions, corrections and additions; providing for parity
4 with Federal credit unions and for involuntary dissolution;
5 and making editorial changes.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. As much of Title 17 of the Pennsylvania
9 Consolidated Statutes as is hereafter set forth is amended or
10 added to read:
11 § 103. Definitions.
12 The following words and phrases when used in this title shall
13 have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 * * *
16 "Community development credit union." A credit union which
17 is designated as a low-income credit union by the Department of
18 Banking.
1 "Corporate credit union." A credit union which is operated
2 primarily for the purpose of serving other credit unions, which
3 is designated by the National Credit Union Administration as a
4 corporate credit union, which is subject to the provisions of
5 sections 301(b) (relating to purposes) and 502 (relating to
6 powers of central or corporate credit unions) and which limits
7 natural person members to the minimum number required to charter
8 and operate the credit union.
9 * * *
10 "INSOLVENT" OR "Insolvency." The condition of a credit union <--
11 when total shares exceed the present cash value of assets after
12 providing for liabilities unless it is determined by the <--
13 Department of Banking that:
14 (1) the facts that caused the deficient share-asset
15 ratio no longer exist;
16 (2) the likelihood of further depreciation of the share-
17 asset ratio is not probable;
18 (3) the return of the share-asset ratio to its normal
19 limits within a reasonable time for the credit union
20 concerned is probable; or
21 (4) the probability of a further loss is negligible. FOR <--
22 LIABILITIES.
23 * * *
24 "Retained earnings." [Undivided profits.] Regular reserves,
25 reserves for contingencies, reserves for losses, supplemental
26 reserves and undivided earnings.
27 "Secretary." The Secretary of Banking of the Commonwealth or
28 the secretary's designee.
29 "Service facility." A subsidiary office of the credit union
30 such as an automated teller machine, kiosk or other type of
20010S1222B1938 - 2 -
1 facility as determined by the Department of Banking which is not
2 capable of offering the same or approximately the same level of
3 service that can be found at the principal office of the credit
4 union.
5 * * *
6 "Total equity capital and reserves." Regular [reserve]
7 reserves, undivided earnings [and all reserve accounts,
8 including the allowance for loan loss reserve.], reserves for
9 contingencies, reserves for losses and supplemental reserves.
10 "Unimpaired capital." Total unencumbered shares.
11 * * *
12 § 104. Prohibition on use of words "credit [union," etc.] <--
13 UNION." <--
14 (a) General rule.--Only a credit union subject to this
15 title, a Federal credit union or a corporation organized in
16 accordance with a state credit union statute may assume and use
17 the words "credit union" in its name or title or operate in the
18 manner of a credit union. Only a credit union which has received
19 a low-income designation by the department or AND the National <--
20 Credit Union Administration, OR A FEDERAL CREDIT UNION WHICH HAS <--
21 RECEIVED A LOW-INCOME DESIGNATION FROM THE NATIONAL CREDIT UNION
22 ADMINISTRATION, may assume and use the words "community
23 development credit union" OR A SIMILAR DESIGNATION in its name <--
24 or title or operate in the manner of a community development
25 credit union.
26 (b) Penalties.--Any person, other than a credit union
27 subject to this title, a Federal credit union, a corporation
28 organized in accordance with a state credit union statute or an
29 association of credit unions, who violates subsection (a) by
30 using a name or title containing the words "credit union" or any
20010S1222B1938 - 3 -
1 other derivation thereof or so representing itself in its
2 advertising, or otherwise conducting business as a credit union
3 shall, for each offense, be subject to a penalty levied by the
4 [Department of Banking] department which shall be not less than
5 $1,000 nor more than $10,000. The officers of a corporation
6 shall be liable for such penalty if the offense is committed by
7 a corporation. This section shall be enforced by the department.
8 * * *
9 § 304. Department of Banking consideration of articles.
10 (a) General rule.--The articles of incorporation and two
11 copies of the proposed bylaws for the general governance of the
12 credit union shall be presented to the [Department of Banking]
13 department, together with such reasonable fees as shall be
14 established by the department, including an application fee and
15 other fees for such examination and such investigation as it may
16 deem necessary to ascertain:
17 (1) Whether the character and general fitness of the
18 incorporators, directors and the treasurer named in the
19 articles of incorporation is satisfactory.
20 (2) Whether the character and number of the group
21 proposed to be served affords reasonable promise of
22 sufficient support for the enterprise so as to make the
23 establishment of the proposed credit union economically
24 advisable.
25 (3) Whether the incorporators, directors and group
26 proposed to be served have a common bond of association as
27 provided in section 701 (relating to membership).
28 (4) Whether the proposed credit union unduly encroaches
29 upon the field of membership of any other credit union.
30 (5) Whether the application is in proper form and within
20010S1222B1938 - 4 -
1 the purpose of this title.
2 (6) Whether the savings of members paid for shares will
3 be insured by the National Credit Union Administration or
4 other share insurance fund approved by the department.
5 Nonprofit corporations created by specific legislation of any
6 state to insure share accounts or depository accounts of
7 credit unions shall not be subject to regulation by the
8 Department of Insurance or to the laws of this Commonwealth
9 concerning insurance.
10 Within 60 days after receipt of the articles, the department
11 shall, upon the basis of the facts disclosed by the application
12 and its investigation, either approve or disapprove the
13 articles.
14 (b) Approval action.--If the department approves the
15 articles, it shall endorse its approval thereon and forward the
16 articles to the Department of State. The Department of State
17 shall, upon the receipt of the articles and the required filing
18 fee, file the same. Upon the filing of the article of
19 incorporation, the corporate existence of the credit union shall
20 begin. The articles of incorporation as filed in the Department
21 of State are conclusive evidence of the fact that the credit
22 union has been incorporated.
23 (c) Disapproval action.--If the [Department of Banking]
24 department disapproves the articles, it shall return them to the
25 incorporators, stating in detail its reasons for doing so.
26 * * *
27 § 305. Bylaws.
28 (a) General rule.--The original bylaws of a credit union
29 shall be adopted by the incorporators of the credit union and
30 copies shall be transmitted to the [Department of Banking]
20010S1222B1938 - 5 -
1 department along with the articles of incorporation as provided
2 in this chapter.
3 (b) [Amendments.--] Board initiated bylaw amendments.--
4 (1) Bylaws may be amended or repealed [either by two-
5 thirds of the members present and voting or a majority of the
6 board of directors at any regular, annual or special meeting
7 of the credit union. Bylaws may alternatively be amended or
8 repealed by members through mail ballot if the bylaws provide
9 for such a procedure and if two-thirds of the responding
10 member ballots favor the proposed amendment or repeal.] by
11 the affirmative vote of a majority of directors at any
12 regular or special meeting of the board. Whenever the board
13 of directors amends the bylaws, written notice thereof shall
14 be given to the members prior to the next meeting of the
15 members or within 90 days after such action by the board of
16 directors, whichever is sooner.
17 (2) Any amendment to the bylaws adopted by the board of <--
18 directors may be repealed or amended by a two-thirds vote of
19 those members who respond and vote in favor of an amendment
20 or repeal of the action taken by the board of directors.
21 (3) A member-initiated repeal or amendment of a bylaw
22 passed by the board of directors may occur at an annual or
23 special meeting of members, or may be conducted by mail
24 ballot, if the bylaws provide for such a procedure, held
25 during a period of at least ten days after the mailing of the
26 notice.
27 (4) Notwithstanding paragraph (3), the members of a
28 (2) ANY AMENDMENT TO OR REPEAL OF THE BYLAWS ADOPTED BY <--
29 THE BOARD OF DIRECTORS MAY BE REPEALED OR AMENDED BY A TWO-
30 THIRDS VOTE OF THE RESPONDING MEMBERS. THE MEMBER-INITIATED
20010S1222B1938 - 6 -
1 REPEAL OR AMENDMENT OF A BYLAW PASSED BY THE BOARD OF
2 DIRECTORS MAY BE CONDUCTED AT AN ANNUAL OR SPECIAL MEMBER
3 MEETING OR CONDUCTED BY MAIL BALLOT, IF THE BYLAWS ALLOW SUCH
4 A PROCEDURE. THE VOTE MUST BE HELD AT LEAST TEN DAYS AFTER
5 THE MAILING OF THE NOTICE IN PARAGRAPH (1).
6 (3) NOTWITHSTANDING PARAGRAPH (2), THE MEMBERS OF A
7 credit union may amend the bylaws pursuant to procedures set
8 forth in subsections (d), (d.1) and (d.2), whichever
9 subsection is appropriate.
10 * * *
11 (d) [Review by members.--Whenever the board of directors
12 amends the bylaws, written notice thereof shall be given to the
13 members prior to the next meeting of the members or within 90
14 days after such action by the board of directors, whichever is
15 sooner. Any amendment to the bylaws adopted by the board of
16 directors may be repealed or amended by the members at an annual
17 or special meeting or by a mail ballot vote held at least ten
18 days after the mailing of the notice.] Member-initiated bylaw
19 amendment or repeal for credit unions with more than 10,000
20 members.--
21 (1) Bylaws of a credit union with more than 10,000
22 members may be amended or repealed upon member-initiated
23 petition and the affirmative vote of two-thirds of the
24 members voting thereon by mail ballot.
25 (2) Written petition signed by 1% of all the members of
26 a credit union with more than 10,000 members shall be the
27 exclusive method by which such members may amend or repeal
28 the bylaws.
29 (3) Whenever the board of directors receives a member-
30 initiated petition to amend or repeal the bylaws, written
20010S1222B1938 - 7 -
1 notice thereof shall be given to all members of the credit
2 union within 90 days and a mail ballot vote of the matter
3 shall be held during a period of at least ten days after the
4 mailing of the notice and ballot.
5 (d.1) Procedure.--
6 (1) To invoke the procedure to amend or repeal the <--
7 bylaws set forth in subsection (d), a member of a credit
8 union must obtain the form of the petition from the
9 department. The department shall indicate the date the
10 petition form was provided to the member on the petition form
11 and shall file a copy thereof in the records of the
12 department.
13 (1) TO INITIATE THE PROCEDURE TO AMEND OR REPEAL THE <--
14 BYLAWS SET FORTH IN SUBSECTION (D), A MEMBER OF A CREDIT
15 UNION MUST OBTAIN THE PETITION FORM FROM THE DEPARTMENT. THE
16 DEPARTMENT SHALL DATE THE PETITION FORM AND FILE A COPY OF
17 THE FORM.
18 (2) Upon the request of a member, the credit union shall
19 provide the member with a list of all groups and their
20 business addresses that are included as members of the credit
21 union.
22 (3) The member seeking to amend or repeal the bylaws
23 shall have 180 days from the date of receiving RECEIPT OF the <--
24 petition form from the department to circulate the petition
25 and obtain the requisite number of signatures from members of
26 the credit union. The petition shall be in a form provided by
27 and approved by the department and shall clearly identify the
28 bylaw to be amended or repealed and disclose INCLUDE the <--
29 language of the proposed bylaw.
30 (4) On or before 180 days from the date the petition
20010S1222B1938 - 8 -
1 form was obtained from the department, the member seeking to
2 amend or repeal the bylaws must file the petition with the
3 department and the. THE department shall indicate the date of <--
4 filing on the petition and file the petition in the records
5 of the department. The department shall send a copy of the
6 petition to the secretary of the credit union.
7 (5) The secretary of the credit union shall verify that
8 the signatures on the petition are the signatures of members
9 of the credit union and that the petition contains the
10 requisite number of signatures.
11 (6) If the credit union decides not to mail the notice <--
12 and ballot provided for in subsection (d) because any
13 signature on the petition does not belong to a member of the
14 credit union, the petition does not contain the requisite
15 number of signatures, or for any other reason, then the
16 secretary of the credit union shall provide written notice of
17 such decision to the member who initiated the petition drive.
18 (6) THE BALLOT MAY NOT BE MAILED IF THE CREDIT UNION <--
19 DETERMINES THAT ANY OF THE FOLLOWING CONDITIONS HAVE NOT BEEN
20 MET:
21 (I) SIGNATURE ON THE PETITION DOES NOT BELONG TO A
22 MEMBER OF THE CREDIT UNION;
23 (II) THE PETITION DOES NOT CONTAIN THE REQUISITE
24 NUMBER OF SIGNATURES; OR
25 (III) FOR ANY OTHER SPECIFIED REASON.
26 IF THE CREDIT UNION DETERMINES THAT THE BALLOT WILL NOT
27 BE MAILED, THEN THE SECRETARY OF THE CREDIT UNION SHALL
28 NOTIFY IN WRITING THE MEMBER WHO INITIATED THE PETITION DRIVE
29 WITHIN TEN DAYS OF THE MEMBER'S PRESENTATION OF THE PETITION
30 TO THE CREDIT UNION. THE NOTIFICATION SHALL INFORM THE MEMBER
20010S1222B1938 - 9 -
1 THAT THE BALLOT WILL NOT BE MAILED AND THE REASON. IT SHALL
2 ALSO INFORM THE MEMBER OF RIGHT TO APPEAL TO THE DEPARTMENT.
3 (7) Any member seeking to contest a determination by the
4 credit union not to mail the notice and ballot provided for
5 in subsection (d) may file a complaint with the department
6 within 30 days of receiving written notice from the secretary
7 of the credit union's decision not to mail such notice and
8 ballot and the department shall adjudicate the matter.
9 (8) The department may provide any person or unit of <--
10 government with a copy of the petition form as either
11 initially or subsequently filed with the department as well
12 (8) THE DEPARTMENT MAY PROVIDE ANY PERSON OR <--
13 GOVERNMENTAL ENTITY WITH A COPY OF THE PETITION FORM AS WELL
14 as any complaints filed with the department and other
15 documents related thereto.
16 (9) If the credit union decides to mail MAILS the notice <--
17 and ballot provided for in subsection (d) or is ordered to do
18 so by the department, then the credit union shall send an
19 official notice to all members of the credit union, prepare
20 and mail the ballots, arrange for tallying of the votes and
21 report the results to all members in accordance with
22 subsection (d).
23 (10) The credit union shall bear the REASONABLE expenses <--
24 associated with:
25 (i) Verifying that the signatures on the petition
26 are the signatures of members of the credit union and
27 that the petition contains the requisite number of
28 signatures.
29 (ii) Notifying the members.
30 (iii) Preparing and mailing the ballots.
20010S1222B1938 - 10 -
1 (iv) Tallying the vote and reporting the results.
2 (d.2) Member-initiated bylaw amendment or repeal for credit <--
3 (D.2) MEMBER-INITIATED AMENDMENT OR REPEAL OF BYLAWS FOR <--
4 CREDIT unions with 10,000 or fewer members.--
5 (1) A credit union with 10,000 or fewer members may <--
6 choose between either the procedure to amend or repeal the
7 bylaws set forth in subsections (d) and (d.1) or a procedure
8 to amend or repeal the bylaws by two-thirds vote of the
9 members present and voting at any regular, annual or special
10 meeting of the credit union. The special meeting must include
11 the opportunity for members to vote on such bylaw amendment
12 or repeal at the meeting and the ability of the board of
13 directors to resubmit the bylaw amendment or repeal by mail
14 ballot to all of the members if a majority of the board of
15 directors votes to do so and which may, in addition, include
16 a mail ballot procedure to amend or repeal the bylaws by
17 which two-thirds of the responding member ballots favor the
18 proposed amendment or repeal if the bylaws provide for such a
19 procedure.
20 (2) A credit union with 10,000 or fewer members may
21 choose between the two alternative procedures to amend or
22 repeal the bylaws provided for by this subsection at any time
23 by using the procedure to amend or repeal the bylaws in place
24 at that time. A CREDIT UNION WITH 10,000 OR FEWER MEMBERS MAY <--
25 AMEND OR REPEAL THE BYLAWS, IN ACCORDANCE WITH EXISTING
26 BYLAWS OF THE CREDIT UNION, AS FOLLOWS:
27 (1) BY FOLLOWING THE PROCEDURE OUTLINED IN SUBSECTIONS
28 (D) AND (D.1); OR
29 (2) BY A TWO-THIRDS VOTE OF THE MEMBERS PRESENT AND
30 VOTING AT A REGULAR, SPECIAL OR ANNUAL MEETING OF THE CREDIT
20010S1222B1938 - 11 -
1 UNION. IF THE VOTE IS TAKEN AT A SPECIAL MEETING:
2 (I) SUBSEQUENT TO THE VOTE, IF A MAJORITY OF THE
3 BOARD OF DIRECTORS VOTE TO RESUBMIT THE AMENDMENT OR
4 REPEAL BY MAIL BALLOT TO ALL OF THE MEMBERS, IT SHALL BE
5 RESUBMITTED.
6 (II) IF THE BYLAWS PROVIDE FOR A MAIL BALLOT
7 PROCEDURE, THEN IT WILL REQUIRE TWO-THIRDS OF THE
8 RESPONDING MEMBER BALLOTS TO SUSTAIN THE ORIGINAL VOTE.
9 * * *
10 § 501. Powers.
11 * * *
12 (b) Special powers.--[Except as set forth in subsection (c),
13 a] A credit union shall have the following special powers:
14 * * *
15 (4) To make purchase money mortgage loans to members
16 secured by mortgages which are first liens on improved real
17 property situated within the United States, the improvement
18 being an established dwelling house for not more than four
19 families which is owned by the member of the credit union
20 making the mortgage and occupied or to be occupied, in whole
21 or in part, by such member. Purchase money mortgages shall
22 not exceed 90% of the fair market value of the property,
23 [except that shares] unless the department grants prior <--
24 EXCEPT [THAT SHARES] AS PROVIDED IN PARAGRAPH (4.1). <--
25 (4.1) THE DEPARTMENT MAY GRANT PRIOR approval of a
26 purchase money mortgage loan policy submitted to the
27 department by the credit union which complies with the above <--
28 conditions PARAGRAPH (4) and, additionally, provides for <--
29 private mortgage insurance for each purchase money mortgage
30 and directs that purchase money mortgages shall be written
20010S1222B1938 - 12 -
1 according to secondary market standards, in which case
2 purchase money mortgage loans shall not exceed 100% of the
3 fair market value of the property. Shares of the credit union <--
4 FAIR MARKET VALUE OF THE PROPERTY. <--
5 (4.2) SHARES OF THE CREDIT UNION owned by the mortgagor
6 may be assigned or pledged as additional collateral security
7 for the mortgage loan and, in such event, the mortgage loan
8 granted upon such property may be increased by the withdrawal
9 value of the additional pledged shares to an amount not to
10 exceed a maximum total mortgage loan of 100% of the fair
11 market value of such real property, and the credit union may
12 release this additional collateral whenever the mortgage loan
13 meets all of the requirements of this title and could be made
14 legally at the time of release without the requirement of
15 additional collateral. Purchase money mortgage loans shall be
16 amortized by approximately equal payments sufficient in
17 amount to pay all interest and effect full repayment of
18 principal within a period not in excess of 30 years.
19 [Purchase] Except as otherwise provided in this section,
20 purchase money mortgage loans on any one property shall not
21 exceed 90% of the fair market value of the property[, except
22 as provided in this subsection,] or 5% of the [paid-in
23 capital] unimpaired capital of the credit union, whichever is
24 lesser. The aggregate total of mortgage loans shall not
25 exceed 50% of the [paid-in capital] unimpaired capital of the
26 credit union. Without regard to the limitations as to the
27 amount and term of a purchase money mortgage loan or the
28 aggregate amount of all mortgage loans set forth in this
29 paragraph, a credit union may grant any mortgage loan which
30 is insured or guaranteed, in whole or in part, by the United
20010S1222B1938 - 13 -
1 States or any instrumentality thereof, or if there is a
2 commitment to so insure or guarantee.
3 * * *
4 (7) To invest its funds in the following investments:
5 * * *
6 (iii) Shares of any savings and loan association or
7 credit union, organized under the laws of this
8 Commonwealth, or of any Federal savings and loan
9 association or Federal credit union, to the extent to
10 which the withdrawal or repurchase value of such shares
11 is insured by any agency of the United States or any
12 other insurer approved by the [Department of Banking]
13 department.
14 * * *
15 (10) To hold, purchase, mortgage, alter, improve and
16 sell fixed assets, meaning such real property, and furniture
17 and fixtures to be used therein, as the purposes of the
18 credit union require and which the credit union occupies or
19 intends to occupy for the transaction of its business or
20 partly so occupies and partly leases to others, except that,
21 without the prior written approval of the department, the
22 cost, at the time of acquisition, of such real property and
23 furniture and fixtures therein shall not exceed 5% of shares
24 and retained earnings.
25 * * *
26 [(c) Southern Africa investments.--No funds of a credit
27 union shall be invested in any stock or obligation of any
28 corporation doing business, either by itself or through any
29 subsidiary or affiliate, in the Republic of South Africa or
30 Namibia. This prohibition shall have prospective effect from
20010S1222B1938 - 14 -
1 February 20, 1990, and shall not affect existing investments.]
2 (d) Special powers of community development credit unions.--
3 A community development credit union may do any or all of the
4 following:
5 (1) Accept payments on shares by public units FROM ANY <--
6 AGENCY, INSTRUMENTALITY, PUBLIC CORPORATION OR OTHER ENTITY
7 OF THE UNITED STATES OR ANY STATE and nonmembers pursuant to
8 Federal law and requirements of the National Credit Union
9 Administration.
10 (2) Participate in the Community Development Revolving
11 Loan Program under the administration of the National Credit
12 Union Administration or any other program acceptable to the <--
13 department.
14 (3) Engage in any other PROGRAMS OR activities permitted <--
15 by Federal or State law applicable to a community development
16 credit union WITH THE PRIOR WRITTEN APPROVAL OF THE <--
17 DEPARTMENT UPON FILING OF AN APPLICATION AND SUBMITTAL OF A
18 FEE.
19 (e) Federal parity.--Notwithstanding any other provisions of
20 this title or any other law, in addition to any other powers as
21 authorized by this title or other law, a credit union shall have
22 the power:
23 (1) To engage in any activity permissible for a Federal
24 credit union as authorized by the Federal Credit Union Act
25 (48 Stat. 1216, 12 U.S.C. § 1751 et seq.), and the rules and
26 regulations of the National Credit Union Administration set
27 forth in 12 CFR Pts 700 (relating to definitions) through 795
28 (relating to omb OMB control numbers assigned pursuant to the <--
29 paperwork reduction act), subject to reasonable conditions,
30 limitations and restrictions as may be imposed by the
20010S1222B1938 - 15 -
1 department, including, but not limited to, conditions,
2 limitations and restrictions based upon safety and soundness.
3 (2) To engage in the activity of creating, amending or
4 expanding its field of membership as authorized by section
5 109 of the Federal Credit Union Act (48 Stat. 1219, 12 U.S.C.
6 § 1759) subject to reasonable conditions, limitations and
7 restrictions as may be imposed by the department, including,
8 but not limited to, conditions, limitations and restrictions
9 based upon safety and soundness.
10 (3) To control, hold an interest in or participate in a
11 credit union service organization that engages in any
12 activity permissible for a Federal credit union to conduct
13 through a credit union service organization, provided that
14 any activity permissible for a credit union service
15 organization shall be subject to reasonable conditions,
16 limitations and restrictions as may be imposed by the
17 department, including, but not limited to, conditions,
18 limitations and restrictions based upon safety and soundness.
19 (f) Notice to department.--Unless earlier approval is
20 granted by the department, a credit union shall provide at least
21 30 days' prior written notice to the department before it
22 engages in an activity or acquires an interest permissible under
23 subsection (e). During the review period provided by this
24 subsection, the department may:
25 (1) request further information concerning any proposed
26 activity or interest;
27 (2) impose any conditions, limitations or restrictions
28 upon such interests or activities to the extent authorized by
29 subsection (e); or
30 (3) prohibit the credit union from engaging in any
20010S1222B1938 - 16 -
1 activity or acquiring any interest, if to do so would have a
2 significant adverse impact upon the safety and soundness of
3 the credit union.
4 (g) Approval to be presumed.--Except as otherwise agreed to
5 by a credit union, the department shall be deemed to have
6 granted approval for a credit union to engage in an activity or
7 acquire an interest if within 30 days of receipt of written
8 notice from a credit union the department does not impose <--
9 conditions, limitations or restrictions upon interests or
10 activities as authorized by subsection (e) or prohibit the
11 credit union from engaging in an activity or acquiring an
12 interest authorized by subsection (e) ACT. <--
13 § 503. Regulation by [Department of Banking] department.
14 (a) General rule.--Credit unions shall be under the
15 supervision of the [Department of Banking] department. The
16 department is hereby authorized and empowered to issue general
17 rules and regulations and specific orders for the protection of
18 members of credit unions, for insuring the conduct of the
19 business of credit unions on a safe and sound basis and for the
20 effective enforcement of this title. Credit unions shall report
21 to the department as often as may be required by it and at least
22 annually on blanks supplied by the department for that purpose.
23 Supplementary reports may be required by the department from
24 time to time. Credit unions shall be examined as often as may be
25 required by the department and at least annually, and the
26 department may use such other methods of assuring itself of the
27 condition of the credit unions as it shall deem advisable. The
28 cost of all such examinations and inspections shall be paid by
29 the credit union. A credit union shall also pay annually its
30 proportionate share of the overhead expense of the department
20010S1222B1938 - 17 -
1 determined by regulation of the department. The department shall
2 give written notice to each credit union of the costs of
3 examinations, investigations and the credit union's
4 proportionate share of the overhead expenses of the department.
5 The credit union shall pay the amount of such costs within 30
6 days of the notice. If payment is not made within 30 days of the
7 notice, the department may assess a penalty fee of $150 for that
8 30-day period and each successive 30-day period of delinquency.
9 For failure to file reports when due, unless excused for cause,
10 a credit union shall pay to the department $100 for each day of
11 its delinquency.
12 (a.1) Fines for violations.--Any credit union subject to <--
13 this title or any director, officer, committee member, employee,
14 volunteer or agent of a credit union who violates the provisions
15 of this title or directs or consents to such violation or who
16 violates any order issued by the department under this title
17 that has become final, or engages in an unsafe or unsound
18 practice involving the credit union or breaches a fiduciary
19 duty, shall be subject to a fine levied by the department of up
20 to $10,000 for each offense.
21 (a.2) Removal of personnel.--Upon 30 days' written notice of
22 a hearing and an opportunity to be heard in any manner provided
23 under 2 Pa.C.S. Ch. 5 Subch. A (relating to practice and
24 procedure of Commonwealth agencies) and Ch. 7 Subch. A (relating
25 to judicial review of Commonwealth agency action) and the
26 general rules of administrative practice and procedure, the
27 department may permanently remove any credit union director,
28 officer, committee member, employee or volunteer from his
29 position at a credit union and prohibit him from participating
30 in the conduct of the affairs of the credit union in any manner
20010S1222B1938 - 18 -
1 for such time as the department deems appropriate, including for
2 the remainder of the life of such director, officer, committee
3 member, employee or volunteer, if the department determines that
4 the credit union director, officer, committee member, employee
5 or volunteer has done any of the following or caused another to
6 do any of the following:
7 (1) violated a statute;
8 (2) violated a regulation;
9 (3) violated a cease and desist order that has become
10 final;
11 (4) engaged in an unsafe or unsound practice involving
12 the credit union; or
13 (5) breached a fiduciary duty.
14 (b) Suspension of personnel.--If, in the opinion of the
15 department, a director, officer [or], committee member, employee
16 or volunteer of a credit union [has committed a violation of a
17 statute, regulation or cease and desist order which has become
18 final or has engaged in an unsafe or unsound practice involving
19 the credit union or has breached a fiduciary duty] has engaged
20 in conduct or failed to engage in conduct that would warrant
21 removal under subsection (a.2), and if the department
22 [determines that] is also of the opinion that, as a result of
23 such conduct or failure to engage in conduct, the credit union
24 has suffered or might suffer or could suffer or will suffer
25 [substantial] any financial loss or other damage or that the
26 interests of its members could be [seriously] prejudiced or
27 might be prejudiced or have been prejudiced by reason of [the
28 violation, practice or breach] such conduct or failure to engage
29 in such conduct, or the suspension is necessary for the
30 protection of the credit union or its members, the department
20010S1222B1938 - 19 -
1 may immediately suspend the director, officer [or], committee
2 member [upon], employee or volunteer from his position and from
3 any further participation in the conduct of the affairs of the
4 credit union by issuing written notice[, pending] of suspension
5 and of a hearing in any manner provided under 2 Pa.C.S. Ch. 5
6 Subch. A and Ch. 7 Subch. A and the general rules of
7 administrative practice and procedure, to determine whether
8 removal is required as provided in subsection (a.2). The notice
9 shall contain a statement of the facts constituting grounds for
10 removal and shall indicate a time and place for a hearing. The
11 hearing shall be fixed for a date between 30 and 60 days from
12 the date of service of notice, unless an earlier or later date
13 is set by the department at the request of the director, officer
14 [or], committee member, employee or volunteer.
15 (b.1) Order of prohibition.--
16 (1) In connection with any proceeding to remove credit
17 union personnel pursuant to subsection (a.2) or to suspend
18 credit union personnel pursuant to subsection (b) or
19 independent of any other administrative action, the
20 department may seek to enter an order to prohibit a credit
21 union director, officer, committee member, employee or
22 volunteer from working in any capacity in any and all other
23 credit unions from such time as the department determines
24 appropriate, including for the remainder of the life of such
25 director, officer, committee member, employee or volunteer.
26 (2) If an order of prohibition is sought by the
27 department in connection with any other administrative
28 action, the notice issued by the department shall contain a
29 statement that the department also seeks to prohibit the
30 credit union director, officer, committee member, employee or
20010S1222B1938 - 20 -
1 volunteer from working in any capacity in any and all other
2 credit unions.
3 (3) If the department seeks to enter an order of
4 prohibition pursuant to this subsection independent of any
5 other administrative action, the department shall provide 30
6 days' written notice of a hearing and an opportunity to be
7 heard to the credit union director, officer, committee
8 member, employee or volunteer in any manner provided under 2
9 Pa.C.S. Ch. 5 Subch. A and Ch. 7 Subch. A and the general
10 rules of administrative practice and procedure.
11 (b.2) Subpoenas and administrative hearings.--
12 (1) In connection with any examination, investigation or
13 other inquiry, the department may issue investigatory
14 subpoenas requiring the attendance of, or the production of
15 pertinent instruments, documents, accounts, books and records
16 by, the directors, officers, committee members, employees,
17 volunteers, agents or members, respectively, of any credit
18 union. In connection with such examination, investigation or
19 other inquiry, the department may also question such
20 witnesses under oath or affirmation and examine such
21 instruments, documents, accounts, books and records.
22 (2) The department may conduct administrative hearings
23 on any matter pertaining to this title, issue subpoenas to
24 compel the attendance of witnesses and the production of
25 instruments, documents, accounts, books and records at any
26 such hearing, which may be retained by the department until
27 the completion of all proceedings in connection with which
28 they were produced, and administer oaths and affirmations to
29 any person whose testimony is required.
30 (3) In the event a person fails to comply with any
20010S1222B1938 - 21 -
1 subpoena issued by the department or to testify on any matter
2 concerning which he may be lawfully interrogated, on
3 application by the department, the Commonwealth Court may
4 issue an order requiring the attendance of such person, the
5 production of instruments, documents, accounts, books or
6 records or the giving of testimony.
7 (4) (i) Whenever a credit union, or a director,
8 officer, committee member, employee or volunteer of a
9 credit union, fails to comply with the terms of an order
10 of the department which has become final, the department,
11 upon notice to such credit union, director, officer,
12 committee member, employee or volunteer, may petition the
13 Commonwealth Court for an order directing such credit
14 union, director, officer, committee member, employee or
15 volunteer to obey the order of the department within such
16 period as shall be fixed by the court.
17 (ii) Upon the filing of such petition, the
18 Commonwealth Court shall allow a rule to show cause why
19 the order requested by the department should not be
20 granted.
21 (iii) Whenever it shall appear that the order of the
22 department was lawfully issued, the Commonwealth Court
23 shall grant the petition of the department.
24 (b.3) Privileges.--In connection with its authority and
25 responsibility under this title, and in addition to any other
26 privileges provided by State law, the department shall have the
27 same privileges enjoyed by Federal banking regulators,
28 including, but not limited to, the bank examination privilege,
29 deliberative process privilege, executive privilege and the
30 mental process privilege.
20010S1222B1938 - 22 -
1 (A.1) FINES, REMOVALS, PROHIBITION, SUSPENSION.--FOR ANY <--
2 VIOLATION OF THIS TITLE OR REGULATION ISSUED PURSUANT TO THIS
3 TITLE, OR ANY FINAL ORDER ISSUED BY THE DEPARTMENT UNDER THIS
4 TITLE, OR ANY UNSAFE OR UNSOUND PRACTICE OR BREACH OF FIDUCIARY
5 DUTY INVOLVING A CREDIT UNION, THE DEPARTMENT MAY TAKE ANY ONE
6 OR MORE OF THE FOLLOWING ACTIONS:
7 (1) THE DEPARTMENT MAY IMPOSE A CIVIL PENALTY OF UP TO
8 $10,000 FOR EACH VIOLATION OF THIS TITLE AGAINST A CREDIT
9 UNION OR ANY DIRECTOR, OFFICER, COMMITTEE MEMBER, EMPLOYEE,
10 VOLUNTEER OR AGENT OF A CREDIT UNION.
11 (2) THE DEPARTMENT MAY IMMEDIATELY SUSPEND ANY DIRECTOR,
12 OFFICER, COMMITTEE MEMBER, EMPLOYEE, VOLUNTEER OR AGENT OF A
13 CREDIT UNION FROM HIS OR HER POSITION AT A CREDIT UNION, AND
14 FROM ANY FURTHER PARTICIPATION IN THE CONDUCT OF THE AFFAIRS
15 OF THE CREDIT UNION, IF IN THE OPINION OF THE DEPARTMENT THE
16 CREDIT UNION OR ITS MEMBERS HAVE SUFFERED OR MAY SUFFER ANY
17 SIGNIFICANT FINANCIAL OR OTHER DAMAGE. TO SUSPEND A PERSON
18 PURSUANT TO THIS PARAGRAPH, THE DEPARTMENT SHALL PROVIDE A
19 NOTICE CONTAINING A STATEMENT OF THE FACTS CONSTITUTING
20 GROUNDS FOR REMOVAL AND SHALL INDICATE A TIME AND PLACE FOR A
21 HEARING. THE HEARING SHALL BE FIXED FOR A DATE BETWEEN 30
22 DAYS AND 60 DAYS FROM THE DATE OF SERVICE OF NOTICE, UNLESS
23 AN EARLIER OR LATER DATE IS SET BY THE DEPARTMENT AT THE
24 REQUEST OF THE PERSON.
25 (3) THE DEPARTMENT MAY REMOVE ANY DIRECTOR, OFFICER,
26 COMMITTEE MEMBER, EMPLOYEE, VOLUNTEER OR AGENT OF A CREDIT
27 UNION FROM HIS OR HER POSITION AT A CREDIT UNION AND PROHIBIT
28 HIM OR HER FROM PARTICIPATING IN THE CONDUCT OF THE AFFAIRS
29 OF THE CREDIT UNION IN ANY MANNER FOR SUCH TIME AS THE
30 DEPARTMENT DEEMS APPROPRIATE.
20010S1222B1938 - 23 -
1 (4) THE DEPARTMENT MAY PROHIBIT ANY DIRECTOR, OFFICER,
2 COMMITTEE MEMBER, EMPLOYEE, VOLUNTEER OR AGENT OF A CREDIT
3 UNION FROM WORKING IN ANY CAPACITY IN ANY AND ALL CREDIT
4 UNIONS FOR SUCH TIME AS THE DEPARTMENT DETERMINES TO BE
5 APPROPRIATE.
6 (A.2) HEARINGS AND SUBPOENAS.--
7 (1) THE DEPARTMENT MAY CONDUCT ADMINISTRATIVE HEARINGS
8 ON ANY MATTER PERTAINING TO THIS TITLE, SUBJECT TO THE
9 PROVISIONS OF 2 PA.C.S. CH. 5 SUBCH. A (RELATING TO PRACTICE
10 AND PROCEDURE OF COMMONWEALTH AGENCIES) AND CH. 7 SUBCH. A
11 (RELATING TO JUDICIAL REVIEW OF COMMONWEALTH AGENCY ACTION).
12 (2) IN CONNECTION WITH ANY EXAMINATION, INVESTIGATION OR
13 ADMINISTRATIVE HEARING, THE DEPARTMENT MAY ISSUE SUBPOENAS
14 REQUIRING THE ATTENDANCE OF OR THE PRODUCTION OF PERTINENT
15 INSTRUMENTS, DOCUMENTS, ACCOUNTS, BOOKS AND RECORDS BY THE
16 DIRECTORS, OFFICERS, COMMITTEE MEMBERS, EMPLOYEES,
17 VOLUNTEERS, AGENTS OR MEMBERS, RESPECTIVELY, OF ANY CREDIT
18 UNION. IN CONNECTION WITH ANY SUCH EXAMINATION, INVESTIGATION
19 OR ADMINISTRATIVE HEARING, THE DEPARTMENT MAY ALSO QUESTION
20 ANY SUCH WITNESS UNDER OATH OR AFFIRMATION AND EXAMINE ANY
21 SUCH INSTRUMENT, DOCUMENT, ACCOUNTS, BOOKS AND RECORDS, AND
22 RETAIN THE RECORDS UNTIL THE PROCEEDINGS ARE CONCLUDED.
23 (3) THE DEPARTMENT MAY ADMINISTER OATHS AND AFFIRMATIONS
24 TO ANY PERSON WHOSE TESTIMONY IS REQUIRED AT ANY
25 ADMINISTRATIVE HEARING OR AT ANY OTHER TIME AUTHORIZED BY
26 THIS TITLE.
27 (4) ANY PRIVILEGES AVAILABLE TO FEDERAL FINANCIAL
28 INSTITUTION REGULATORS UNDER FEDERAL STATUTE, REGULATION OR
29 COMMON LAW SHALL BE AVAILABLE TO THE DEPARTMENT. THE SERVICE
30 OF A SUBPOENA UPON ANY EMPLOYEE OF THE DEPARTMENT SHALL NOT
20010S1222B1938 - 24 -
1 REQUIRE SUCH PERSON TO DISCLOSE ANY INFORMATION. SUCH PERSON
2 SHALL HAVE ALL RIGHTS AND PRIVILEGES TO OBJECT TO PRODUCTION
3 OF INFORMATION.
4 (5) IF ANY CREDIT UNION OR PERSON FAILS TO COMPLY WITH
5 ANY SUBPOENA, SUSPENSION NOTICE OR FINAL ORDER ISSUED UNDER
6 THIS TITLE, THEN THE DEPARTMENT MAY ENFORCE ANY OF THE
7 FOREGOING IN COMMONWEALTH COURT. THE COMMONWEALTH COURT SHALL
8 ENTER AN ORDER TO ENFORCE ANY SUCH SUBPOENA, SUSPENSION
9 NOTICE OR FINAL ORDER.
10 [(B) SUSPENSION OF PERSONNEL.--IF, IN THE OPINION OF THE
11 DEPARTMENT, A DIRECTOR, OFFICER OR COMMITTEE MEMBER OF A CREDIT
12 UNION HAS COMMITTED A VIOLATION OF A STATUTE, REGULATION OR
13 CEASE AND DESIST ORDER WHICH HAS BECOME FINAL OR HAS ENGAGED IN
14 AN UNSAFE OR UNSOUND PRACTICE INVOLVING THE CREDIT UNION OR HAS
15 BREACHED A FIDUCIARY DUTY AND IF THE DEPARTMENT DETERMINES THAT
16 THE CREDIT UNION HAS SUFFERED OR WILL SUFFER SUBSTANTIAL
17 FINANCIAL LOSS OR OTHER DAMAGE OR THAT THE INTERESTS OF ITS
18 MEMBERS COULD BE SERIOUSLY PREJUDICED BY REASON OF THE
19 VIOLATION, PRACTICE OR BREACH, THE DEPARTMENT MAY SUSPEND THE
20 DIRECTOR, OFFICER OR COMMITTEE MEMBER UPON WRITTEN NOTICE,
21 PENDING A HEARING TO DETERMINE WHETHER REMOVAL IS REQUIRED. THE
22 NOTICE SHALL CONTAIN A STATEMENT OF THE FACTS CONSTITUTING
23 GROUNDS FOR REMOVAL AND SHALL INDICATE A TIME AND PLACE FOR A
24 HEARING. THE HEARING SHALL BE FIXED FOR A DATE BETWEEN 30 AND 60
25 DAYS FROM THE DATE OF SERVICE OF NOTICE, UNLESS AN EARLIER OR
26 LATER DATE IS SET BY THE DEPARTMENT AT THE REQUEST OF THE
27 DIRECTOR, OFFICER OR COMMITTEE MEMBER.]
28 (c) Seizure of credit union.--
29 (1) If the department determines that a credit union is:
30 [(1)] (i) violating any of the provisions of this
20010S1222B1938 - 25 -
1 title or any rule or regulation of the department issued
2 under [and within] the authority of this title or any
3 order issued by the department under the authority of
4 this title that has become final;
5 [(2)] (ii) conducting its business in an unsafe
6 manner;
7 [(3)] (iii) in an unsafe [and] or unsound condition
8 to transact its business; [or]
9 (iv) SIGNIFICANTLY UNDERCAPITALIZED OR critically <--
10 undercapitalized according to the prompt corrective
11 action standards of the National Credit Union
12 Administration consistent with the Federal Credit Union
13 Act (48 Stat. 1216, 12 U.S.C. § 1751 et seq.) and related
14 regulations; or
15 [(4)] (v) insolvent;
16 the department may [serve written notice of its intention to
17 take possession of the credit union. If the condition
18 continues for a period of 15 days after the giving of such
19 notice, the department may, in its discretion], in its
20 discretion, immediately or at such other time set by the <--
21 DISCRETION, AT SUCH TIME SET BY THE department, take <--
22 possession of the business and property of the credit union
23 and retain possession until such time as the condition
24 predicating such action is remedied or until the affairs of
25 the credit union are finally liquidated.
26 (2) The department shall take possession of a credit
27 union by serving a written notice of seizure on the credit
28 union's board of directors that contains a statement of the
29 facts constituting grounds for seizure of the credit union
30 and that contains notice of a hearing and an opportunity to
20010S1222B1938 - 26 -
1 be heard. Upon taking possession of a credit union, the
2 department may liquidate or otherwise resolve THE CREDIT <--
3 UNION OR TAKE ANY OTHER ACTION THE DEPARTMENT DEEMS
4 APPROPRIATE REGARDING the credit union, appoint the National
5 Credit Union Administration to liquidate or otherwise resolve <--
6 THE CREDIT UNION OR TAKE ANY OTHER ACTION THE DEPARTMENT <--
7 DEEMS APPROPRIATE REGARDING the credit union pursuant to
8 Federal law, or appoint such other agent or employee of the
9 department to liquidate or otherwise resolve THE CREDIT UNION <--
10 OR TAKE ANY OTHER ACTION THE DEPARTMENT DEEMS APPROPRIATE
11 REGARDING the credit union.
12 (3) The department may take similar action if any report
13 is not filed within a period of 15 days after it is due.
14 (4) Any person aggrieved by the action of the department
15 in taking possession of a credit union may appeal within ten
16 days of commencement of the receivership, whereupon the
17 matter shall be set down for hearing de novo [in accordance
18 with the procedures set forth at 10 Pa. Code Ch. 3 (relating
19 to hearings and conferences)].
20 (d) Exchange of reports of examination.--
21 (1) Whenever the shares of a credit union are insured by
22 the National Credit Union Share Insurance Fund or any other
23 share insurance fund approved by the department, the
24 department [is authorized to] may furnish to the
25 Administrator of the National Credit Union Administration or
26 to any other approved insurer any reports of examination made
27 by the department under this section[.] or any credit union
28 board resolution or enforcement document including any order
29 issued by the department regarding the particular credit
30 union.
20010S1222B1938 - 27 -
1 (2) The department may furnish to any outside accountant
2 or trade organization contracted by the credit union or
3 authorized by the department to satisfy the audit
4 requirements in this title or meet specifications as defined
5 in any order any reports of examination made by the
6 department under this section or any credit union board
7 resolution or enforcement document including orders issued by
8 the department.
9 (3) If a Pennsylvania credit union conducts business in
10 another state through the establishment and operation of
11 additional branch offices and service facilities under
12 section 904 (relating to place of business), the department
13 [is authorized to] may furnish to the financial regulatory
14 agency of that state reports of examination [made by the],
15 credit union board resolutions, or any enforcement document
16 including orders issued by the department [for] regarding the
17 particular credit union.
18 (e) Report.--A credit union shall furnish to the department
19 copies of the report of financial condition, known as the call
20 report, in the same form and with the same frequency that the
21 credit union is required to provide the report to the National
22 Credit Union Administration.
23 (f) Disclosure of information.-- <--
24 (1) No record or item of information concerning an
25 individual which is contained in a system of records
26 maintained by the department shall be disclosed by any means
27 of communication to any person, or to another agency, without
28 the prior consent of the individual to whom the record or
29 item of information pertains, unless:
30 (i) The disclosure would be to another agency or to
20010S1222B1938 - 28 -
1 an instrumentality of any governmental jurisdiction
2 within or under the control of the Commonwealth of
3 Pennsylvania or its instrumentalities or of the United
4 States for a civil or criminal law enforcement activity
5 authorized by law.
6 (ii) The head of the agency or instrumentality or
7 his designee has made a written request to the department
8 specifying the particular portion desired and the law
9 enforcement activity for which the record or item is
10 sought.
11 (2) Notwithstanding the provisions of paragraph (1), the
12 service of a subpoena upon the secretary, deputy, examiner,
13 clerk or other employee of the department shall not be
14 construed as requiring such person to disclose any
15 information but such person shall have all the rights and
16 privileges as any other subpoenaed party to object to
17 production of information on the same basis as provided in
18 the Pennsylvania Rules of Civil Procedure, State law or
19 common law.
20 (F) DISCLOSURE OF INFORMATION.--THE DEPARTMENT MAY NOT <--
21 DISCLOSE ANY CREDIT UNION INFORMATION IN ITS CUSTODY THAT
22 RELATES TO AN INDIVIDUAL UNLESS THAT INDIVIDUAL CONSENTS.
23 HOWEVER, IN ITS DISCRETION, THE DEPARTMENT MAY DISCLOSE SUCH
24 CREDIT UNION INFORMATION TO ANY FEDERAL, STATE OR LOCAL
25 GOVERNMENT, AGENCY OR INSTRUMENTALITY THEREOF FOR OFFICIAL
26 PURPOSES.
27 § 505. Capital and shares.
28 * * *
29 (d) Share insurance required.--The shares representing the
30 savings of members shall be insured in such amounts as provided
20010S1222B1938 - 29 -
1 by the National Credit Union Administration or other share
2 insurance fund approved by the [Department of Banking]
3 department to insure the shares of credit unions. A credit union
4 that has not obtained share account insurance from the National
5 Credit Union Administration or other share insurance fund
6 approved by the department may not, without the prior written
7 approval of the department, accept payments from its members for
8 the purchase of shares.
9 § 511. Power to borrow.
10 (a) General rule.--A credit union may borrow from any source
11 a sum not exceeding 50% of its [capital, surplus and undivided]
12 unimpaired capital, regular reserve, contingency reserves and
13 retained earnings for the purpose of meeting the demand for
14 loans to members or for the purpose of meeting demands for share
15 withdrawals.
16 * * *
17 § 513. Reserves.
18 (a) General rule.--[At the end of each accounting period,
19 the gross income shall be determined. From this amount, there
20 shall be set aside a sum in accordance with the following
21 schedule as a regular reserve:
22 (1) A credit union in operation for more than four years
23 and having assets of $500,000 or more shall set aside:
24 (i) 10% of gross income until the regular reserve
25 shall equal 4% of the total of outstanding loans and risk
26 assets; then
27 (ii) 5% of gross income until the regular reserve
28 shall equal 6% of the total of outstanding loans and risk
29 assets.
30 (2) A credit union in operation less than four years or
20010S1222B1938 - 30 -
1 having assets of less than $500,000 shall set aside:
2 (i) 10% of gross income until the regular reserve
3 shall equal 7.5% of the total of the outstanding loans
4 and risk assets; then
5 (ii) 5% of gross income until the regular reserve
6 shall equal 10% of the total of outstanding loans and
7 risk assets.
8 (3) Whenever the regular reserve falls below the stated
9 percentage of the total of outstanding loans and risk assets,
10 it shall be replenished by regular contributions in such
11 amounts as may be needed to maintain the stated reserve
12 goals.
13 (4) All entrance fees collected shall be set aside in
14 the regular reserve fund.
15 (5) The regular reserve fund thus established shall not
16 be loaned out to members and shall be deposited as authorized
17 in section 501(b)(6) (relating to powers) or invested in such
18 investments as are authorized by section 501(b)(7). The
19 regular reserve fund shall belong to the credit union and
20 shall not be distributed except in case of liquidation.
21 (6) The directors are authorized, after the required
22 reserve has been provided for, to make additional transfers
23 from undivided earnings to a contingent reserve for other
24 anticipated losses and expenses, but the members at the
25 annual meeting may retransfer any part or all of such
26 contingent reserve to the undivided earnings account.] Each
27 credit union shall establish and maintain a regular reserve
28 account for the purpose of absorbing losses that exceed
29 undivided earnings and other appropriations of undivided
30 earnings to the same extent and in the same manner as
20010S1222B1938 - 31 -
1 required of a Federal credit union.
2 (b) [Changes in reserve requirement.--The department may
3 decrease the reserve requirement set forth in subsection (a)
4 when in its opinion such a decrease is necessary or desirable.
5 The department may also require special reserves to protect the
6 interests of members either by regulation or for an individual
7 credit union in any special case.] Computation of reserve and
8 net worth requirements.--For the purpose of establishing the
9 reserves required by this section and for the provision and
10 maintenance of adequate equity or net worth, a credit union
11 shall compute its reserve and net worth requirements consistent
12 with section 216 of the Federal Credit Union Act (48 Stat. 1216,
13 12 U.S.C. § 1790d and the National Credit Union Administration
14 rules and regulations set forth in 12 CFR Pt. 702 (relating to
15 prompt corrective action).
16 (c) Allowance for loan loss.--Each credit union, in addition
17 to maintaining a regular reserve, shall establish an allowance
18 for loan loss. The allowance for loan loss reserve shall be
19 funded in the manner and used for the purposes as designated
20 from time to time by the [Department of Banking] department. The
21 board of directors shall decide the loans which are to be
22 charged off against the allowance for loan loss, except that the
23 [Department of Banking] department may, at the time of
24 examination of a credit union, recommend for charge-off such
25 loans which in its opinion are unsound, which loans shall be
26 charged against the allowance for loan loss account within 60
27 days of the receipt of such recommendation from the department.
28 Any amount received from the repayment of a loan after it has
29 been charged off against the allowance for loan loss account
30 shall be credited back to the account.
20010S1222B1938 - 32 -
1 [(d) Allowance for investment loss.--Each credit union, in
2 addition to maintaining a regular reserve, shall establish an
3 allowance for investment loss in compliance with Federal or
4 State laws or regulations as well as generally accepted
5 accounting principles. The allowance for investment loss reserve
6 shall be funded in conformity with such laws, regulations or
7 generally accepted accounting principles.]
8 § 514. Dividends.
9 (a) General rule.--The board of directors of a credit union
10 or the members on recommendation of the board of directors,
11 whichever the bylaws provide, may declare dividends to be paid
12 on all shares and share certificates from the net earnings and
13 undivided earnings at such rates and intervals and for such
14 periods as the board of directors may authorize and after
15 provision for the required reserves. [Within the discretion of
16 the board of directors, payments on all shares which are made
17 within the first ten days of a month may be entitled to
18 dividends for the full month in which such payment is made.]
19 Dividends may be added to the credit of the members share
20 accounts, paid in cash, or partially credited to share accounts
21 and partially paid in cash, at the option of the board of
22 directors.
23 * * *
24 § 701. Membership.
25 (a) General rule.--Credit union organizations shall be
26 limited to groups having a potential membership of 500 or more
27 adult persons and having a common bond of association within a
28 well-defined community or rural district by reason of occupation
29 or of membership in a religious congregation or fraternal or
30 labor organization or residence within a well-defined community
20010S1222B1938 - 33 -
1 or rural district. A credit union may also retain its original
2 field of membership and, additionally, include in its field of
3 membership other occupational groups, as well as like
4 associational groups having a common bond with the original
5 field of membership, with insufficient number of members to form
6 or conduct the affairs of a separate credit union, if the
7 existing credit union obtains prior permission from the
8 [Department of Banking] department. The membership of a credit
9 union shall be limited to and consist of the incorporators of
10 the credit union and such other persons, having the common bond
11 of association, set forth in the articles of incorporation, as
12 have been duly admitted members, have paid the entrance fee as
13 provided in the bylaws and own and retain one or more shares.
14 Organizations composed principally of the same group as the
15 credit union membership may be members. Employes of credit
16 unions may be members of such credit unions.
17 * * *
18 (f) Effect of certain association formations.--Any
19 association formed primarily to obtain a State credit union
20 charter shall not be considered by the department to have a
21 sufficient common bond.
22 § 706. Election of directors and credit and supervisory
23 committee members.
24 * * *
25 (b) Report to department.--A statement in writing of the
26 names and addresses of the members of the board and the
27 committees and the officers, as well as any interim
28 appointments, shall be filed with the [Department of Banking]
29 department within ten days after their election and
30 qualification or interim appointment. For failure to file such
20010S1222B1938 - 34 -
1 statements when due, unless excused for cause, the credit union
2 shall pay to the department [$5] $100 for each day of its
3 delinquency.
4 § 707. Duties of directors generally.
5 (a) General rule.--The directors of a credit union shall
6 have general management of the affairs of the credit union and
7 are specifically required:
8 (1) To act on applications for membership.
9 (2) To determine interest rates on loans.
10 (3) To fix the amount of the surety bond which shall be
11 required of all officers and employees handling money which
12 amount shall be not less than the minimum schedule
13 established by the [Department of Banking] department.
14 (4) To declare dividends or recommend dividends as
15 provided in the bylaws.
16 (5) To transmit or cause to be transmitted to the
17 members all proposed amendments to the bylaws.
18 (6) If the bylaws provide for appointed credit or
19 supervisory committees, to appoint individuals to serve on
20 the credit committee or the supervisory committee and to fill
21 vacancies in the board and in the credit committee until
22 successors are duly chosen and qualified.
23 (7) To determine the maximum individual share holdings
24 and, subject to the limitations contained in this title, the
25 maximum individual loan which can be made with or without
26 security.
27 (8) To have charge of investments, first mortgage loans
28 and loans to other credit unions and Federal credit unions
29 but not loans to members which are under the supervision of
30 the credit committee as otherwise provided in this title. The
20010S1222B1938 - 35 -
1 board may, however, delegate to the credit committee the
2 authority to approve some or all first mortgage loans and to
3 an investment committee or qualified individual the authority
4 to make all or some investments if the board first
5 establishes guidelines and standards for the approval and
6 making of such loans and investments in accordance with the
7 policies of the board of directors.
8 (9) To fix the amount of compensation of directors,
9 officers, committee members, [the loan officer] loan officers
10 and employees.
11 (10) To determine whether, to what extent and to what
12 class or classes of borrowers, if any, an interest refund is
13 to be made in any dividend period. Any such interest refund
14 shall be paid in proportion to the interest paid by each
15 borrower within any class during that dividend period. [No
16 interest refund may be authorized unless a share dividend at
17 the rate of not less than 5% has been declared from the
18 earnings of that dividend period.]
19 (11) To appoint alternate credit committee members as
20 needed to serve during incapacity or absence of the credit
21 committee members.
22 (b) Notice of interest refund to department.--Immediately
23 upon the board deciding to refund any interest pursuant to
24 subsection (a)(10), notice of such decision and a copy of any
25 board resolution and related documents shall forthwith be sent
26 to the department. The department shall, within 30 days after
27 receipt thereof, have the power to disapprove, for any
28 reasonable cause stated in writing, any such interest refund. If
29 the department does not disapprove the interest refund within 30
30 days, the interest refund shall become effective.
20010S1222B1938 - 36 -
1 § 709. Compensation of directors and officers.
2 [A member of the board of directors and members of the credit
3 committee and the supervisory committee may be compensated if
4 the credit union paid a dividend of not less than 3% from the
5 earnings of the last preceding year.] Members of the board of
6 directors, the credit committee and the supervisory committee
7 may be compensated if the credit union pays dividends to its
8 members commensurate with prevailing market rates during the
9 preceding year. A credit union shall be deemed to pay dividends
10 commensurate with prevailing market rates if declared dividend
11 rates on share accounts are competitive with dividend or
12 interest rates offered by other credit unions, Federal credit
13 unions, or other financial institutions authorized to engage in
14 the business of receiving money for deposit. The [Department of
15 Banking] department may prohibit or regulate the payment of
16 compensation of directors, committee members and officers,
17 exclusive of the treasurer, if it deems such compensation
18 excessive or if, in its opinion, the financial condition of the
19 credit union is not such as to warrant the payment of such
20 compensation.
21 § 711. Procedures for approving service by certain persons.
22 (a) General rule.--No person who has been convicted of a
23 misdemeanor or a felony involving dishonesty, breach of trust or
24 violation of this title or corresponding provisions of prior law
25 may serve or seek to serve as an officer, director, committee <--
26 member [or], employee, VOLUNTEER OR AGENT of a credit union <--
27 unless the person[:
28 (1) in the case of an officer, director or committee
29 member seeking office,] has or obtains the unanimous approval
30 of the [nominating committee] board of directors of the
20010S1222B1938 - 37 -
1 credit union.[;
2 (2) in the case of an employee, has the approval of the
3 officer in charge of operations;
4 (3) in the case of an officer, including an officer in
5 charge of operations, director or committee member seeking
6 office, has the unanimous approval of the board of directors
7 of the credit union; or
8 (4) in the case of an employee, other than an officer in
9 charge of operations, has the approval of the board of
10 directors by a vote of at least two-thirds of the board of
11 directors.]
12 * * *
13 § 713. Loan procedures.
14 * * *
15 (b) Conflict of interest.--No credit committee member, loan
16 officer or director of a credit union shall vote on the granting
17 of any loan in which such official has guaranteed the repayment
18 of the loan or where a member of [his or her] the member's
19 immediate family has a beneficial interest.
20 * * *
21 (d) Approval by credit committee.--
22 (1) If the bylaws provide for a credit committee, at
23 least a majority of the members of the credit committee shall
24 pass on all loans[,] and no loan shall be approved unless it
25 is approved by a majority of the members of the credit
26 committee [present and voting, unless the credit committee
27 has appointed] at a credit committee meeting.
28 (2) Notwithstanding paragraph (1), the credit committee
29 may appoint one or more loan officers and [delegated]
30 delegate to such person or persons the power to approve
20010S1222B1938 - 38 -
1 loans, share withdrawals of amounts previously pledged as
2 security for a loan, releases and substitutions of security,
3 within limits specified by the committee.
4 (3) The appointment and delegation shall be approved by
5 a majority of the credit committee present and voting at a
6 credit committee meeting and shall be recorded in a written
7 resolution signed by the credit committee members who
8 approved the delegation or appointment. The written
9 resolution shall be forwarded to the board of directors prior
10 to the next board meeting.
11 (4) The credit committee shall meet as often as may be
12 necessary after due notice to each member. The credit
13 committee shall keep minutes of each meeting. The minutes
14 shall include a list of loans approved and disapproved by the
15 credit committee.
16 (5) The credit committee shall require any loan officers
17 it appoints to report regularly to the credit committee on
18 any loan approvals or other actions taken by the loan officer
19 in the authority delegated to the loan officer by the credit
20 committee.
21 * * *
22 § 714. Annual [examination] audit.
23 (a) Supervisory committee.--If the bylaws of the credit
24 union provide for a supervisory committee, the duties of the
25 supervisory committee shall be as follows:
26 (1) To make at least an annual [examination] audit of
27 the affairs of the credit union. The committee shall submit a
28 report to the board of directors and to the members at the
29 next annual meeting of the credit union.
30 * * *
20010S1222B1938 - 39 -
1 (b) Default by supervisory committee.--Whenever the
2 supervisory committee fails to make the [examinations] audits or
3 reports as provided in subsection (a)(1), the board of directors
4 shall remove from office the members of the supervisory
5 committee and appoint a new committee to make such
6 [examinations] audits, or the board may employ the services of a
7 public accountant to make such [examinations] audits. The
8 charges for the services of such public accountants shall be
9 paid by the credit union. If the board of directors under such
10 circumstances fails or refuses to act, the [Department of
11 Banking] department may, in addition to its other powers, remove
12 the members of the supervisory committee and issue an order on
13 the board of directors requiring such [examinations] audits to
14 be made by a public accountant at the expense of the credit
15 union.
16 (c) [Examination] Audit by public accountant.--If the bylaws
17 do not provide for a supervisory committee, the board shall
18 employ the services of a public accountant to make
19 [examinations] audits under subsections (a) and (b). The charges
20 for the services of the public accountant shall be paid by the
21 credit union.
22 (d) Requirement for an outside audit.--
23 (1) A credit union shall obtain an outside, independent
24 audit by a certified public accountant or other approved
25 service for any fiscal year during which any one of the
26 following conditions exist:
27 (i) the supervisory committee of the credit union
28 has not conducted an annual supervisory committee audit;
29 (ii) the annual supervisory committee audit
30 conducted did not meet the audit requirements required by
20010S1222B1938 - 40 -
1 the department; or
2 (iii) the credit union has experienced serious and
3 persistent recordkeeping deficiencies as defined in
4 subsection (e).
5 (2) In the case of an audit required pursuant to
6 paragraph (1)(i) or (ii), the scope of the outside,
7 independent audit shall fully encompass the requirements set
8 forth in the department's audit guidelines. In the case of an
9 audit required pursuant to paragraph (1)(iii), the outside,
10 independent audit must be conducted by a certified public
11 accountant and must be an opinion audit as that term is
12 understood under generally accepted auditing standards.
13 (e) Definition.--As used in subsection (d)(1), "persistent
14 recordkeeping deficiencies" means serious recordkeeping problems
15 which continue to exist past a usual, expected or normal period
16 of time. Persistent recordkeeping deficiencies shall be
17 considered serious if the department has a reasonable doubt:
18 (1) That the financial condition of the credit union is
19 accurately and fairly presented in the credit union's
20 statement.
21 (2) That management practices and procedures of the
22 credit union are sufficient to safeguard members' assets.
23 § 903. Filing and review of articles of amendment.
24 (a) General rule.--Articles of amendment shall be filed with
25 the [Department of Banking] department. If the department finds
26 that the articles of amendment conform to law, it shall endorse
27 its approval thereon and forward the articles of amendment to
28 the Department of State. Upon receipt of the articles of
29 amendment, the Department of State shall file the same.
30 * * *
20010S1222B1938 - 41 -
1 § 904. Place of business.
2 (a) Change in principal place of business.--A credit union
3 may change its place of business upon the filing of a statement
4 of change of principal place of business with the Department of
5 State and the [Department of Banking] department.
6 (b) Branch offices and service facilities.--If a credit
7 union gives the [Department of Banking] department prior written
8 notification and, in the case of branch offices, receives prior
9 approval from the department, it may establish and maintain, at
10 locations other than its principal place of business, additional
11 branch offices and service facilities to furnish services to its
12 members.
13 (c) Discontinuance of branch offices or service
14 facilities.--If a credit union pursuant to a resolution of its
15 board of directors provides the department prior written
16 notification, the credit union may discontinue the operation of
17 and close branch offices or service facilities.
18 [(c)] (d) Cross reference.--See 15 Pa.C.S. § 134 (relating
19 to docketing statement).
20 § 1101. Conversion into Federal credit union.
21 (a) General rule.--A credit union may be converted into a
22 Federal credit union by complying with the following
23 requirements:
24 (1) The proposition for such conversion shall first be
25 approved by a majority vote of the directors of the credit
26 union who shall also set a date for the vote thereon by the
27 members. The vote of the members shall be conducted at a
28 meeting held on such date, or by written ballot if the bylaws
29 so provide to be filed on or before such date. Written notice
30 of the proposition and of the date set for the vote shall be
20010S1222B1938 - 42 -
1 given each member not more than 30 nor less than ten days
2 prior to such date. Approval of the proposition shall be by
3 the affirmative vote of a majority of the members voting, in
4 person or in writing, either at a meeting of the credit union
5 or through a mail ballot vote. In order for a vote to be
6 considered valid, there must be a quorum established. In the
7 case of a meeting of the credit union, a quorum shall be
8 established by the presence of at least 10% of the credit
9 union's membership. In the case of a mail ballot vote, a
10 quorum shall be established by the written response of at
11 least 10% of the credit union's membership.
12 (2) A statement of the result of the vote, certified by
13 an officer of the credit union, shall be filed with the
14 [Department of Banking] department within ten days after the
15 vote is taken.
16 (3) Promptly after the vote is taken and in no event
17 later than 90 days thereafter, if the proposition for
18 conversion was approved, the credit union shall take such
19 action as may be necessary under the applicable laws of the
20 United States to make it a Federal credit union, and, within
21 ten days after receipt of the Federal credit union charter,
22 it shall file a copy of the charter thus issued with the
23 Department of State which shall furnish a copy thereof to the
24 [Department of Banking] department. Upon such filing with the
25 Department of State, the credit union shall no longer be
26 subject to any of the provisions of this title. The successor
27 Federal credit union shall be vested with all of the assets
28 and shall continue to be responsible for all of the
29 obligations of the credit union thus converted to the same
30 extent as though the conversion had not taken place.
20010S1222B1938 - 43 -
1 * * *
2 § 1102. Conversion from Federal credit union.
3 (a) General rule.--A Federal credit union may be converted
4 into a credit union subject to the provisions of this title by:
5 (1) Complying with all Federal requirements requisite to
6 enabling it to convert to a credit union or to cease being a
7 Federal credit union.
8 (2) Filing with the [Department of Banking] department
9 proof of compliance with such Federal requirements in form
10 satisfactory to the department.
11 (3) Filing with the department, together with such
12 reasonable fees as shall be established by the department
13 including an application fee and fees for such examination
14 and such investigation as it may deem necessary, articles of
15 conversion which shall set forth:
16 (i) The proposed name of the converted credit union.
17 (ii) The exact location of the principal place of
18 business of the credit union into which the Federal
19 credit union plans to become converted.
20 (iii) The number, names and addresses of the persons
21 to be the first directors of the converted credit union.
22 (iv) All other statements required by this title to
23 be set forth in original articles of incorporation in the
24 case of the formation of a credit union in so far as such
25 information is applicable to a Federal credit union
26 proposing to become converted into a credit union.
27 (b) Department [of Banking] review.--Immediately upon the
28 receipt of the articles of conversion, the department shall
29 conduct such examination as may be deemed necessary to ascertain
30 from the best sources of information at its command:
20010S1222B1938 - 44 -
1 (1) Whether the name of the proposed credit union
2 conforms with the requirements of law for the name of a
3 credit union and whether it is the same as one already
4 adopted or reserved by another person or is so similar
5 thereto that it is likely to mislead the public.
6 (2) Whether the conversion is made for legitimate
7 purposes.
8 (3) Whether the interests of members and creditors are
9 adequately protected.
10 (4) Whether the proposed credit union meets all of the
11 requirements of this title and violates none of its
12 prohibitions applicable to a credit union incorporated under
13 this title.
14 (5) Whether the Federal credit union has complied with
15 the requirements of the laws of the United States as they
16 relate to the conversion of a Federal credit union into a
17 credit union.
18 Within 60 days after receipt of the articles of conversion, the
19 [Department of Banking] department shall, upon the basis of the
20 facts disclosed by its investigation, either approve or
21 disapprove such articles.
22 * * *
23 (d) Disapproval action.--If the [Department of Banking]
24 department disapproves the articles of conversion, it shall
25 return them to the Federal credit union desiring to become
26 converted into a credit union stating in detail its reasons for
27 so doing.
28 * * *
29 § 1103. Merger and consolidation authorized.
30 * * *
20010S1222B1938 - 45 -
1 (b) Approvals and conditions.--Before merging or
2 consolidating, the credit unions involved must obtain prior
3 approval from the [Department of Banking] department. In the
4 case of a merger or consolidation with a Federal credit union,
5 the merger or consolidation shall be made pursuant to Federal
6 law in addition to the provisions of this title. In the case of
7 a merger or consolidation with an out-of-State credit union, the
8 merger or consolidation shall be made pursuant to the credit
9 union law of the state of incorporation of the out-of-State
10 credit union or, if credit unions incorporated in different
11 states are involved, pursuant to the credit union laws of the
12 various states of incorporation of the out-of-State credit
13 unions in addition to the provisions of this title.
14 § 1105. Articles of merger or consolidation.
15 * * *
16 (b) Department [of Banking] review.--The articles of merger
17 or consolidation shall be filed with the [Department of Banking]
18 department which, immediately upon receipt thereof, shall
19 conduct such investigation as may be deemed necessary to
20 ascertain from the best sources at its command:
21 (1) Whether, if the articles are articles of
22 consolidation, the name of the proposed new credit union,
23 Federal credit union or out-of-State credit union conforms
24 with the requirements of law for the name of a credit union
25 and whether it is the same as one already adopted or reserved
26 by another corporation or person or is so similar thereto
27 that it is likely to mislead the public.
28 (2) Whether, if the merger or consolidation includes one
29 or more Federal credit unions, all requirements of the laws
30 of the United States pertaining thereto have been complied
20010S1222B1938 - 46 -
1 with.
2 (3) Whether the interests of members and creditors are
3 adequately protected.
4 (4) Whether the credit unions, including the surviving
5 or new credit union, have met all of the requirements of this
6 title and have violated none of its prohibitions applicable
7 to a credit union incorporated under this title.
8 (5) Whether, if the merger or consolidation includes an
9 out-of-State credit union, there is compliance with the
10 applicable requirements of the law of the state of
11 incorporation of the out-of-State credit union.
12 Within 60 days after receipt of the articles of merger or
13 consolidation, the [Department of Banking] department shall,
14 upon the basis of the facts disclosed by its investigation,
15 either approve or disapprove such articles.
16 * * *
17 * * *
18 (e) Disapproval action.--If the [Department of Banking]
19 department shall disapprove the articles, it shall return them
20 to the credit union, Federal credit union or out-of-State credit
21 union from which they were received, stating the reasons for
22 such disapproval.
23 * * *
24 § 1106. Supervisory mergers or consolidations by [Department of
25 Banking] department.
26 Notwithstanding any other provision of this title, the
27 [Department of Banking] department may require a merger or
28 consolidation of a credit union which is insolvent or is in
29 danger of insolvency with any other credit union, Federal credit
30 union or out-of-State credit union or may authorize a credit
20010S1222B1938 - 47 -
1 union to purchase any of the assets of, or assume any of the
2 liabilities and capital of, any other credit union, Federal
3 credit union or out-of-State credit union if the department is
4 satisfied that:
5 (1) an emergency requiring expeditious action exists
6 with respect to such a credit union;
7 (2) other alternatives are not reasonably available; and
8 (3) the public interest would best be served by approval
9 of such merger, consolidation, purchase or assumption.
10 § 1301. Dissolution authorized.
11 Any credit union may elect to dissolve voluntarily and wind
12 up its affairs in the manner provided in this chapter. However,
13 if it shall appear to the [Department of Banking] department,
14 upon an examination of the business, assets and affairs of the
15 credit union, that its assets will probably be insufficient to
16 pay in full its members and creditors, it shall take possession
17 of the business and property of the credit union and retain
18 possession until its affairs are finally liquidated.
19 § 1302. Approval of voluntary dissolution.
20 (a) General rule.--The procedure for voluntary dissolution
21 shall be as follows:
22 * * *
23 (4) A certificate of election to dissolve signed by a
24 duly authorized officer of the credit union shall be executed
25 and delivered to the [Department of Banking] department. The
26 certificate shall set forth:
27 (i) The name of the credit union.
28 (ii) The exact location of its place of business.
29 (iii) The names and addresses of its officers and
30 directors.
20010S1222B1938 - 48 -
1 (iv) The number of directors voting for, and the
2 number voting against, the proposed plan of voluntary
3 dissolution.
4 (v) The total number of members and the number of
5 members voting for, and the number voting against, the
6 proposed plan of voluntary dissolution.
7 (vi) The names and addresses of the proposed
8 liquidating trustees and the number of votes received by
9 every candidate for the position of liquidating trustee.
10 (vii) The amount of the bond required to be supplied
11 by each trustee.
12 (viii) A verified statement by each of the proposed
13 liquidating trustees stating that he is willing to serve
14 as liquidating trustee, subject to the provisions of this
15 chapter and to the terms of the proposed plan of
16 voluntary dissolution, that he will, so far as the duty
17 devolves upon him, diligently and honestly liquidate the
18 affairs of the credit union, and will not knowingly
19 violate or permit to be violated any of the provisions of
20 this chapter or of the proposed plan of voluntary
21 liquidation.
22 (ix) The proposed plan of voluntary dissolution.
23 (b) Department [of Banking] review.--Upon receipt of the
24 certificate of election to dissolve, the [Department of Banking]
25 department shall conduct an examination or an investigation, or
26 take such other action as it deems necessary, to determine
27 whether to approve the plan of voluntary dissolution. If the
28 department determines that the plan of voluntary dissolution
29 does not prejudice the interests of members or creditors, it
30 shall endorse its approval on the certificate of election to
20010S1222B1938 - 49 -
1 dissolve and send it to the Department of State for filing. If
2 the [Department of Banking] department disapproves the plan, it
3 shall return the certificate to the credit union stating in
4 detail its reasons for doing so.
5 (c) Effect of filing certificate.--Upon the filing by the
6 Department of State of the certificate of election to dissolve,
7 the Department of State shall furnish a copy thereof to the
8 [Department of Banking] department and the credit union. Upon
9 such filing, the credit union shall cease to transact its
10 business, and the liquidating trustee or trustees shall commence
11 the liquidation of the credit union. The liquidating trustee or
12 trustees shall thereafter be authorized to carry out, in his own
13 name or in their own names as liquidating trustee or trustees of
14 the credit union, the powers granted to him or them by the plan
15 of voluntary dissolution and may sue and be sued for the purpose
16 of determining and enforcing the debts due the credit union and
17 its obligations.
18 * * *
19 § 1303. Dissolution proceedings.
20 (a) Collection and distribution of assets.--The liquidating
21 trustee or trustees shall proceed in the manner provided by the
22 [Department of Banking] department to gather the assets,
23 determine the liabilities and distribute the assets of the
24 credit union until its affairs are fully adjusted and wound up.
25 Under this section the department shall set forth the order of
26 the distribution of the assets. The provisions of this section
27 on distribution of assets apply whether the dissolution is
28 voluntary or involuntary.
29 * * *
30 (d) Transfer possession.--If the department takes possession
20010S1222B1938 - 50 -
1 of the credit union under section 503(c) (relating to regulation
2 by the department) and appoints the National Credit Union
3 Administration to liquidate or otherwise resolve the credit <--
4 union, then Federal law shall apply to the credit union and
5 neither this section nor the remainder of this title shall be
6 applicable except as provided in Federal law. ADMINISTRATION TO <--
7 LIQUIDATE THE CREDIT UNION OR TAKE OTHER ACTION DEEMED
8 APPROPRIATE REGARDING THE CREDIT UNION, THEN THE DEPARTMENT
9 SHALL BE DEEMED TO HAVE SURRENDERED JURISDICTION OF THE CREDIT
10 UNION AND THE DEPARTMENT SHALL HAVE NO LIABILITY RELATED TO SUCH
11 CREDIT UNION.
12 § 1304. Department [of Banking] supervision.
13 The [Department of Banking] department shall continue to
14 supervise the credit union, in the hands of the liquidating
15 trustee or trustees, until the liquidation is complete and the
16 affairs of the credit union are fully settled.
17 § 1305. Articles of dissolution.
18 (a) General rule.--When, in the opinion of the [Department
19 of Banking] department, the liquidation of a credit union is
20 complete and its affairs are fully settled, the [Department of
21 Banking] department shall execute and file in the Department of
22 State articles of dissolution, which shall set forth:
23 (1) The name of the credit union.
24 (2) The statute under which the credit union was
25 incorporated and the date of incorporation.
26 (3) A statement that the liquidation of the credit union
27 is complete and its affairs are fully settled.
28 * * *
29 § 1306. Involuntary dissolution.
30 (a) Issuance of certificate of dissolution by department.--
20010S1222B1938 - 51 -
1 In the event the department finds after issuing written notice
2 of a hearing and an opportunity to be heard to a credit union,
3 that the credit union has not exercised any of its powers or
4 opened for business with its proposed members within one year
5 after the date of its incorporation or such longer time as the
6 department may allow, then the department shall issue under its
7 seal a certificate of dissolution reciting the applicable facts
8 and stating that articles of incorporation have been forfeited
9 by reason of such facts and shall file the certificate of
10 dissolution with the Department of State.
11 (b) Effect of certificate of dissolution.--Upon filing of
12 the certificate of dissolution in the Department of State, all
13 rights of the credit union under its articles of incorporation
14 shall cease and its existence shall cease.
15 § 1501. Authorization to do business.
16 (a) General rule.--A credit union organized in another state
17 may conduct business as [a] an out-of-State credit union in this
18 Commonwealth with the approval of the [Department of Banking]
19 department as long as a credit union chartered under the laws of
20 this Commonwealth is permitted to do business in the state in
21 which the credit union is organized.
22 * * *
23 § 1503. Supervision by [Department of Banking] department.
24 (a) General rule.--The [Department of Banking] department
25 may examine an out-of-State credit union:
26 (1) to the same extent that a Pennsylvania credit union
27 is examined by the regulatory agency with jurisdiction over
28 credit unions in the state in which the out-of-State credit
29 union is incorporated; or
30 (2) pursuant to an agreement between the department and
20010S1222B1938 - 52 -
1 the regulatory agency with jurisdiction over credit unions in
2 the state in which the out-of-State credit union is
3 incorporated.
4 * * *
5 § 1504. Revocation of authorization to do business.
6 The [Department of Banking] department may revoke the
7 approval of an out-of-State credit union to conduct business as
8 a credit union in this Commonwealth if the department makes any
9 of the following findings:
10 (1) The out-of-State credit union no longer meets the
11 requirements of section 1501 (relating to authorization to do
12 business).
13 (2) The out-of-State credit union has violated
14 Pennsylvania statutes or regulations or orders of the
15 department.
16 (3) The out-of-State credit union has engaged in a
17 pattern of unsafe or unsound credit union practices.
18 (4) Continued operation by the out-of-State credit union
19 is likely to have a substantially adverse impact on the
20 financial, economic or other interests of residents of this
21 Commonwealth served by the out-of-State credit union.
22 Section 2. This act shall take effect in 60 days.
J25L17DMS/20010S1222B1938 - 53 -