PRIOR PRINTER'S NOS. 1559, 1938, 2101 PRINTER'S NO. 2158
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
AS AMENDED ON THIRD CONSIDERATION, JUNE 26, 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. The definitions of "retained earnings," "service
9 facility," "total equity capital and reserves" and "unimpaired
10 capital" in section 103 of Title 17 of the Pennsylvania
11 Consolidated Statutes are amended and the section is amended by
12 adding definitions to read:
13 § 103. Definitions.
14 The following words and phrases when used in this title shall
15 have the meanings given to them in this section unless the
16 context clearly indicates otherwise:
17 * * *
18 "Community development credit union." A credit union which
1 is designated as a low-income credit union by the Department of
2 Banking.
3 "Corporate credit union." A credit union which is operated
4 primarily for the purpose of serving other credit unions, is
5 designated by the National Credit Union Administration as a
6 corporate credit union, is subject to the provisions of sections
7 301(b) (relating to purposes) and 502 (relating to powers of
8 central or corporate credit unions) of this title and limits
9 natural person members to the minimum number required to charter
10 and operate the credit union.
11 * * *
12 "Insolvent" or "Insolvency." The condition of a credit union
13 when total shares exceed the present cash value of assets after
14 providing for liabilities.
15 * * *
16 ["Retained earnings." Undivided profits.]
17 "Secretary." The Secretary of Banking of the Commonwealth or
18 the secretary's designee.
19 "Service facility." A subsidiary office of the credit union
20 such as an automated teller machine, kiosk or other type of
21 facility as determined by the Department of Banking which is not
22 capable of offering the same or approximately the same level of
23 service that can be found at the principal office of the credit
24 union.
25 * * *
26 ["Total equity capital and reserves." Regular reserve,
27 undivided earnings and all reserve accounts, including the
28 allowance for loan loss reserve.]
29 "Unimpaired capital." Total unencumbered shares.
30 * * *
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1 Section 2. Sections 104 heading and (a) and (b) and 304(a),
2 (b) and (c) of Title 17 are amended to read:
3 § 104. Prohibition on use of words "credit [union," etc.]
4 union."
5 (a) General rule.--Only a credit union subject to this
6 title, a Federal credit union or a corporation organized in
7 accordance with a state credit union statute may assume and use
8 the words "credit union" in its name or title or operate in the
9 manner of a credit union. Only a credit union which has received
10 a low-income designation by the department and the National
11 Credit Union Administration, or a Federal credit union which has
12 received a low-income designation from the National Credit Union
13 Administration, may assume and use the words "community
14 development credit union" or a similar designation in its name
15 or title or operate in the manner of a community development
16 credit union.
17 (b) Penalties.--Any person, other than a credit union
18 subject to this title, a Federal credit union, a corporation
19 organized in accordance with a state credit union statute or an
20 association of credit unions, who violates subsection (a) by
21 using a name or title containing the words "credit union" or any
22 other derivation thereof or so representing itself in its
23 advertising, or otherwise conducting business as a credit union
24 shall, for each offense, be subject to a penalty levied by the
25 [Department of Banking] department which shall be not less than
26 $1,000 nor more than $10,000. The officers of a corporation
27 shall be liable for such penalty if the offense is committed by
28 a corporation. This section shall be enforced by the department.
29 * * *
30 § 304. Department of Banking consideration of articles.
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1 (a) General rule.--The articles of incorporation and two
2 copies of the proposed bylaws for the general governance of the
3 credit union shall be presented to the [Department of Banking]
4 department, together with such reasonable fees as shall be
5 established by the department, including an application fee and
6 other fees for such examination and such investigation as it may
7 deem necessary to ascertain:
8 (1) Whether the character and general fitness of the
9 incorporators, directors and the treasurer named in the
10 articles of incorporation is satisfactory.
11 (2) Whether the character and number of the group
12 proposed to be served affords reasonable promise of
13 sufficient support for the enterprise so as to make the
14 establishment of the proposed credit union economically
15 advisable.
16 (3) Whether the incorporators, directors and group
17 proposed to be served have a common bond of association as
18 provided in section 701 (relating to membership).
19 (4) Whether the proposed credit union unduly encroaches
20 upon the field of membership of any other credit union.
21 (5) Whether the application is in proper form and within
22 the purpose of this title.
23 (6) Whether the savings of members paid for shares will
24 be insured by the National Credit Union Administration or
25 other share insurance fund approved by the department.
26 Nonprofit corporations created by specific legislation of any
27 state to insure share accounts or depository accounts of
28 credit unions shall not be subject to regulation by the
29 Department of Insurance or to the laws of this Commonwealth
30 concerning insurance.
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1 Within 60 days after receipt of the articles, the department
2 shall, upon the basis of the facts disclosed by the application
3 and its investigation, either approve or disapprove the
4 articles.
5 (b) Approval action.--If the department approves the
6 articles, it shall endorse its approval thereon and forward the
7 articles to the Department of State. The Department of State
8 shall, upon the receipt of the articles and the required filing
9 fee, file the same. Upon the filing of the article of
10 incorporation, the corporate existence of the credit union shall
11 begin. The articles of incorporation as filed in the Department
12 of State are conclusive evidence of the fact that the credit
13 union has been incorporated.
14 (c) Disapproval action.--If the [Department of Banking]
15 department disapproves the articles, it shall return them to the
16 incorporators, stating in detail its reasons for doing so.
17 * * *
18 Section 3. Section 305(a), (b) and (d) of Title 17 are
19 amended and the section is amended by adding subsections to
20 read:
21 § 305. Bylaws.
22 (a) General rule.--The original bylaws of a credit union
23 shall be adopted by the incorporators of the credit union and
24 copies shall be transmitted to the [Department of Banking]
25 department along with the articles of incorporation as provided
26 in this chapter.
27 (b) [Amendments.--] Board initiated bylaw amendments.--
28 (1) Bylaws may be amended or repealed [either by two-
29 thirds of the members present and voting or a majority of the
30 board of directors at any regular, annual or special meeting
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1 of the credit union. Bylaws may alternatively be amended or
2 repealed by members through mail ballot if the bylaws provide
3 for such a procedure and if two-thirds of the responding
4 member ballots favor the proposed amendment or repeal.] by
5 the affirmative vote of a majority of directors at any
6 regular or special meeting of the board. Whenever the board
7 of directors amends the bylaws, written notice thereof shall
8 be given to the members prior to the next meeting of the
9 members or within 90 days after such action by the board of
10 directors, whichever is sooner.
11 (2) Any amendment to or repeal of the bylaws adopted by
12 the board of directors may be repealed or amended by a two-
13 thirds vote of the responding members. The member-initiated
14 repeal or amendment of a bylaw passed by the board of
15 directors may be conducted at an annual or special member
16 meeting or conducted by mail ballot, if the bylaws allow such
17 a procedure. The vote must be held at least ten days after
18 the mailing of the notice in paragraph (1).
19 (3) Notwithstanding paragraph (2), the members of a
20 credit union may amend the bylaws pursuant to procedures set
21 forth in subsections (d), (d.1) and (d.2), whichever
22 subsection is appropriate.
23 * * *
24 (d) [Review by members.--Whenever the board of directors
25 amends the bylaws, written notice thereof shall be given to the
26 members prior to the next meeting of the members or within 90
27 days after such action by the board of directors, whichever is
28 sooner. Any amendment to the bylaws adopted by the board of
29 directors may be repealed or amended by the members at an annual
30 or special meeting or by a mail ballot vote held at least ten
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1 days after the mailing of the notice.] Member-initiated bylaw
2 amendment or repeal for credit unions with more than 10,000
3 members.--
4 (1) Bylaws of a credit union with more than 10,000
5 members may be amended or repealed upon member-initiated
6 petition and the affirmative vote of two-thirds of the
7 members voting thereon by mail ballot.
8 (2) Written petition signed by 1% of all the members of
9 a credit union with more than 10,000 members shall be the
10 exclusive method by which such members may amend or repeal
11 the bylaws.
12 (3) Whenever the board of directors receives a member-
13 initiated petition to amend or repeal the bylaws, written
14 notice thereof shall be given to all members of the credit
15 union within 90 days and a mail ballot vote of the matter
16 shall be held during a period of at least ten days after the
17 mailing of the notice and ballot.
18 (d.1) Procedure.--
19 (1) To initiate the procedure to amend or repeal the
20 bylaws set forth in subsection (d), a member of a credit
21 union must obtain the petition form from the department. The
22 department shall date the petition form and file a copy of
23 the form.
24 (2) Upon the request of a member, the credit union shall
25 provide the member with a list of all groups and their
26 business addresses that are included as members of the credit
27 union.
28 (3) The member seeking to amend or repeal the bylaws
29 shall have 180 days from the receipt of the petition form
30 from the department to circulate the petition and obtain the
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1 requisite number of signatures from members of the credit
2 union. The petition shall be in a form provided by and
3 approved by the department and shall clearly identify the
4 bylaw to be amended or repealed and include the language of
5 the proposed bylaw.
6 (4) On or before 180 days from the date the petition
7 form was obtained from the department, the member seeking to
8 amend or repeal the bylaws must file the petition with the
9 department. The department shall indicate the date of filing
10 on the petition and file the petition in the records of the
11 department. The department shall send a copy of the petition
12 to the secretary of the credit union.
13 (5) The secretary of the credit union shall verify that
14 the signatures on the petition are the signatures of members
15 of the credit union and that the petition contains the
16 requisite number of signatures.
17 (6) The ballot may not be mailed if the credit union
18 determines that any of the following conditions have not been
19 met:
20 (i) the petition does not contain the requisite
21 number of signatures of members of the credit union; or
22 (ii) for any other specified reason.
23 If the credit union determines that the ballot will not be
24 mailed, then the secretary of the credit union shall notify
25 in writing the member who initiated the petition drive within
26 ten days of receipt of the petition by the credit union. The
27 notification shall inform the member that the ballot will not
28 be mailed and the reason. It shall also inform the member of
29 right to appeal to the department.
30 (7) Any member seeking to contest a determination by the
20010S1222B2158 - 8 -
1 credit union not to mail the notice and ballot provided for
2 in subsection (d) may file a complaint with the department
3 within 30 days of receiving written notice from the secretary
4 of the credit union's decision not to mail such notice and
5 ballot and the department shall adjudicate the matter.
6 (8) The department may provide any person or
7 governmental entity with a copy of the petition form as well
8 as any complaints filed with the department and other
9 documents related to the ballot procedure.
10 (9) If the credit union mails the notice and ballot
11 provided for in subsection (d) or is ordered to do so by the
12 department, then the credit union shall send an official
13 notice to all members of the credit union, prepare and mail
14 the ballots, arrange for tallying of the votes and report the
15 results to all members in accordance with subsection (d).
16 (10) The credit union shall bear the reasonable expenses
17 associated with:
18 (i) Verifying that the signatures on the petition
19 are the signatures of members of the credit union and
20 that the petition contains the requisite number of
21 signatures.
22 (ii) Notifying the members.
23 (iii) Preparing and mailing the ballots.
24 (iv) Tallying the vote and reporting the results.
25 (d.2) Member-initiated amendment or repeal of bylaws for
26 credit unions with 10,000 or fewer members.--A credit union with
27 10,000 or fewer members may amend or repeal the bylaws, in
28 accordance with existing bylaws of the credit union, as follows:
29 (1) by following the procedure outlined in subsections
30 (d) and (d.1); or
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1 (2) by a two-thirds vote of the members present and
2 voting at a regular, special or annual meeting of the credit
3 union. If the vote is taken at a special meeting:
4 (i) Subsequent to the vote, if a majority of the
5 board of directors vote to resubmit the amendment or
6 repeal by mail ballot to all of the members, it shall be
7 resubmitted.
8 (ii) If the bylaws provide for a mail ballot
9 procedure, then it will require two-thirds of the
10 responding member ballots to sustain the original vote.
11 * * *
12 Section 4. Section 501(b) introductory paragraph, (4),
13 (7)(iii) and (10) and (c) of Title 17 are amended, subsection
14 (b) is amended by adding paragraphs and the section is amended
15 by adding subsections to read:
16 § 501. Powers.
17 * * *
18 (b) Special powers.--[Except as set forth in subsection (c),
19 a] A credit union shall have the following special powers:
20 * * *
21 (4) To make purchase money mortgage loans to members
22 secured by mortgages which are first liens on improved real
23 property situated within the United States, the improvement
24 being an established dwelling house for not more than four
25 families which is owned by the member of the credit union
26 making the mortgage and occupied or to be occupied, in whole
27 or in part, by such member. Purchase money mortgages shall
28 not exceed 90% of the fair market value of the property,
29 except [that shares] as provided in paragraph (4.1).
30 (4.1) The department may grant prior approval of a
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1 purchase money mortgage loan policy submitted to the
2 department by the credit union which complies with paragraph
3 (4) and, additionally, provides for private mortgage
4 insurance for each purchase money mortgage and directs that
5 purchase money mortgages shall be written according to
6 secondary market standards, in which case purchase money
7 mortgage loans shall not exceed 100% of the fair market value
8 of the property.
9 (4.2) Shares of the credit union owned by the mortgagor
10 may be assigned or pledged as additional collateral security
11 for the mortgage loan and, in such event, the mortgage loan
12 granted upon such property may be increased by the withdrawal
13 value of the additional pledged shares to an amount not to
14 exceed a maximum total mortgage loan of 100% of the fair
15 market value of such real property, and the credit union may
16 release this additional collateral whenever the mortgage loan
17 meets all of the requirements of this title and could be made
18 legally at the time of release without the requirement of
19 additional collateral. Purchase money mortgage loans shall be
20 amortized by approximately equal payments sufficient in
21 amount to pay all interest and effect full repayment of
22 principal within a period not in excess of 30 years.
23 [Purchase] Except as otherwise provided in this section,
24 purchase money mortgage loans on any one property shall not
25 exceed 90% of the fair market value of the property[, except
26 as provided in this subsection,] or 5% of the [paid-in
27 capital] unimpaired capital of the credit union, whichever is
28 lesser. The aggregate total of mortgage loans shall not
29 exceed 50% of the [paid-in capital] unimpaired capital of the
30 credit union. Without regard to the limitations as to the
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1 amount and term of a purchase money mortgage loan or the
2 aggregate amount of all mortgage loans set forth in this
3 paragraph, a credit union may grant any mortgage loan which
4 is insured or guaranteed, in whole or in part, by the United
5 States or any instrumentality thereof, or if there is a
6 commitment to so insure or guarantee.
7 * * *
8 (7) To invest its funds in the following investments:
9 * * *
10 (iii) Shares of any savings and loan association or
11 credit union, organized under the laws of this
12 Commonwealth, or of any Federal savings and loan
13 association or Federal credit union, to the extent to
14 which the withdrawal or repurchase value of such shares
15 is insured by any agency of the United States or any
16 other insurer approved by the [Department of Banking]
17 department.
18 * * *
19 (10) To hold, purchase, mortgage, alter, improve and
20 sell fixed assets, meaning such real property, and furniture
21 and fixtures to be used therein, as the purposes of the
22 credit union require and which the credit union occupies or
23 intends to occupy for the transaction of its business or
24 partly so occupies and partly leases to others, except that,
25 without the prior written approval of the department, the
26 cost, at the time of acquisition, of such real property and
27 furniture and fixtures therein shall not exceed 5% of shares
28 and retained earnings.
29 * * *
30 [(c) Southern Africa investments.--No funds of a credit
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1 union shall be invested in any stock or obligation of any
2 corporation doing business, either by itself or through any
3 subsidiary or affiliate, in the Republic of South Africa or
4 Namibia. This prohibition shall have prospective effect from
5 February 20, 1990, and shall not affect existing investments.]
6 (d) Special powers of community development credit unions.--
7 A community development credit union may do all of the
8 following:
9 (1) Accept payments on shares from any agency,
10 instrumentality, public corporation or other entity of the
11 United States or any state and nonmembers pursuant to the
12 Federal Credit Union Act (48 Stat. 1216, 12 U.S.C. § 1751 et
13 seq.) and other applicable Federal law and requirements of
14 the National Credit Union Administration.
15 (2) Participate in the Community Development Revolving
16 Loan Program under the administration of the National Credit
17 Union Administration.
18 (3) Engage in any other programs or activities permitted
19 by Federal or State law applicable to a community development
20 credit union with the prior written approval of the
21 department upon filing of an application and submittal of a
22 fee.
23 (e) Federal parity.--Notwithstanding any other provisions of
24 this title or any other law, in addition to any other powers as
25 authorized by this title or other law, a credit union shall have
26 the power:
27 (1) To engage in any activity permissible for a Federal
28 credit union as authorized by the Federal Credit Union Act
29 (48 Stat. 1216, 12 U.S.C. § 1751 et seq.), and the rules and
30 regulations of the National Credit Union Administration,
20010S1222B2158 - 13 -
1 subject to reasonable conditions, limitations and
2 restrictions as may be imposed by the department, including,
3 but not limited to, conditions, limitations and restrictions
4 based upon safety and soundness.
5 (2) To engage in the activity of creating, amending or
6 expanding its field of membership as authorized by section
7 109 of the Federal Credit Union Act (48 Stat. 1219, 12 U.S.C.
8 § 1759) subject to reasonable conditions, limitations and
9 restrictions as may be imposed by the department, including,
10 but not limited to, conditions, limitations and restrictions
11 based upon safety and soundness.
12 (3) To control, hold an interest in or participate in a
13 credit union service organization that engages in any
14 activity permissible for a Federal credit union to conduct
15 through a credit union service organization, provided that
16 any activity permissible for a credit union service
17 organization shall be subject to reasonable conditions,
18 limitations and restrictions as may be imposed by the
19 department, including, but not limited to, conditions,
20 limitations and restrictions based upon safety and soundness.
21 (f) Notice to department.--Unless prior approval is granted
22 by the department, a credit union shall provide at least 30
23 days' prior written notice to the department before it engages
24 in an activity or acquires an interest permissible under
25 subsection (e). During the review period provided by this
26 subsection, the department may:
27 (1) request further information concerning any proposed
28 activity or interest;
29 (2) impose any conditions, limitations or restrictions
30 upon such interests or activities to the extent authorized by
20010S1222B2158 - 14 -
1 subsection (e); or
2 (3) prohibit the credit union from engaging in any
3 activity or acquiring any interest, if to do so would have a
4 significant adverse impact upon the safety and soundness of
5 the credit union.
6 (g) Approval to be presumed.--Except as otherwise agreed to
7 by a credit union, the department shall be deemed to have
8 granted approval for a credit union to engage in an activity or
9 acquire an interest if within 30 days of receipt of written
10 notice from a credit union the department does not act.
11 Section 5. Sections 503, 505(d), 511(a), 513 and 514(a) of
12 Title 17 are amended to read:
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] forms supplied by the department for that
23 purpose. Supplementary reports may be required by the department
24 from time to time. Credit unions shall be examined as often as
25 may be 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
20010S1222B2158 - 15 -
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, removals, prohibition, suspension.--For any
13 violation of this title or regulation issued pursuant to this
14 title, or any final order issued by the department under this
15 title, or any unsafe or unsound practice or breach of fiduciary
16 duty involving a credit union, the department may take any one
17 or more of the following actions:
18 (1) The department may impose a civil penalty of up to
19 $10,000 for each violation of this title against a credit
20 union or any director, officer, committee member, employee,
21 volunteer or agent of a credit union.
22 (2) The department may immediately suspend any director,
23 officer, committee member, employee, volunteer or agent of a
24 credit union from his or her position at a credit union, and
25 from any further participation in the conduct of the affairs
26 of the credit union, if in the opinion of the department the
27 credit union or its members have suffered or may suffer any
28 significant financial harm or other prejudice. To suspend a
29 person pursuant to this paragraph, the department shall
30 provide a notice containing a statement of the facts
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1 constituting grounds for removal and shall indicate a time
2 and place for a hearing. The hearing shall be fixed for a
3 date between 30 days and 60 days from the date of service of
4 notice, unless an earlier or later date is set by the
5 department at the request of the person.
6 (3) The department may remove any director, officer,
7 committee member, employee, volunteer or agent of a credit
8 union from his or her position at a credit union and prohibit
9 him or her from participating in the conduct of the affairs
10 of the credit union in any manner for such time as the
11 department deems appropriate.
12 (4) The department may prohibit any director, officer,
13 committee member, employee, volunteer or agent of a credit
14 union under the jurisdiction of the department from working
15 in any capacity in any and all credit unions for such time as
16 the department determines to be appropriate.
17 (a.2) Hearings and subpoenas.--
18 (1) The department may conduct administrative hearings
19 on any matter pertaining to this title, subject to the
20 provisions of 2 Pa.C.S. Ch. 5 Subch. A (relating to practice
21 and procedure of Commonwealth agencies) and Ch. 7 Subch. A
22 (relating to judicial review of Commonwealth agency action).
23 (2) In connection with any examination, investigation or
24 administrative hearing, the department may issue subpoenas
25 requiring the attendance of or the production of pertinent
26 instruments, documents, accounts, books and records by the
27 directors, officers, committee members, employees,
28 volunteers, agents or members OR AGENTS, respectively, of any <--
29 credit union. In connection with any such examination,
30 investigation or administrative hearing, the department may
20010S1222B2158 - 17 -
1 also question any such witness under oath or affirmation and
2 examine any such instrument, document, accounts, books and
3 records, and retain the records until the proceedings are
4 concluded.
5 (3) The department may administer oaths and affirmations
6 to any person whose testimony is required at any
7 administrative hearing or at any other time authorized by
8 this title.
9 (4) Any privileges available to Federal financial
10 institution regulators under Federal statute, regulation or
11 common law shall be available to the department. The service
12 of a subpoena upon any employee of the department shall not
13 require such person to IMMEDIATELY disclose any information. <--
14 Such person shall have all rights and privileges to object to
15 production of information.
16 (5) If any credit union or person fails to comply with
17 any subpoena, suspension notice or final order issued under
18 this title, then the department may enforce any of the
19 foregoing in Commonwealth Court. The Commonwealth Court shall
20 enter an order to enforce any such subpoena, suspension
21 notice or final order.
22 [(b) Suspension of personnel.--If, in the opinion of the
23 department, a director, officer or committee member of a credit
24 union has committed a violation of a statute, regulation or
25 cease and desist order which has become final or has engaged in
26 an unsafe or unsound practice involving the credit union or has
27 breached a fiduciary duty and if the department determines that
28 the credit union has suffered or will suffer substantial
29 financial loss or other damage or that the interests of its
30 members could be seriously prejudiced by reason of the
20010S1222B2158 - 18 -
1 violation, practice or breach, the department may suspend the
2 director, officer or committee member upon written notice,
3 pending a hearing to determine whether removal is required. The
4 notice shall contain a statement of the facts constituting
5 grounds for removal and shall indicate a time and place for a
6 hearing. The hearing shall be fixed for a date between 30 and 60
7 days from the date of service of notice, unless an earlier or
8 later date is set by the department at the request of the
9 director, officer or committee member.]
10 (c) Seizure of credit union.--
11 (1) If the department determines that a credit union is:
12 [(1)] (i) violating any of the provisions of this
13 title or any rule or regulation of the department issued
14 under [and within] the authority of this title or any
15 order issued by the department under the authority of
16 this title that has become final;
17 [(2)] (ii) conducting its business in an unsafe
18 manner;
19 [(3)] (iii) in an unsafe [and] or unsound condition
20 to transact its business; [or]
21 (iv) significantly undercapitalized or critically
22 undercapitalized according to the prompt corrective
23 action standards of the National Credit Union
24 Administration consistent with the Federal Credit Union
25 Act (48 Stat. 1216, 12 U.S.C. § 1751 et seq.) and related
26 regulations; or
27 [(4)] (v) insolvent;
28 the department may [serve written notice of its intention to
29 take possession of the credit union. If the condition
30 continues for a period of 15 days after the giving of such
20010S1222B2158 - 19 -
1 notice, the department may, in its discretion], in its
2 discretion, at such time set by the department, take
3 possession of the business and property of the credit union
4 and retain possession until such time as the condition
5 predicating such action is remedied or until the affairs of
6 the credit union are finally liquidated.
7 (2) The department shall take possession of a credit
8 union by serving a written notice of seizure on the credit
9 union's board of directors that contains a statement of the
10 facts constituting grounds for seizure of the credit union
11 and that contains notice of a hearing and an opportunity to
12 be heard. Upon taking possession of a credit union, the
13 department may liquidate the credit union, appoint the
14 National Credit Union Administration to liquidate the credit
15 union pursuant to Federal law, or appoint such other agent or
16 employee of the department to liquidate the credit union or
17 take any other action the department deems appropriate
18 regarding the credit union.
19 (3) The department may take similar action if any report
20 is not filed within a period of 15 days after it is due.
21 (4) Any person aggrieved by the action of the department
22 in taking possession of a credit union may appeal within ten
23 days of commencement of the receivership, whereupon the
24 matter shall be set down for hearing de novo [in accordance
25 with the procedures set forth at 10 Pa. Code Ch. 3 (relating
26 to hearings and conferences)].
27 (d) Exchange of reports of examination.--
28 (1) Whenever the shares of a credit union are insured by
29 the National Credit Union Share Insurance Fund or any other
30 share insurance fund approved by the department, the
20010S1222B2158 - 20 -
1 department [is authorized to] may furnish to the
2 Administrator of the National Credit Union Administration or
3 to any other approved insurer any reports of examination made
4 by the department under this section[.] or any credit union
5 board resolution or enforcement document including any order
6 issued by the department regarding the particular credit
7 union.
8 (2) The department may furnish to any outside accountant
9 or trade organization contracted by the credit union or
10 authorized by the department to satisfy the audit
11 requirements in this title or meet specifications as defined
12 in any order any reports of examination made by the
13 department under this section or any credit union board
14 resolution or enforcement document including orders issued by
15 the department.
16 (3) If a Pennsylvania credit union conducts business in
17 another state through the establishment and operation of
18 additional branch offices and service facilities under
19 section 904 (relating to place of business), the department
20 [is authorized to] may furnish to the financial regulatory
21 agency of that state reports of examination [made by the],
22 credit union board resolutions, or any enforcement document
23 including orders issued by the department [for] regarding the
24 particular credit union.
25 (e) Report.--A credit union shall furnish to the department
26 copies of the report of financial condition, known as the call
27 report, in the same form and with the same frequency that the
28 credit union is required to provide the report to the National
29 Credit Union Administration.
30 (f) Disclosure of information.--The department may not
20010S1222B2158 - 21 -
1 disclose any credit union information in its custody that
2 relates to an individual unless that individual consents.
3 However, in its discretion, the department may disclose such <--
4 credit union information to any Federal, State or local
5 government, agency or instrumentality for official purposes.
6 § 505. Capital and shares.
7 * * *
8 (d) Share insurance required.--The shares representing the
9 savings of members shall be insured in such amounts as provided
10 by the National Credit Union Administration or other share
11 insurance fund approved by the [Department of Banking]
12 department to insure the shares of credit unions. A credit union
13 that has not obtained share account insurance from the National
14 Credit Union Administration or other share insurance fund
15 approved by the department may not, without the prior written
16 approval of the department, accept payments from its members for
17 the purchase of shares.
18 § 511. Power to borrow.
19 (a) General rule.--A credit union may borrow from any source
20 a sum not exceeding 50% of its [capital, surplus and undivided]
21 unimpaired capital, regular reserve, contingency reserves and
22 retained earnings for the purpose of meeting the demand for
23 loans to members or for the purpose of meeting demands for share
24 withdrawals.
25 * * *
26 § 513. Reserves.
27 (a) General rule.--[At the end of each accounting period,
28 the gross income shall be determined. From this amount, there
29 shall be set aside a sum in accordance with the following
30 schedule as a regular reserve:
20010S1222B2158 - 22 -
1 (1) A credit union in operation for more than four years
2 and having assets of $500,000 or more shall set aside:
3 (i) 10% of gross income until the regular reserve
4 shall equal 4% of the total of outstanding loans and risk
5 assets; then
6 (ii) 5% of gross income until the regular reserve
7 shall equal 6% of the total of outstanding loans and risk
8 assets.
9 (2) A credit union in operation less than four years or
10 having assets of less than $500,000 shall set aside:
11 (i) 10% of gross income until the regular reserve
12 shall equal 7.5% of the total of the outstanding loans
13 and risk assets; then
14 (ii) 5% of gross income until the regular reserve
15 shall equal 10% of the total of outstanding loans and
16 risk assets.
17 (3) Whenever the regular reserve falls below the stated
18 percentage of the total of outstanding loans and risk assets,
19 it shall be replenished by regular contributions in such
20 amounts as may be needed to maintain the stated reserve
21 goals.
22 (4) All entrance fees collected shall be set aside in
23 the regular reserve fund.
24 (5) The regular reserve fund thus established shall not
25 be loaned out to members and shall be deposited as authorized
26 in section 501(b)(6) (relating to powers) or invested in such
27 investments as are authorized by section 501(b)(7). The
28 regular reserve fund shall belong to the credit union and
29 shall not be distributed except in case of liquidation.
30 (6) The directors are authorized, after the required
20010S1222B2158 - 23 -
1 reserve has been provided for, to make additional transfers
2 from undivided earnings to a contingent reserve for other
3 anticipated losses and expenses, but the members at the
4 annual meeting may retransfer any part or all of such
5 contingent reserve to the undivided earnings account.] Each
6 credit union shall establish and maintain a regular reserve
7 account to the same extent and in the same manner as required
8 of a Federal credit union.
9 (b) [Changes in reserve requirement.--The department may
10 decrease the reserve requirement set forth in subsection (a)
11 when in its opinion such a decrease is necessary or desirable.
12 The department may also require special reserves to protect the
13 interests of members either by regulation or for an individual
14 credit union in any special case.] Computation of reserve and
15 net worth requirements.--For the purpose of establishing the
16 reserves required by this section and for the provision and
17 maintenance of adequate equity or net worth, a credit union
18 shall compute its reserve and net worth requirements consistent
19 with section 216 of the Federal Credit Union Act (48 Stat. 1216,
20 12 U.S.C. § 1790d and the National Credit Union Administration
21 rules and regulations set forth in 12 CFR Pt. 702 (relating to
22 prompt corrective action).
23 (c) Allowance for loan loss.--Each credit union, in addition
24 to maintaining a regular reserve, shall establish an allowance
25 for loan loss. The allowance for loan loss reserve shall be
26 funded in the manner and used for the purposes as designated
27 from time to time by the [Department of Banking] department. The
28 board of directors shall decide the loans which are to be
29 charged off against the allowance for loan loss, except that the
30 [Department of Banking] department may, at the time of
20010S1222B2158 - 24 -
1 examination of a credit union, recommend for charge-off such
2 loans which in its opinion are unsound, which loans shall be
3 charged against the allowance for loan loss account within 60
4 days of the receipt of such recommendation from the department.
5 Any amount received from the repayment of a loan after it has
6 been charged off against the allowance for loan loss account
7 shall be credited back to the account.
8 [(d) Allowance for investment loss.--Each credit union, in
9 addition to maintaining a regular reserve, shall establish an
10 allowance for investment loss in compliance with Federal or
11 State laws or regulations as well as generally accepted
12 accounting principles. The allowance for investment loss reserve
13 shall be funded in conformity with such laws, regulations or
14 generally accepted accounting principles.]
15 § 514. Dividends.
16 (a) General rule.--The board of directors of a credit union
17 or the members on recommendation of the board of directors,
18 whichever the bylaws provide, may declare dividends to be paid
19 on all shares and share certificates from the net earnings and
20 undivided earnings at such rates and intervals and for such
21 periods as the board of directors may authorize and after
22 provision for the required reserves. [Within the discretion of
23 the board of directors, payments on all shares which are made
24 within the first ten days of a month may be entitled to
25 dividends for the full month in which such payment is made.]
26 Dividends may be added to the credit of the members share
27 accounts, paid in cash, or partially credited to share accounts
28 and partially paid in cash, at the option of the board of
29 directors.
30 * * *
20010S1222B2158 - 25 -
1 Section 6. Section 701(a) of Title 17 is amended and the
2 section is amended by adding a subsection to read:
3 § 701. Membership.
4 (a) General rule.--Credit union organizations shall be
5 limited to groups having a potential membership of 500 or more
6 adult persons and having a common bond of association within a
7 well-defined community or rural district by reason of occupation
8 or of membership in a religious congregation or fraternal or
9 labor organization or residence within a well-defined community
10 or rural district. A credit union may also retain its original
11 field of membership and, additionally, include in its field of
12 membership other occupational groups, as well as like
13 associational groups having a common bond with the original
14 field of membership, with insufficient number of members to form
15 or conduct the affairs of a separate credit union, if the
16 existing credit union obtains prior permission from the
17 [Department of Banking] department. The membership of a credit
18 union shall be limited to and consist of the incorporators of
19 the credit union and such other persons, having the common bond
20 of association, set forth in the articles of incorporation, as
21 have been duly admitted members, have paid the entrance fee as
22 provided in the bylaws and own and retain one or more shares.
23 Organizations composed principally of the same group as the
24 credit union membership may be members. Employes of credit
25 unions may be members of such credit unions.
26 * * *
27 (f) Effect of certain association formations.--Any
28 association formed primarily to obtain a State credit union
29 charter shall not be considered by the department to have a
30 sufficient common bond.
20010S1222B2158 - 26 -
1 Section 7. Sections 706(b), 707, 709, 711(a) and 713(b) and
2 (d) of Title 17 are amended to read:
3 § 706. Election of directors and credit and supervisory
4 committee members.
5 * * *
6 (b) Report to department.--A statement in writing of the
7 names and addresses of the members of the board and the
8 committees and the officers, as well as any interim
9 appointments, shall be filed with the [Department of Banking]
10 department within ten days after their election and
11 qualification or interim appointment. For failure to file such
12 statements when due, unless excused for cause, the credit union
13 shall pay to the department [$5] $100 for each day of its
14 delinquency.
15 § 707. Duties of directors generally.
16 (a) General rule.--The directors of a credit union shall
17 have general management of the affairs of the credit union and
18 are specifically required:
19 (1) To act on applications for membership.
20 (2) To determine interest rates on loans.
21 (3) To fix the amount of the surety bond which shall be
22 required of all officers and employees handling money which
23 amount shall be not less than the minimum schedule
24 established by the [Department of Banking] department.
25 (4) To declare dividends or recommend dividends as
26 provided in the bylaws.
27 (5) To transmit or cause to be transmitted to the
28 members all proposed amendments to the bylaws.
29 (6) If the bylaws provide for appointed credit or
30 supervisory committees, to appoint individuals to serve on
20010S1222B2158 - 27 -
1 the credit committee or the supervisory committee and to fill
2 vacancies in the board and in the credit committee until
3 successors are duly chosen and qualified.
4 (7) To determine the maximum individual share holdings
5 and, subject to the limitations contained in this title, the
6 maximum individual loan which can be made with or without
7 security.
8 (8) To have charge of investments, first mortgage loans
9 and loans to other credit unions and Federal credit unions
10 but not loans to members which are under the supervision of
11 the credit committee as otherwise provided in this title. The
12 board may, however, delegate to the credit committee the
13 authority to approve some or all first mortgage loans and to
14 an investment committee or qualified individual the authority
15 to make all or some investments if the board first
16 establishes guidelines and standards for the approval and
17 making of such loans and investments in accordance with the
18 policies of the board of directors.
19 (9) To fix the amount of compensation of directors,
20 officers, committee members, [the loan officer] loan officers
21 and employees.
22 (10) To determine whether, to what extent and to what
23 class or classes of borrowers, if any, an interest refund is
24 to be made in any dividend period. Any such interest refund
25 shall be paid in proportion to the interest paid by each
26 borrower within any class during that dividend period. [No
27 interest refund may be authorized unless a share dividend at
28 the rate of not less than 5% has been declared from the
29 earnings of that dividend period.]
30 (11) To appoint alternate credit committee members as
20010S1222B2158 - 28 -
1 needed to serve during incapacity or absence of the credit
2 committee members.
3 (b) Notice of interest refund to department.--Immediately
4 upon the board deciding to refund any interest pursuant to
5 subsection (a)(10), notice of such decision and a copy of any
6 board resolution and related documents shall forthwith be sent
7 to the department. The department shall, within 30 days after
8 receipt thereof, have the power to disapprove, for any
9 reasonable cause stated in writing, any such interest refund. If
10 the department does not disapprove the interest refund within 30
11 days, the interest refund shall become effective.
12 § 709. Compensation of directors and officers.
13 [A member of the board of directors and members of the credit
14 committee and the supervisory committee may be compensated if
15 the credit union paid a dividend of not less than 3% from the
16 earnings of the last preceding year.] Members of the board of
17 directors, the credit committee and the supervisory committee
18 may be compensated if the credit union pays dividends to its
19 members commensurate with prevailing market rates during the
20 preceding year. A credit union shall be deemed to pay dividends
21 commensurate with prevailing market rates if declared dividend
22 rates on share accounts are competitive with dividend or
23 interest rates offered by other credit unions, Federal credit
24 unions, or other financial institutions authorized to engage in
25 the business of receiving money for deposit. The [Department of
26 Banking] department may prohibit or regulate the payment of
27 compensation of directors, committee members and officers,
28 exclusive of the treasurer, if it deems such compensation
29 excessive or if, in its opinion, the financial condition of the
30 credit union is not such as to warrant the payment of such
20010S1222B2158 - 29 -
1 compensation.
2 § 711. Procedures for approving service by certain persons.
3 (a) General rule.--No person who has been convicted of a
4 misdemeanor or a felony involving dishonesty, breach of trust or
5 violation of this title or corresponding provisions of prior law
6 may serve as an officer, director, committee member [or],
7 employee, volunteer or agent of a credit union unless the
8 person[:
9 (1) in the case of an officer, director or committee
10 member seeking office,] has or obtains the unanimous approval
11 of the [nominating committee] board of directors of the
12 credit union.[;
13 (2) in the case of an employee, has the approval of the
14 officer in charge of operations;
15 (3) in the case of an officer, including an officer in
16 charge of operations, director or committee member seeking
17 office, has the unanimous approval of the board of directors
18 of the credit union; or
19 (4) in the case of an employee, other than an officer in
20 charge of operations, has the approval of the board of
21 directors by a vote of at least two-thirds of the board of
22 directors.]
23 * * *
24 § 713. Loan procedures.
25 * * *
26 (b) Conflict of interest.--No credit committee member, loan
27 officer or director of a credit union shall vote on the granting
28 of any loan in which such official has guaranteed the repayment
29 of the loan or where a member of [his or her] the member's
30 immediate family has a beneficial interest.
20010S1222B2158 - 30 -
1 * * *
2 (d) Approval by credit committee.--
3 (1) If the bylaws provide for a credit committee, at
4 least a majority of the members of the credit committee shall
5 pass on all loans[,] and no loan shall be approved unless it
6 is approved by a majority of the members of the credit
7 committee [present and voting, unless the credit committee
8 has appointed] at a credit committee meeting.
9 (2) Notwithstanding paragraph (1), the credit committee
10 may appoint one or more loan officers and [delegated]
11 delegate to such person or persons the power to approve
12 loans, share withdrawals of amounts previously pledged as
13 security for a loan, releases and substitutions of security,
14 within limits specified by the committee.
15 (3) The appointment and delegation shall be approved by
16 a majority of the credit committee present and voting at a
17 credit committee meeting and shall be recorded in a written
18 resolution signed by the credit committee members who
19 approved the delegation or appointment. The written
20 resolution shall be forwarded to the board of directors prior
21 to the next board meeting.
22 (4) The credit committee shall meet as often as may be
23 necessary after due notice to each member. The credit
24 committee shall keep minutes of each meeting. The minutes
25 shall include a list of loans approved and disapproved by the
26 credit committee.
27 (5) The credit committee shall require any loan officers
28 it appoints to report regularly to the credit committee on
29 any loan approvals or other actions taken by the loan officer
30 in the authority delegated to the loan officer by the credit
20010S1222B2158 - 31 -
1 committee.
2 * * *
3 Section 8. Section 714 heading and (a)(1), (b) and (c) of
4 Title 17 are amended and the section is amended by adding
5 subsections to read:
6 § 714. Annual [examination] audit.
7 (a) Supervisory committee.--If the bylaws of the credit
8 union provide for a supervisory committee, the duties of the
9 supervisory committee shall be as follows:
10 (1) To make at least an annual [examination] audit of
11 the affairs of the credit union. The committee shall submit a
12 report to the board of directors and to the members at the
13 next annual meeting of the credit union.
14 * * *
15 (b) Default by supervisory committee.--Whenever the
16 supervisory committee fails to make the [examinations] audits or
17 reports as provided in subsection (a)(1), the board of directors
18 shall remove from office the members of the supervisory
19 committee and appoint a new committee to make such
20 [examinations] audits, or the board may employ the services of a
21 public accountant to make such [examinations] audits. The
22 charges for the services of such public accountants shall be
23 paid by the credit union. If the board of directors under such
24 circumstances fails or refuses to act, the [Department of
25 Banking] department may, in addition to its other powers, remove
26 the members of the supervisory committee and issue an order on
27 the board of directors requiring such [examinations] audits to
28 be made by a public accountant at the expense of the credit
29 union.
30 (c) [Examination] Audit by public accountant.--If the bylaws
20010S1222B2158 - 32 -
1 do not provide for a supervisory committee, the board shall
2 employ the services of a public accountant to make
3 [examinations] audits under subsections (a) and (b). The charges
4 for the services of the public accountant shall be paid by the
5 credit union.
6 (d) Requirement for an outside audit.--
7 (1) A credit union shall obtain an outside, independent
8 audit by a certified public accountant or other approved
9 service for any fiscal year during which any one of the
10 following conditions exist:
11 (i) the supervisory committee of the credit union
12 has not conducted an annual supervisory committee audit;
13 (ii) the annual supervisory committee audit
14 conducted did not meet the audit requirements required by
15 the department; or
16 (iii) the credit union has experienced serious and
17 persistent recordkeeping deficiencies as defined in
18 subsection (e).
19 (2) In the case of an audit required pursuant to
20 paragraph (1)(i) or (ii), the scope of the outside,
21 independent audit shall fully encompass the requirements set
22 forth in the department's audit guidelines. In the case of an
23 audit required pursuant to paragraph (1)(iii), the outside,
24 independent audit must be conducted by a certified public
25 accountant and must be an opinion audit as that term is
26 understood under generally accepted auditing standards.
27 (e) Definition.--As used in subsection (d)(1), "persistent
28 recordkeeping deficiencies" means serious recordkeeping problems
29 which continue to exist past a usual, expected or normal period
30 of time. Persistent recordkeeping deficiencies shall be
20010S1222B2158 - 33 -
1 considered serious if the department has a reasonable doubt:
2 (1) That the financial condition of the credit union is
3 accurately and fairly presented in the credit union's
4 statement.
5 (2) That management practices and procedures of the
6 credit union are sufficient to safeguard members' assets.
7 Section 9. Sections 903(a), 904, 1101(a), 1102(a), (b) and
8 (d), 1103(b), 1105(b) and (e), 1106, 1301 and 1302(a)(4), (b)
9 and (c) of Title 17 are amended to read:
10 § 903. Filing and review of articles of amendment.
11 (a) General rule.--Articles of amendment shall be filed with
12 the [Department of Banking] department. If the department finds
13 that the articles of amendment conform to law, it shall endorse
14 its approval thereon and forward the articles of amendment to
15 the Department of State. Upon receipt of the articles of
16 amendment, the Department of State shall file the same.
17 * * *
18 § 904. Place of business.
19 (a) Change in principal place of business.--A credit union
20 may change its place of business upon the filing of a statement
21 of change of principal place of business with the Department of
22 State and the [Department of Banking] department.
23 (b) Branch offices and service facilities.--If a credit
24 union gives the [Department of Banking] department prior written
25 notification and, in the case of branch offices, receives prior
26 approval from the department, it may establish and maintain, at
27 locations other than its principal place of business, additional
28 branch offices and service facilities to furnish services to its
29 members.
30 (c) Discontinuance of branch offices or service
20010S1222B2158 - 34 -
1 facilities.--If a credit union pursuant to a resolution of its
2 board of directors provides the department prior written
3 notification, the credit union may discontinue the operation of
4 and close branch offices or service facilities.
5 [(c)] (d) Cross reference.--See 15 Pa.C.S. § 134 (relating
6 to docketing statement).
7 § 1101. Conversion into Federal credit union.
8 (a) General rule.--A credit union may be converted into a
9 Federal credit union by complying with the following
10 requirements:
11 (1) The proposition for such conversion shall first be
12 approved by a majority vote of the directors of the credit
13 union who shall also set a date for the vote thereon by the
14 members. The vote of the members shall be conducted at a
15 meeting held on such date, or by written ballot if the bylaws
16 so provide to be filed on or before such date. Written notice
17 of the proposition and of the date set for the vote shall be
18 given each member not more than 30 nor less than ten days
19 prior to such date. Approval of the proposition shall be by
20 the affirmative vote of a majority of the members voting, in
21 person or in writing, either at a meeting of the credit union
22 or through a mail ballot vote. In order for a vote to be
23 considered valid, there must be a quorum established. In the
24 case of a meeting of the credit union, a quorum shall be
25 established by the presence of at least 10% of the credit
26 union's membership. In the case of a mail ballot vote, a
27 quorum shall be established by the written response of at
28 least 10% of the credit union's membership.
29 (2) A statement of the result of the vote, certified by
30 an officer of the credit union, shall be filed with the
20010S1222B2158 - 35 -
1 [Department of Banking] department within ten days after the
2 vote is taken.
3 (3) Promptly after the vote is taken and in no event
4 later than 90 days thereafter, if the proposition for
5 conversion was approved, the credit union shall take such
6 action as may be necessary under the applicable laws of the
7 United States to make it a Federal credit union, and, within
8 ten days after receipt of the Federal credit union charter,
9 it shall file a copy of the charter thus issued with the
10 Department of State which shall furnish a copy thereof to the
11 [Department of Banking] department. Upon such filing with the
12 Department of State, the credit union shall no longer be
13 subject to any of the provisions of this title. The successor
14 Federal credit union shall be vested with all of the assets
15 and shall continue to be responsible for all of the
16 obligations of the credit union thus converted to the same
17 extent as though the conversion had not taken place.
18 * * *
19 § 1102. Conversion from Federal credit union.
20 (a) General rule.--A Federal credit union may be converted
21 into a credit union subject to the provisions of this title by:
22 (1) Complying with all Federal requirements requisite to
23 enabling it to convert to a credit union or to cease being a
24 Federal credit union.
25 (2) Filing with the [Department of Banking] department
26 proof of compliance with such Federal requirements in form
27 satisfactory to the department.
28 (3) Filing with the department, together with such
29 reasonable fees as shall be established by the department
30 including an application fee and fees for such examination
20010S1222B2158 - 36 -
1 and such investigation as it may deem necessary, articles of
2 conversion which shall set forth:
3 (i) The proposed name of the converted credit union.
4 (ii) The exact location of the principal place of
5 business of the credit union into which the Federal
6 credit union plans to become converted.
7 (iii) The number, names and addresses of the persons
8 to be the first directors of the converted credit union.
9 (iv) All other statements required by this title to
10 be set forth in original articles of incorporation in the
11 case of the formation of a credit union in so far as such
12 information is applicable to a Federal credit union
13 proposing to become converted into a credit union.
14 (b) Department [of Banking] review.--Immediately upon the
15 receipt of the articles of conversion, the department shall
16 conduct such examination as may be deemed necessary to ascertain
17 from the best sources of information at its command:
18 (1) Whether the name of the proposed credit union
19 conforms with the requirements of law for the name of a
20 credit union and whether it is the same as one already
21 adopted or reserved by another person or is so similar
22 thereto that it is likely to mislead the public.
23 (2) Whether the conversion is made for legitimate
24 purposes.
25 (3) Whether the interests of members and creditors are
26 adequately protected.
27 (4) Whether the proposed credit union meets all of the
28 requirements of this title and violates none of its
29 prohibitions applicable to a credit union incorporated under
30 this title.
20010S1222B2158 - 37 -
1 (5) Whether the Federal credit union has complied with
2 the requirements of the laws of the United States as they
3 relate to the conversion of a Federal credit union into a
4 credit union.
5 Within 60 days after receipt of the articles of conversion, the
6 [Department of Banking] department shall, upon the basis of the
7 facts disclosed by its investigation, either approve or
8 disapprove such articles.
9 * * *
10 (d) Disapproval action.--If the [Department of Banking]
11 department disapproves the articles of conversion, it shall
12 return them to the Federal credit union desiring to become
13 converted into a credit union stating in detail its reasons for
14 so doing.
15 * * *
16 § 1103. Merger and consolidation authorized.
17 * * *
18 (b) Approvals and conditions.--Before merging or
19 consolidating, the credit unions involved must obtain prior
20 approval from the [Department of Banking] department. In the
21 case of a merger or consolidation with a Federal credit union,
22 the merger or consolidation shall be made pursuant to Federal
23 law in addition to the provisions of this title. In the case of
24 a merger or consolidation with an out-of-State credit union, the
25 merger or consolidation shall be made pursuant to the credit
26 union law of the state of incorporation of the out-of-State
27 credit union or, if credit unions incorporated in different
28 states are involved, pursuant to the credit union laws of the
29 various states of incorporation of the out-of-State credit
30 unions in addition to the provisions of this title.
20010S1222B2158 - 38 -
1 § 1105. Articles of merger or consolidation.
2 * * *
3 (b) Department [of Banking] review.--The articles of merger
4 or consolidation shall be filed with the [Department of Banking]
5 department which, immediately upon receipt thereof, shall
6 conduct such investigation as may be deemed necessary to
7 ascertain from the best sources at its command:
8 (1) Whether, if the articles are articles of
9 consolidation, the name of the proposed new credit union,
10 Federal credit union or out-of-State credit union conforms
11 with the requirements of law for the name of a credit union
12 and whether it is the same as one already adopted or reserved
13 by another corporation or person or is so similar thereto
14 that it is likely to mislead the public.
15 (2) Whether, if the merger or consolidation includes one
16 or more Federal credit unions, all requirements of the laws
17 of the United States pertaining thereto have been complied
18 with.
19 (3) Whether the interests of members and creditors are
20 adequately protected.
21 (4) Whether the credit unions, including the surviving
22 or new credit union, have met all of the requirements of this
23 title and have violated none of its prohibitions applicable
24 to a credit union incorporated under this title.
25 (5) Whether, if the merger or consolidation includes an
26 out-of-State credit union, there is compliance with the
27 applicable requirements of the law of the state of
28 incorporation of the out-of-State credit union.
29 Within 60 days after receipt of the articles of merger or
30 consolidation, the [Department of Banking] department shall,
20010S1222B2158 - 39 -
1 upon the basis of the facts disclosed by its investigation,
2 either approve or disapprove such articles.
3 * * *
4 (e) Disapproval action.--If the [Department of Banking]
5 department shall disapprove the articles, it shall return them
6 to the credit union, Federal credit union or out-of-State credit
7 union from which they were received, stating the reasons for
8 such disapproval.
9 * * *
10 § 1106. Supervisory mergers or consolidations by [Department of
11 Banking] department.
12 Notwithstanding any other provision of this title, the
13 [Department of Banking] department may require a merger or
14 consolidation of a credit union which is insolvent or is in
15 danger of insolvency with any other credit union, Federal credit
16 union or out-of-State credit union or may authorize a credit
17 union to purchase any of the assets of, or assume any of the
18 liabilities and capital of, any other credit union, Federal
19 credit union or out-of-State credit union if the department is
20 satisfied that:
21 (1) an emergency requiring expeditious action exists
22 with respect to such a credit union;
23 (2) other alternatives are not reasonably available; and
24 (3) the public interest would best be served by approval
25 of such merger, consolidation, purchase or assumption.
26 § 1301. Dissolution authorized.
27 Any credit union may elect to dissolve voluntarily and wind
28 up its affairs in the manner provided in this chapter. However,
29 if it shall appear to the [Department of Banking] department,
30 upon an examination of the business, assets and affairs of the
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1 credit union, that its assets will probably be insufficient to
2 pay in full its members and creditors, it shall take possession
3 of the business and property of the credit union and retain
4 possession until its affairs are finally liquidated.
5 § 1302. Approval of voluntary dissolution.
6 (a) General rule.--The procedure for voluntary dissolution
7 shall be as follows:
8 * * *
9 (4) A certificate of election to dissolve signed by a
10 duly authorized officer of the credit union shall be executed
11 and delivered to the [Department of Banking] department. The
12 certificate shall set forth:
13 (i) The name of the credit union.
14 (ii) The exact location of its place of business.
15 (iii) The names and addresses of its officers and
16 directors.
17 (iv) The number of directors voting for, and the
18 number voting against, the proposed plan of voluntary
19 dissolution.
20 (v) The total number of members and the number of
21 members voting for, and the number voting against, the
22 proposed plan of voluntary dissolution.
23 (vi) The names and addresses of the proposed
24 liquidating trustees and the number of votes received by
25 every candidate for the position of liquidating trustee.
26 (vii) The amount of the bond required to be supplied
27 by each trustee.
28 (viii) A verified statement by each of the proposed
29 liquidating trustees stating that he is willing to serve
30 as liquidating trustee, subject to the provisions of this
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1 chapter and to the terms of the proposed plan of
2 voluntary dissolution, that he will, so far as the duty
3 devolves upon him, diligently and honestly liquidate the
4 affairs of the credit union, and will not knowingly
5 violate or permit to be violated any of the provisions of
6 this chapter or of the proposed plan of voluntary
7 liquidation.
8 (ix) The proposed plan of voluntary dissolution.
9 (b) Department [of Banking] review.--Upon receipt of the
10 certificate of election to dissolve, the [Department of Banking]
11 department shall conduct an examination or an investigation, or
12 take such other action as it deems necessary, to determine
13 whether to approve the plan of voluntary dissolution. If the
14 department determines that the plan of voluntary dissolution
15 does not prejudice the interests of members or creditors, it
16 shall endorse its approval on the certificate of election to
17 dissolve and send it to the Department of State for filing. If
18 the [Department of Banking] department disapproves the plan, it
19 shall return the certificate to the credit union stating in
20 detail its reasons for doing so.
21 (c) Effect of filing certificate.--Upon the filing by the
22 Department of State of the certificate of election to dissolve,
23 the Department of State shall furnish a copy thereof to the
24 [Department of Banking] department and the credit union. Upon
25 such filing, the credit union shall cease to transact its
26 business, and the liquidating trustee or trustees shall commence
27 the liquidation of the credit union. The liquidating trustee or
28 trustees shall thereafter be authorized to carry out, in his own
29 name or in their own names as liquidating trustee or trustees of
30 the credit union, the powers granted to him or them by the plan
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1 of voluntary dissolution and may sue and be sued for the purpose
2 of determining and enforcing the debts due the credit union and
3 its obligations.
4 * * *
5 Section 10. Section 1303(a) of Title 17 is amended and the
6 section is amended by adding a subsection to read:
7 § 1303. Dissolution proceedings.
8 (a) Collection and distribution of assets.--The liquidating
9 trustee or trustees shall proceed in the manner provided by the
10 [Department of Banking] department to gather the assets,
11 determine the liabilities and distribute the assets of the
12 credit union until its affairs are fully adjusted and wound up.
13 Under this section the department shall set forth the order of
14 the distribution of the assets. The provisions of this section
15 on distribution of assets apply whether the dissolution is
16 voluntary or involuntary.
17 * * *
18 (d) Transfer possession.--If the department takes possession
19 of the credit union under section 503(c) (relating to regulation
20 by the department) and appoints the National Credit Union
21 Administration to liquidate the credit union or take other
22 action deemed appropriate regarding the credit union, then the
23 department shall be deemed to have surrendered jurisdiction of
24 the credit union and the department shall have no liability
25 related to such credit union.
26 Section 11. Sections 1304 and 1305(a) of Title 17 are
27 amended to read:
28 § 1304. Department [of Banking] supervision.
29 The [Department of Banking] department shall continue to
30 supervise the credit union, in the hands of the liquidating
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1 trustee or trustees, until the liquidation is complete and the
2 affairs of the credit union are fully settled.
3 § 1305. Articles of dissolution.
4 (a) General rule.--When, in the opinion of the [Department
5 of Banking] department, the liquidation of a credit union is
6 complete and its affairs are fully settled, the [Department of
7 Banking] department shall execute and file in the Department of
8 State articles of dissolution, which shall set forth:
9 (1) The name of the credit union.
10 (2) The statute under which the credit union was
11 incorporated and the date of incorporation.
12 (3) A statement that the liquidation of the credit union
13 is complete and its affairs are fully settled.
14 * * *
15 Section 12. Title 17 is amended by adding a section to read:
16 § 1306. Involuntary dissolution.
17 (a) Issuance of certificate of dissolution by department.--
18 In the event the department finds after issuing written notice
19 of a hearing and an opportunity to be heard to a credit union,
20 that the credit union has not exercised any of its powers or
21 opened for business with its proposed members within one year
22 after the date of its incorporation or such longer time as the
23 department may allow, then the department shall issue under its
24 seal a certificate of dissolution reciting the applicable facts
25 and stating that articles of incorporation have been forfeited
26 by reason of such facts and shall file the certificate of
27 dissolution with the Department of State.
28 (b) Effect of certificate of dissolution.--Upon filing of
29 the certificate of dissolution in the Department of State, all
30 rights of the credit union under its articles of incorporation
20010S1222B2158 - 44 -
1 shall cease and its existence shall cease.
2 Section 13. Sections 1501(a), 1503 heading and (a) and 1504
3 of Title 17 are amended to read:
4 § 1501. Authorization to do business.
5 (a) General rule.--A credit union organized in another state
6 may conduct business as [a] an out-of-State credit union in this
7 Commonwealth with the approval of the [Department of Banking]
8 department as long as a credit union chartered under the laws of
9 this Commonwealth is permitted to do business in the state in
10 which the credit union is organized.
11 * * *
12 § 1503. Supervision by [Department of Banking] department.
13 (a) General rule.--The [Department of Banking] department
14 may examine an out-of-State credit union:
15 (1) to the same extent that a Pennsylvania credit union
16 is examined by the regulatory agency with jurisdiction over
17 credit unions in the state in which the out-of-State credit
18 union is incorporated; or
19 (2) pursuant to an agreement between the department and
20 the regulatory agency with jurisdiction over credit unions in
21 the state in which the out-of-State credit union is
22 incorporated.
23 * * *
24 § 1504. Revocation of authorization to do business.
25 The [Department of Banking] department may revoke the
26 approval of an out-of-State credit union to conduct business as
27 a credit union in this Commonwealth if the department makes any
28 of the following findings:
29 (1) The out-of-State credit union no longer meets the
30 requirements of section 1501 (relating to authorization to do
20010S1222B2158 - 45 -
1 business).
2 (2) The out-of-State credit union has violated
3 Pennsylvania statutes or regulations or orders of the
4 department.
5 (3) The out-of-State credit union has engaged in a
6 pattern of unsafe or unsound credit union practices.
7 (4) Continued operation by the out-of-State credit union
8 is likely to have a substantially adverse impact on the
9 financial, economic or other interests of residents of this
10 Commonwealth served by the out-of-State credit union.
11 Section 14. This act shall take effect in 60 days.
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