AN ACT

 

1Amending Title 17 (Credit Unions) of the Pennsylvania
2Consolidated Statutes, in preliminary provisions, further
3providing for definitions; in incorporation, further
4providing for articles of incorporation, for Department of
5Banking consideration of articles and for bylaws; in
6corporate powers, duties and safeguards, further providing
7for powers, for fees and charges, for loan interest, for
8power to borrow, for loans and for dividends; in members,
9directors and officers, further providing for notice to
10members and for expulsion and withdrawal; in amendment of
11articles, further providing for procedure for amendment of
12articles; in conversion, merger and consolidation, further
13providing for conversion into Federal credit union and for
14adoption of plan; and, in dissolution, further providing for
15approval of voluntary dissolution.

16The General Assembly of the Commonwealth of Pennsylvania
17hereby enacts as follows:

18Section 1. The definitions of "community development credit 
19union," "department," "secretary" and "service facility" in
20section 103 of Title 17 of the Pennsylvania Consolidated
21Statutes are amended and the section is amended by adding a
22definition to read:

23§ 103. Definitions.

24The following words and phrases when used in this title shall

1have the meanings given to them in this section unless the
2context clearly indicates otherwise:

3* * *

4"Community development credit union." A credit union which
5is designated as a low-income credit union by the [Department of
6Banking] department.

7* * *

8"Department." The Department of Banking and Securities of
9the Commonwealth.

10* * *

11"Officer." Any of the following:

12(1) The chief executive officer or equivalent.

13(2) The president.

14(3) The chief financial officer or equivalent.

15(4) The treasurer.

16(5) The secretary.

17(6) Any assistant chief executive officers or their
18equivalents, including vice presidents.

19* * *

20["Secretary." The Secretary of Banking of the Commonwealth
21or the secretary's designee.]

22"Service facility." A subsidiary office of the credit union
23such as an automated teller machine, kiosk or other type of
24facility as determined by the [Department of Banking] department
25which is not capable of offering the same or approximately the
26same level of service that can be found at the principal office
27of the credit union.

28* * *

29Section 2. Sections 303, 304 heading, 305(a), (b), (d)(3)
30and (d.1)(1), (3), (4), (7), (8) and (9), 501(b)(10), 509(c) and

1(d), 510(a) and (b), 511(a), 512, 514(b), 704, 705, 901, 1101(a)
2(1), 1104(a) and 1302(a)(2) of Title 17 are amended to read:

3§ 303. Articles of incorporation.

4(a) General rule.--Articles of incorporation shall be signed
5by each of the incorporators. The articles of incorporation
6shall set forth:

7(1) The name of the proposed credit union, which shall
8contain the words "credit union."

9(2) The class of services to be performed by the credit
10union, which services shall be within the scope of activities
11of such associations as set forth in this title.

12(3) The principal place where its business is to be
13transacted, which shall be within this Commonwealth.

14(4) The term for which it is to exist, which may be
15perpetual.

16(5) The par value of its shares.

17(6) The names and post office addresses of the
18incorporators, and the number of shares subscribed by each.

19(7) The names and residences of each of the first
20directors, not less than five in number, who shall serve
21until the first annual meeting of the credit union, and the
22name and residence of the treasurer.

23(8) The common bond of membership.

24(9) Any provision, not inconsistent with law, which the
25incorporators may choose to insert for the regulation of the
26business and the internal affairs of the credit union.

27(b) Maintenance of copies.--A copy of the original articles
28of incorporation of the credit union and all amendments thereto
29shall be maintained by the credit union.

30§ 304. Department [of Banking] consideration of articles.

1* * *

2§ 305. Bylaws.

3(a) General rule.--The original bylaws of a credit union
4shall be adopted by the incorporators of the credit union and
5copies shall be transmitted to the department along with the
6articles of incorporation as provided in this chapter. The 
7original bylaws of the credit union and all amendments thereto 
8shall be maintained by the credit union.

9(b) Board-initiated bylaw amendments.--

10(1) Bylaws may be amended or repealed by the affirmative
11vote of a majority of directors at any regular or special
12meeting of the board. Whenever the board of directors amends
13the bylaws, [written] notice thereof shall be given to the
14members prior to the next meeting of the members or within 90
15days after such action by the board of directors, whichever
16is sooner.

17[(2) Any amendment to or repeal of the bylaws adopted by
18the board of directors may be repealed or amended by a two-
19thirds vote of the responding members. The member-initiated
20repeal or amendment of a bylaw passed by the board of
21directors may be conducted at an annual or special member
22meeting or conducted by mail ballot if the bylaws allow such
23a procedure. The vote must be held at least ten days after
24the mailing of the notice in paragraph (1).]

25(3) [Notwithstanding paragraph (2), the] The members of
26a credit union may amend the bylaws pursuant to procedures
27set forth in subsections (d), (d.1) and (d.2), whichever
28subsection is appropriate.

29* * *

30(d) Member-initiated bylaw amendment or repeal for credit

1unions with more than 10,000 members.--

2* * *

3(3) Whenever the board of directors receives a member-
4initiated petition to amend or repeal the bylaws, [written]
5notice thereof shall be given to all members of the credit
6union within 90 days, and a mail ballot vote of the matter
7shall be held during a period of at least ten days after the
8mailing of the [notice and] ballot.

9(d.1) Procedure.--

10(1) To initiate the procedure to amend or repeal the
11bylaws set forth in subsection (d), a member of a credit
12union must [obtain the petition form from the department. The
13department shall date the petition form and file a copy of
14the form] circulate a petition to all members of the credit 
15union.

16* * *

17(3) The member seeking to amend or repeal the bylaws
18shall [have 180 days from the receipt of the petition form
19from the department to] circulate the petition and obtain the
20requisite number of signatures from members of the credit
21union. The petition shall [be in a form provided by and
22approved by the department and shall] clearly identify the
23bylaw to be amended or repealed and include the language of
24the proposed bylaw.

25[(4) On or before 180 days from the date the petition
26form was obtained from the department, the member seeking to
27amend or repeal the bylaws must file the petition with the
28department. The department shall indicate the date of filing
29on the petition and file the petition in the records of the
30department. The department shall send a copy of the petition

1to the secretary of the credit union.]

2* * *

3(7) Any member seeking to contest a determination by the
4credit union not to mail the [notice and] ballot provided for
5in subsection (d) may file a complaint with the department
6within 30 days of receiving [written] notice from the
7secretary of the credit union's decision not to mail such
8[notice and] ballot, and the department shall adjudicate the
9matter.

10(8) The department may provide any person or
11governmental entity with a copy of the petition [form] as
12well as any complaints filed with the department and other
13documents related to the ballot procedure.

14(9) If the credit union mails the [notice and] ballot
15provided for in subsection (d) or is ordered to do so by the
16department, then the credit union shall [send] provide an
17official notice to all members of the credit union, prepare
18and mail the ballots, arrange for tallying of the votes and
19report the results to all members in accordance with
20subsection (d).

21* * *

22§ 501. Powers.

23* * *

24(b) Special powers.--A credit union shall have the following
25special powers:

26* * *

27(10) To hold, purchase, mortgage, alter, improve and
28sell fixed assets, meaning such real property, and furniture
29and fixtures to be used therein, as the purposes of the
30credit union require and which the credit union occupies or

1intends to occupy for the transaction of its business or
2partly so occupies and partly leases to others, except that,
3without the prior written approval of the department, the
4cost, at the time of acquisition, of such real property and
5furniture and fixtures therein shall not exceed 5% of shares
6and [retained] undivided earnings.

7* * *

8§ 509. Fees and charges.

9* * *

10(c) Fees in connection with collectors or outside collection
11agencies.--A credit union may collect fees paid to outside
12collectors or outside collection agencies, provided the
13aggregate of such collection fees does not exceed 20% of the
14outstanding loan balance or other share or loan service related 
15amounts owed to the credit union.

16(d) Other fees.--A credit union may additionally:

17(1) charge fees for other services to its members,
18provided that the fees charged will be for the actual cost of
19the respective services provided by the credit union[.]; and

20(2) recoup actual sums expended by the credit union,
21including use of credit union personnel, incurred in
22collection of outstanding loan balances or other share or
23loan service related amounts owed to the credit union.

24* * *

25§ 510. Loan interest.

26(a) General rule.--Interest rates on loans made by a credit
27union to its members shall not exceed [15% per annum when
28calculated on the unpaid principal balances. Interest shall be
29computed for the actual number of days which have elapsed at the
30time of payment, except that interest for mortgage loans may be

1paid according to a preauthorized amortization schedule] the 
2interest rates and finance charges permissible for a Federal 
3credit union as authorized by the Federal Credit Union Act (48 
4Stat. 1216, 12 U.S.C. § 1751 et seq.) and the rules and 
5regulations of the National Credit Union Administration.

6[(b) Procedure for increase in rates.--Before any credit
7union shall charge any higher rate than that authorized in
8subsection (a), it shall obtain approval for such higher rate
9from at least two-thirds of the board of directors of the credit
10union, and such higher approved rate shall then apply only to
11loans made by the credit union thereafter. Members shall be
12notified in writing of the action of the board of directors not
13later than the next regular mailing of members account
14statements, which is at least 20 days subsequent to the action
15of the board.]

16* * *

17§ 511. Power to borrow.

18(a) General rule.--A credit union may borrow from any source
19a sum not exceeding 50% of its unimpaired capital, regular
20reserve, contingency reserves and [retained] undivided earnings
21for the purpose of meeting the demand for loans to members or
22for the purpose of meeting demands for share withdrawals.

23* * *

24§ 512. Loans.

25[Except as otherwise provided in this title, a credit union
26may make loans to its members only. Loans must be made subject
27to the conditions contained in the bylaws. A borrower may repay
28his loan, in whole or in part, any day the office of the credit
29union is open for business. No director, officer or member of
30any committee may obtain or guarantee a loan from the credit

1union in which he holds office on terms, rates or conditions
2more favorable than those granted to any other member.]

3(a) Loans to members only.--Except as otherwise provided in
4this title, a credit union may make loans to its members only.

5(b) Loans subject to bylaws.--Loans must be made subject to
6the conditions contained in the bylaws.

7(c) Borrower repayment of loans.--A borrower may repay the
8borrower's loan, in whole or in part, any day the office of the
9credit union is open for business.

10(d) Nonpreferential treatment.--The following may not obtain
11or guarantee a loan from the credit union on terms, rates or
12conditions more favorable than those granted to any other
13member:

14(1) A director.

15(2) An officer.

16(3) A member of any committee.

17(4) A member of the immediate family of a director,
18officer or member of a committee.

19(5) Any individual having a common ownership, investment
20or other pecuniary interest in a business enterprise with a
21director, officer or member of a committee.

22§ 514. Dividends.

23* * *

24(b) Inactive accounts.--A share account may be transferred
25to a special account if, for at least [six] five years, there
26has been no activity by the owner of the account and all written
27communications from the credit union to the owner of the account
28have been returned to the credit union with no forwarding
29address. After the transfer, the credit union may cease paying
30dividends on the transferred account and may cease sending

1notices to the owner. A member whose account has been
2transferred may reclaim the funds from the credit union at any
3time prior to the time the account is escheated. After escheat,
4reclaiming is governed by Article XIII.1 of the act of April 9, 
51929 (P.L.343, No.176), known as The Fiscal Code.

6§ 704. Notice to members.

7(a) General rule.--All [written] notices required by this 
8title to be given to members shall be:

9(1) delivered in person to each member [or];

10(2) mailed to each member at the address for such member
11appearing on the records of the credit union[.]; or

12(3) by facsimile transmission, e-mail or other
13electronic communication to each member's facsimile number or
14address for e-mail or other electronic communications
15appearing on the records of the credit union. Notice pursuant
16to this paragraph shall be deemed to have been given to the
17member entitled to the notice when sent.

18(b) Notice of changes in fees, charges or policies.--Each
19new member to a credit union shall be provided with [written]
20notice by the respective credit union listing any fees, service
21charges or policies regarding the transfer of funds to
22noninterest bearing accounts. A new member and each existing
23member shall subsequently be provided with similar [written]
24notice if there is a change by the credit union in the amount or
25type of fees or service charges or a change in the policy
26regarding the transfer of funds to noninterest bearing accounts.
27The credit union shall also provide such information to any
28member upon request by that member.

29§ 705. Expulsion, suspension and withdrawal.

30(a) Expulsion.--[A member may be expelled:

1(1) by a vote of a majority of the members present at a
2regular or a special meeting called to consider the matter at
3which a quorum, as provided in the bylaws, is present but
4only after a hearing after due notice to the member of the
5time and place of the meeting and of the reason or reasons
6for such proposed expulsion; or

7(2) by a vote of a two-thirds majority of the board of
8directors present at a regular or special meeting called to
9consider the matter if:

10(i) the board has given the member notice of the
11meeting and of the reason for proposed expulsion;

12(ii) there is a quorum, as provided in the bylaws,
13present at the meeting; and

14(iii) there is a hearing on the matter at the
15meeting.]

16Unless otherwise provided in the credit union's bylaws:

17(1) The board of directors may expel a member for cause
18by a majority vote of a quorum of directors pursuant to a
19written policy adopted by the board. For the purposes of this
20subsection, "cause" includes a loss to the credit union, a
21violation of the membership agreement or any policy or
22procedure adopted by the board, or inappropriate behavior,
23such as physical or verbal abuse of credit union members or
24staff. All members shall be given written notice of such
25policies. Any person expelled by the board shall have the
26right to request a hearing before the board to reconsider the
27expulsion.

28(2) A credit union may terminate the membership of any
29member who withdraws the member's shares to less than one
30share.

1(3) Persons whose membership has been terminated,
2whether by withdrawal or expulsion, shall have no further
3rights in the credit union, but are not released from any
4obligation owed to the credit union.

5(4) A member who has been expelled as provided by this
6subsection may not be readmitted to membership except upon
7approval by a majority vote of the board after application
8and proof that the applicant remains within the credit
9union's field of membership, has adequately explained,
10addressed or remedied the conditions leading to expulsion and
11will abide by the terms and conditions of membership. Not
12more than one such application for readmission may be made
13within any 12-month calendar period.

14(a.1) Suspension.--Unless otherwise provided in the credit
15union's bylaws, a credit union may, for cause, suspend certain
16services to a credit union member under a policy adopted by the
17credit union's board of directors. Members with suspended
18services may maintain a share account and continue to vote at
19annual and special meetings.

20(b) Withdrawal.--Any member may withdraw from the credit
21union at any time, but notice of withdrawal may be required.

22§ 901. Procedure for amendment of articles.

23The articles of incorporation may be amended at any regular
24or special meeting of the credit union, if [written] notice of
25the meeting and of the proposed amendment or amendments is
26furnished each member at least ten days prior to the meeting at
27which such amendment or amendments will be considered.
28Notwithstanding statutory provisions to the contrary, the
29articles of incorporation may alternatively be amended by the
30members through mail ballot voting as provided in the bylaws.

1Amendments to the articles of incorporation must be approved by
2a majority of the members present at any meeting at which the
3amendments are considered or, in the case of a mail ballot, by a
4majority of the members responding by mail ballot. The proposed
5amendments shall be acted upon only in the event a quorum of the
6members, as provided in the bylaws, is present or, in the case
7of a mail ballot vote, a number of returned mail ballots equal
8to the quorum of the members, as provided in the bylaws, exists.

9§ 1101. Conversion into Federal credit union.

10(a) General rule.--A credit union may be converted into a
11Federal credit union by complying with the following
12requirements:

13(1) The proposition for such conversion shall first be
14approved by a majority vote of the directors of the credit
15union who shall also set a date for the vote thereon by the
16members. The vote of the members shall be conducted at a
17meeting held on such date, or by written ballot if the bylaws
18so provide to be filed on or before such date. [Written
19notice] Notice of the proposition and of the date set for the
20vote shall be given each member not more than 30 nor less
21than ten days prior to such date. Approval of the proposition
22shall be by the affirmative vote of a majority of the members
23voting, in person or in writing, either at a meeting of the
24credit union or through a mail ballot vote. In order for a
25vote to be considered valid, there must be a quorum
26established. In the case of a meeting of the credit union, a
27quorum shall be established by the presence of at least 10%
28of the credit union's membership. In the case of a mail
29ballot vote, a quorum shall be established by the written
30response of at least 10% of the credit union's membership.

1* * *

2§ 1104. Adoption of plan.

3(a) General rule.--The board of directors of each of the
4credit unions, Federal credit unions or out-of-State credit
5unions which desire to merge or consolidate shall, by resolution
6adopted by at least a majority of all the members of each board,
7approve a plan of merger or consolidation setting forth the
8terms and conditions of the merger or consolidation and the mode
9of carrying the same into effect, the manner and basis of
10converting the shares of each credit union, Federal credit union
11or out-of-State credit union into shares or other securities or
12obligations of the surviving or new credit union, Federal credit
13union or out-of-State credit union, and such other details and
14provisions as are deemed necessary. Except where the approval of
15the members is not required, the board of directors shall direct
16that the plan be submitted to a vote of the members of such
17credit union, Federal credit union or out-of-State credit union
18entitled to vote thereon at an annual or special meeting of the
19members to be held on not less than 15 days prior [written]
20notice thereof given to each member of record, which notice
21shall state the place, day, hour and purpose of the meeting and
22shall have included therein or enclosed therewith a copy or
23summary of the plan of merger or consolidation.

24* * *

25§ 1302. Approval of voluntary dissolution.

26(a) General rule.--The procedure for voluntary dissolution
27shall be as follows:

28* * *

29(2) A meeting of the membership shall be called for the
30purpose of acting on the plan of dissolution. [Written

1notice] Notice setting forth the date and purpose of such
2meeting shall be furnished each member at least ten days
3prior to the date of the meeting. The plan of dissolution
4shall be adopted upon the affirmative vote of a majority of
5the entire membership of the credit union in person or by
6written ballot.

7* * *

8Section 3. This act shall take effect in 60 days.