PRINTER'S NO. 1559
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 AND MURPHY,
DECEMBER 3, 2001
REFERRED TO BANKING AND INSURANCE, DECEMBER 3, 2001
AN ACT
1 Amending Title 17 (Credit Unions) of the Pennsylvania
2 Consolidated Statutes, relating to credit unions; making
3 revisions, corrections and additions; providing for parity
4 with Federal credit unions and for involuntary dissolution;
5 and making editorial changes.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. As much of Title 17 of the Pennsylvania
9 Consolidated Statutes as is hereafter set forth is amended or
10 added to read:
11 § 103. Definitions.
12 The following words and phrases when used in this title shall
13 have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 * * *
16 "Community development credit union." A credit union which
17 is designated as a low-income credit union by the Department of
18 Banking.
1 "Corporate credit union." A credit union which is operated
2 primarily for the purpose of serving other credit unions, which
3 is designated by the National Credit Union Administration as a
4 corporate credit union, which is subject to the provisions of
5 sections 301(b) (relating to purposes) and 502 (relating to
6 powers of central or corporate credit unions) and which limits
7 natural person members to the minimum number required to charter
8 and operate the credit union.
9 * * *
10 "Insolvency." The condition of a credit union when total
11 shares exceed the present cash value of assets after providing
12 for liabilities unless it is determined by the Department of
13 Banking that:
14 (1) the facts that caused the deficient share-asset
15 ratio no longer exist;
16 (2) the likelihood of further depreciation of the share-
17 asset ratio is not probable;
18 (3) the return of the share-asset ratio to its normal
19 limits within a reasonable time for the credit union
20 concerned is probable; or
21 (4) the probability of a further loss is negligible.
22 * * *
23 "Retained earnings." [Undivided profits.] Regular reserves,
24 reserves for contingencies, reserves for losses, supplemental
25 reserves and undivided earnings.
26 "Secretary." The Secretary of Banking of the Commonwealth or
27 the secretary's designee.
28 "Service facility." A subsidiary office of the credit union
29 such as an automated teller machine, kiosk or other type of
30 facility as determined by the Department of Banking which is not
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1 capable of offering the same or approximately the same level of
2 service that can be found at the principal office of the credit
3 union.
4 * * *
5 "Total equity capital and reserves." Regular [reserve]
6 reserves, undivided earnings [and all reserve accounts,
7 including the allowance for loan loss reserve.], reserves for
8 contingencies, reserves for losses and supplemental reserves.
9 "Unimpaired capital." Total unencumbered shares.
10 * * *
11 § 104. Prohibition on use of words "credit union," etc.
12 (a) General rule.--Only a credit union subject to this
13 title, a Federal credit union or a corporation organized in
14 accordance with a state credit union statute may assume and use
15 the words "credit union" in its name or title or operate in the
16 manner of a credit union. Only a credit union which has received
17 a low-income designation by the department or the National
18 Credit Union Administration may assume and use the words
19 "community development credit union" in its name or title or
20 operate in the manner of a community development credit union.
21 (b) Penalties.--Any person, other than a credit union
22 subject to this title, a Federal credit union, a corporation
23 organized in accordance with a state credit union statute or an
24 association of credit unions, who violates subsection (a) by
25 using a name or title containing the words "credit union" or any
26 other derivation thereof or so representing itself in its
27 advertising, or otherwise conducting business as a credit union
28 shall, for each offense, be subject to a penalty levied by the
29 [Department of Banking] department which shall be not less than
30 $1,000 nor more than $10,000. The officers of a corporation
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1 shall be liable for such penalty if the offense is committed by
2 a corporation. This section shall be enforced by the department.
3 * * *
4 § 304. Department of Banking consideration of articles.
5 (a) General rule.--The articles of incorporation and two
6 copies of the proposed bylaws for the general governance of the
7 credit union shall be presented to the [Department of Banking]
8 department, together with such reasonable fees as shall be
9 established by the department, including an application fee and
10 other fees for such examination and such investigation as it may
11 deem necessary to ascertain:
12 (1) Whether the character and general fitness of the
13 incorporators, directors and the treasurer named in the
14 articles of incorporation is satisfactory.
15 (2) Whether the character and number of the group
16 proposed to be served affords reasonable promise of
17 sufficient support for the enterprise so as to make the
18 establishment of the proposed credit union economically
19 advisable.
20 (3) Whether the incorporators, directors and group
21 proposed to be served have a common bond of association as
22 provided in section 701 (relating to membership).
23 (4) Whether the proposed credit union unduly encroaches
24 upon the field of membership of any other credit union.
25 (5) Whether the application is in proper form and within
26 the purpose of this title.
27 (6) Whether the savings of members paid for shares will
28 be insured by the National Credit Union Administration or
29 other share insurance fund approved by the department.
30 Nonprofit corporations created by specific legislation of any
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1 state to insure share accounts or depository accounts of
2 credit unions shall not be subject to regulation by the
3 Department of Insurance or to the laws of this Commonwealth
4 concerning insurance.
5 Within 60 days after receipt of the articles, the department
6 shall, upon the basis of the facts disclosed by the application
7 and its investigation, either approve or disapprove the
8 articles.
9 (b) Approval action.--If the department approves the
10 articles, it shall endorse its approval thereon and forward the
11 articles to the Department of State. The Department of State
12 shall, upon the receipt of the articles and the required filing
13 fee, file the same. Upon the filing of the article of
14 incorporation, the corporate existence of the credit union shall
15 begin. The articles of incorporation as filed in the Department
16 of State are conclusive evidence of the fact that the credit
17 union has been incorporated.
18 (c) Disapproval action.--If the [Department of Banking]
19 department disapproves the articles, it shall return them to the
20 incorporators, stating in detail its reasons for doing so.
21 * * *
22 § 305. Bylaws.
23 (a) General rule.--The original bylaws of a credit union
24 shall be adopted by the incorporators of the credit union and
25 copies shall be transmitted to the [Department of Banking]
26 department along with the articles of incorporation as provided
27 in this chapter.
28 (b) [Amendments.--] Board initiated bylaw amendments.--
29 (1) Bylaws may be amended or repealed [either by two-
30 thirds of the members present and voting or a majority of the
20010S1222B1559 - 5 -
1 board of directors at any regular, annual or special meeting
2 of the credit union. Bylaws may alternatively be amended or
3 repealed by members through mail ballot if the bylaws provide
4 for such a procedure and if two-thirds of the responding
5 member ballots favor the proposed amendment or repeal.] by
6 the affirmative vote of a majority of directors at any
7 regular or special meeting of the board. Whenever the board
8 of directors amends the bylaws, written notice thereof shall
9 be given to the members prior to the next meeting of the
10 members or within 90 days after such action by the board of
11 directors, whichever is sooner.
12 (2) Any amendment to the bylaws adopted by the board of
13 directors may be repealed or amended by a two-thirds vote of
14 those members who respond and vote in favor of an amendment
15 or repeal of the action taken by the board of directors.
16 (3) A member-initiated repeal or amendment of a bylaw
17 passed by the board of directors may occur at an annual or
18 special meeting of members, or may be conducted by mail
19 ballot, if the bylaws provide for such a procedure, held
20 during a period of at least ten days after the mailing of the
21 notice.
22 (4) Notwithstanding paragraph (3), the members of a
23 credit union may amend the bylaws pursuant to procedures set
24 forth in subsections (d), (d.1) and (d.2), whichever
25 subsection is appropriate.
26 * * *
27 (d) [Review by members.--Whenever the board of directors
28 amends the bylaws, written notice thereof shall be given to the
29 members prior to the next meeting of the members or within 90
30 days after such action by the board of directors, whichever is
20010S1222B1559 - 6 -
1 sooner. Any amendment to the bylaws adopted by the board of
2 directors may be repealed or amended by the members at an annual
3 or special meeting or by a mail ballot vote held at least ten
4 days after the mailing of the notice.] Member-initiated bylaw
5 amendment or repeal for credit unions with more than 10,000
6 members.--
7 (1) Bylaws of a credit union with more than 10,000
8 members may be amended or repealed upon member-initiated
9 petition and the affirmative vote of two-thirds of the
10 members voting thereon by mail ballot.
11 (2) Written petition signed by 1% of all the members of
12 a credit union with more than 10,000 members shall be the
13 exclusive method by which such members may amend or repeal
14 the bylaws.
15 (3) Whenever the board of directors receives a member-
16 initiated petition to amend or repeal the bylaws, written
17 notice thereof shall be given to all members of the credit
18 union within 90 days and a mail ballot vote of the matter
19 shall be held during a period of at least ten days after the
20 mailing of the notice and ballot.
21 (d.1) Procedure.--
22 (1) To invoke the procedure to amend or repeal the
23 bylaws set forth in subsection (d), a member of a credit
24 union must obtain the form of the petition from the
25 department. The department shall indicate the date the
26 petition form was provided to the member on the petition form
27 and shall file a copy thereof in the records of the
28 department.
29 (2) Upon the request of a member, the credit union shall
30 provide the member with a list of all groups and their
20010S1222B1559 - 7 -
1 business addresses that are included as members of the credit
2 union.
3 (3) The member seeking to amend or repeal the bylaws
4 shall have 180 days from the date of receiving the petition
5 form from the department to circulate the petition and obtain
6 the requisite number of signatures from members of the credit
7 union. The petition shall be in a form provided by and
8 approved by the department and shall clearly identify the
9 bylaw to be amended or repealed and disclose the language of
10 the proposed bylaw.
11 (4) On or before 180 days from the date the petition
12 form was obtained from the department, the member seeking to
13 amend or repeal the bylaws must file the petition with the
14 department and the department shall indicate the date of
15 filing on the petition and file the petition in the records
16 of the department. The department shall send a copy of the
17 petition to the secretary of the credit union.
18 (5) The secretary of the credit union shall verify that
19 the signatures on the petition are the signatures of members
20 of the credit union and that the petition contains the
21 requisite number of signatures.
22 (6) If the credit union decides not to mail the notice
23 and ballot provided for in subsection (d) because any
24 signature on the petition does not belong to a member of the
25 credit union, the petition does not contain the requisite
26 number of signatures, or for any other reason, then the
27 secretary of the credit union shall provide written notice of
28 such decision to the member who initiated the petition drive.
29 (7) Any member seeking to contest a determination by the
30 credit union not to mail the notice and ballot provided for
20010S1222B1559 - 8 -
1 in subsection (d) may file a complaint with the department
2 within 30 days of receiving written notice from the secretary
3 of the credit union's decision not to mail such notice and
4 ballot and the department shall adjudicate the matter.
5 (8) The department may provide any person or unit of
6 government with a copy of the petition form as either
7 initially or subsequently filed with the department as well
8 as any complaints filed with the department and other
9 documents related thereto.
10 (9) If the credit union decides to mail the notice and
11 ballot provided for in subsection (d) or is ordered to do so
12 by the department, then the credit union shall send an
13 official notice to all members of the credit union, prepare
14 and mail the ballots, arrange for tallying of the votes and
15 report the results to all members in accordance with
16 subsection (d).
17 (10) The credit union shall bear the expenses associated
18 with:
19 (i) Verifying that the signatures on the petition
20 are the signatures of members of the credit union and
21 that the petition contains the requisite number of
22 signatures.
23 (ii) Notifying the members.
24 (iii) Preparing and mailing the ballots.
25 (iv) Tallying the vote and reporting the results.
26 (d.2) Member-initiated bylaw amendment or repeal for credit
27 unions with 10,000 or fewer members.--
28 (1) A credit union with 10,000 or fewer members may
29 choose between either the procedure to amend or repeal the
30 bylaws set forth in subsections (d) and (d.1) or a procedure
20010S1222B1559 - 9 -
1 to amend or repeal the bylaws by two-thirds vote of the
2 members present and voting at any regular, annual or special
3 meeting of the credit union. The special meeting must include
4 the opportunity for members to vote on such bylaw amendment
5 or repeal at the meeting and the ability of the board of
6 directors to resubmit the bylaw amendment or repeal by mail
7 ballot to all of the members if a majority of the board of
8 directors votes to do so and which may, in addition, include
9 a mail ballot procedure to amend or repeal the bylaws by
10 which two-thirds of the responding member ballots favor the
11 proposed amendment or repeal if the bylaws provide for such a
12 procedure.
13 (2) A credit union with 10,000 or fewer members may
14 choose between the two alternative procedures to amend or
15 repeal the bylaws provided for by this subsection at any time
16 by using the procedure to amend or repeal the bylaws in place
17 at that time.
18 * * *
19 § 501. Powers.
20 * * *
21 (b) Special powers.--[Except as set forth in subsection (c),
22 a] A credit union shall have the following special powers:
23 * * *
24 (4) To make purchase money mortgage loans to members
25 secured by mortgages which are first liens on improved real
26 property situated within the United States, the improvement
27 being an established dwelling house for not more than four
28 families which is owned by the member of the credit union
29 making the mortgage and occupied or to be occupied, in whole
30 or in part, by such member. Purchase money mortgages shall
20010S1222B1559 - 10 -
1 not exceed 90% of the fair market value of the property,
2 [except that shares] unless the department grants prior
3 approval of a purchase money mortgage loan policy submitted
4 to the department by the credit union which complies with the
5 above conditions and, additionally, provides for private
6 mortgage insurance for each purchase money mortgage and
7 directs that purchase money mortgages shall be written
8 according to secondary market standards, in which case
9 purchase money mortgage loans shall not exceed 100% of the
10 fair market value of the property. Shares of the credit union
11 owned by the mortgagor may be assigned or pledged as
12 additional collateral security for the mortgage loan and, in
13 such event, the mortgage loan granted upon such property may
14 be increased by the withdrawal value of the additional
15 pledged shares to an amount not to exceed a maximum total
16 mortgage loan of 100% of the fair market value of such real
17 property, and the credit union may release this additional
18 collateral whenever the mortgage loan meets all of the
19 requirements of this title and could be made legally at the
20 time of release without the requirement of additional
21 collateral. Purchase money mortgage loans shall be amortized
22 by approximately equal payments sufficient in amount to pay
23 all interest and effect full repayment of principal within a
24 period not in excess of 30 years. [Purchase] Except as
25 otherwise provided in this section, purchase money mortgage
26 loans on any one property shall not exceed 90% of the fair
27 market value of the property[, except as provided in this
28 subsection,] or 5% of the [paid-in capital] unimpaired
29 capital of the credit union, whichever is lesser. The
30 aggregate total of mortgage loans shall not exceed 50% of the
20010S1222B1559 - 11 -
1 [paid-in capital] unimpaired capital of the credit union.
2 Without regard to the limitations as to the amount and term
3 of a purchase money mortgage loan or the aggregate amount of
4 all mortgage loans set forth in this paragraph, a credit
5 union may grant any mortgage loan which is insured or
6 guaranteed, in whole or in part, by the United States or any
7 instrumentality thereof, or if there is a commitment to so
8 insure or guarantee.
9 * * *
10 (7) To invest its funds in the following investments:
11 * * *
12 (iii) Shares of any savings and loan association or
13 credit union, organized under the laws of this
14 Commonwealth, or of any Federal savings and loan
15 association or Federal credit union, to the extent to
16 which the withdrawal or repurchase value of such shares
17 is insured by any agency of the United States or any
18 other insurer approved by the [Department of Banking]
19 department.
20 * * *
21 (10) To hold, purchase, mortgage, alter, improve and
22 sell fixed assets, meaning such real property, and furniture
23 and fixtures to be used therein, as the purposes of the
24 credit union require and which the credit union occupies or
25 intends to occupy for the transaction of its business or
26 partly so occupies and partly leases to others, except that,
27 without the prior written approval of the department, the
28 cost, at the time of acquisition, of such real property and
29 furniture and fixtures therein shall not exceed 5% of shares
30 and retained earnings.
20010S1222B1559 - 12 -
1 * * *
2 [(c) Southern Africa investments.--No funds of a credit
3 union shall be invested in any stock or obligation of any
4 corporation doing business, either by itself or through any
5 subsidiary or affiliate, in the Republic of South Africa or
6 Namibia. This prohibition shall have prospective effect from
7 February 20, 1990, and shall not affect existing investments.]
8 (d) Special powers of community development credit unions.--
9 A community development credit union may do any or all of the
10 following:
11 (1) Accept payments on shares by public units and
12 nonmembers pursuant to Federal law and requirements of the
13 National Credit Union Administration.
14 (2) Participate in the Community Development Revolving
15 Loan Program under the administration of the National Credit
16 Union Administration or any other program acceptable to the
17 department.
18 (3) Engage in any other activities permitted by Federal
19 or State law applicable to a community development credit
20 union.
21 (e) Federal parity.--Notwithstanding any other provisions of
22 this title or any other law, in addition to any other powers as
23 authorized by this title or other law, a credit union shall have
24 the power:
25 (1) To engage in any activity permissible for a Federal
26 credit union as authorized by the Federal Credit Union Act
27 (48 Stat. 1216, 12 U.S.C. § 1751 et seq.), and the rules and
28 regulations of the National Credit Union Administration set
29 forth in 12 CFR Pts 700 (relating to definitions) through 795
30 (relating to omb control numbers assigned pursuant to the
20010S1222B1559 - 13 -
1 paperwork reduction act), subject to reasonable conditions,
2 limitations and restrictions as may be imposed by the
3 department, including, but not limited to, conditions,
4 limitations and restrictions 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 earlier approval is
22 granted by the department, a credit union shall provide at least
23 30 days' prior written notice to the department before it
24 engages 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
20010S1222B1559 - 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 impose
11 conditions, limitations or restrictions upon interests or
12 activities as authorized by subsection (e) or prohibit the
13 credit union from engaging in an activity or acquiring an
14 interest authorized by subsection (e).
15 § 503. Regulation by [Department of Banking] department.
16 (a) General rule.--Credit unions shall be under the
17 supervision of the [Department of Banking] department. The
18 department is hereby authorized and empowered to issue general
19 rules and regulations and specific orders for the protection of
20 members of credit unions, for insuring the conduct of the
21 business of credit unions on a safe and sound basis and for the
22 effective enforcement of this title. Credit unions shall report
23 to the department as often as may be required by it and at least
24 annually on blanks supplied by the department for that purpose.
25 Supplementary reports may be required by the department from
26 time to time. Credit unions shall be examined as often as may be
27 required by the department and at least annually, and the
28 department may use such other methods of assuring itself of the
29 condition of the credit unions as it shall deem advisable. The
30 cost of all such examinations and inspections shall be paid by
20010S1222B1559 - 15 -
1 the credit union. A credit union shall also pay annually its
2 proportionate share of the overhead expense of the department
3 determined by regulation of the department. The department shall
4 give written notice to each credit union of the costs of
5 examinations, investigations and the credit union's
6 proportionate share of the overhead expenses of the department.
7 The credit union shall pay the amount of such costs within 30
8 days of the notice. If payment is not made within 30 days of the
9 notice, the department may assess a penalty fee of $150 for that
10 30-day period and each successive 30-day period of delinquency.
11 For failure to file reports when due, unless excused for cause,
12 a credit union shall pay to the department $100 for each day of
13 its delinquency.
14 (a.1) Fines for violations.--Any credit union subject to
15 this title or any director, officer, committee member, employee,
16 volunteer or agent of a credit union who violates the provisions
17 of this title or directs or consents to such violation or who
18 violates any order issued by the department under this title
19 that has become final, or engages in an unsafe or unsound
20 practice involving the credit union or breaches a fiduciary
21 duty, shall be subject to a fine levied by the department of up
22 to $10,000 for each offense.
23 (a.2) Removal of personnel.--Upon 30 days' written notice of
24 a hearing and an opportunity to be heard in any manner provided
25 under 2 Pa.C.S. Ch. 5 Subch. A (relating to practice and
26 procedure of Commonwealth agencies) and Ch. 7 Subch. A (relating
27 to judicial review of Commonwealth agency action) and the
28 general rules of administrative practice and procedure, the
29 department may permanently remove any credit union director,
30 officer, committee member, employee or volunteer from his
20010S1222B1559 - 16 -
1 position at a credit union and prohibit him from participating
2 in the conduct of the affairs of the credit union in any manner
3 for such time as the department deems appropriate, including for
4 the remainder of the life of such director, officer, committee
5 member, employee or volunteer, if the department determines that
6 the credit union director, officer, committee member, employee
7 or volunteer has done any of the following or caused another to
8 do any of the following:
9 (1) violated a statute;
10 (2) violated a regulation;
11 (3) violated a cease and desist order that has become
12 final;
13 (4) engaged in an unsafe or unsound practice involving
14 the credit union; or
15 (5) breached a fiduciary duty.
16 (b) Suspension of personnel.--If, in the opinion of the
17 department, a director, officer [or], committee member, employee
18 or volunteer of a credit union [has committed a violation of a
19 statute, regulation or cease and desist order which has become
20 final or has engaged in an unsafe or unsound practice involving
21 the credit union or has breached a fiduciary duty] has engaged
22 in conduct or failed to engage in conduct that would warrant
23 removal under subsection (a.2), and if the department
24 [determines that] is also of the opinion that, as a result of
25 such conduct or failure to engage in conduct, the credit union
26 has suffered or might suffer or could suffer or will suffer
27 [substantial] any financial loss or other damage or that the
28 interests of its members could be [seriously] prejudiced or
29 might be prejudiced or have been prejudiced by reason of [the
30 violation, practice or breach] such conduct or failure to engage
20010S1222B1559 - 17 -
1 in such conduct, or the suspension is necessary for the
2 protection of the credit union or its members, the department
3 may immediately suspend the director, officer [or], committee
4 member [upon], employee or volunteer from his position and from
5 any further participation in the conduct of the affairs of the
6 credit union by issuing written notice[, pending] of suspension
7 and of a hearing in any manner provided under 2 Pa.C.S. Ch. 5
8 Subch. A and Ch. 7 Subch. A and the general rules of
9 administrative practice and procedure, to determine whether
10 removal is required as provided in subsection (a.2). The notice
11 shall contain a statement of the facts constituting grounds for
12 removal and shall indicate a time and place for a hearing. The
13 hearing shall be fixed for a date between 30 and 60 days from
14 the date of service of notice, unless an earlier or later date
15 is set by the department at the request of the director, officer
16 [or], committee member, employee or volunteer.
17 (b.1) Order of prohibition.--
18 (1) In connection with any proceeding to remove credit
19 union personnel pursuant to subsection (a.2) or to suspend
20 credit union personnel pursuant to subsection (b) or
21 independent of any other administrative action, the
22 department may seek to enter an order to prohibit a credit
23 union director, officer, committee member, employee or
24 volunteer from working in any capacity in any and all other
25 credit unions from such time as the department determines
26 appropriate, including for the remainder of the life of such
27 director, officer, committee member, employee or volunteer.
28 (2) If an order of prohibition is sought by the
29 department in connection with any other administrative
30 action, the notice issued by the department shall contain a
20010S1222B1559 - 18 -
1 statement that the department also seeks to prohibit the
2 credit union director, officer, committee member, employee or
3 volunteer from working in any capacity in any and all other
4 credit unions.
5 (3) If the department seeks to enter an order of
6 prohibition pursuant to this subsection independent of any
7 other administrative action, the department shall provide 30
8 days' written notice of a hearing and an opportunity to be
9 heard to the credit union director, officer, committee
10 member, employee or volunteer in any manner provided under 2
11 Pa.C.S. Ch. 5 Subch. A and Ch. 7 Subch. A and the general
12 rules of administrative practice and procedure.
13 (b.2) Subpoenas and administrative hearings.--
14 (1) In connection with any examination, investigation or
15 other inquiry, the department may issue investigatory
16 subpoenas requiring the attendance of, or the production of
17 pertinent instruments, documents, accounts, books and records
18 by, the directors, officers, committee members, employees,
19 volunteers, agents or members, respectively, of any credit
20 union. In connection with such examination, investigation or
21 other inquiry, the department may also question such
22 witnesses under oath or affirmation and examine such
23 instruments, documents, accounts, books and records.
24 (2) The department may conduct administrative hearings
25 on any matter pertaining to this title, issue subpoenas to
26 compel the attendance of witnesses and the production of
27 instruments, documents, accounts, books and records at any
28 such hearing, which may be retained by the department until
29 the completion of all proceedings in connection with which
30 they were produced, and administer oaths and affirmations to
20010S1222B1559 - 19 -
1 any person whose testimony is required.
2 (3) In the event a person fails to comply with any
3 subpoena issued by the department or to testify on any matter
4 concerning which he may be lawfully interrogated, on
5 application by the department, the Commonwealth Court may
6 issue an order requiring the attendance of such person, the
7 production of instruments, documents, accounts, books or
8 records or the giving of testimony.
9 (4) (i) Whenever a credit union, or a director,
10 officer, committee member, employee or volunteer of a
11 credit union, fails to comply with the terms of an order
12 of the department which has become final, the department,
13 upon notice to such credit union, director, officer,
14 committee member, employee or volunteer, may petition the
15 Commonwealth Court for an order directing such credit
16 union, director, officer, committee member, employee or
17 volunteer to obey the order of the department within such
18 period as shall be fixed by the court.
19 (ii) Upon the filing of such petition, the
20 Commonwealth Court shall allow a rule to show cause why
21 the order requested by the department should not be
22 granted.
23 (iii) Whenever it shall appear that the order of the
24 department was lawfully issued, the Commonwealth Court
25 shall grant the petition of the department.
26 (b.3) Privileges.--In connection with its authority and
27 responsibility under this title, and in addition to any other
28 privileges provided by State law, the department shall have the
29 same privileges enjoyed by Federal banking regulators,
30 including, but not limited to, the bank examination privilege,
20010S1222B1559 - 20 -
1 deliberative process privilege, executive privilege and the
2 mental process privilege.
3 (c) Seizure of credit union.--
4 (1) If the department determines that a credit union is:
5 [(1)] (i) violating any of the provisions of this
6 title or any rule or regulation of the department issued
7 under [and within] the authority of this title or any
8 order issued by the department under the authority of
9 this title that has become final;
10 [(2)] (ii) conducting its business in an unsafe
11 manner;
12 [(3)] (iii) in an unsafe [and] or unsound condition
13 to transact its business; [or]
14 (iv) critically undercapitalized according to the
15 prompt corrective action standards of the National Credit
16 Union Administration consistent with the Federal Credit
17 Union Act (48 Stat. 1216, 12 U.S.C. § 1751 et seq.) and
18 related regulations; or
19 [(4)] (v) insolvent;
20 the department may [serve written notice of its intention to
21 take possession of the credit union. If the condition
22 continues for a period of 15 days after the giving of such
23 notice, the department may, in its discretion], in its
24 discretion, immediately or at such other time set by the
25 department, take possession of the business and property of
26 the credit union and retain possession until such time as the
27 condition predicating such action is remedied or until the
28 affairs of the credit union are finally liquidated.
29 (2) The department shall take possession of a credit
30 union by serving a written notice of seizure on the credit
20010S1222B1559 - 21 -
1 union's board of directors that contains a statement of the
2 facts constituting grounds for seizure of the credit union
3 and that contains notice of a hearing and an opportunity to
4 be heard. Upon taking possession of a credit union, the
5 department may liquidate or otherwise resolve the credit
6 union, appoint the National Credit Union Administration to
7 liquidate or otherwise resolve the credit union pursuant to
8 Federal law, or appoint such other agent or employee of the
9 department to liquidate or otherwise resolve the credit
10 union.
11 (3) The department may take similar action if any report
12 is not filed within a period of 15 days after it is due.
13 (4) Any person aggrieved by the action of the department
14 in taking possession of a credit union may appeal within ten
15 days of commencement of the receivership, whereupon the
16 matter shall be set down for hearing de novo [in accordance
17 with the procedures set forth at 10 Pa. Code Ch. 3 (relating
18 to hearings and conferences)].
19 (d) Exchange of reports of examination.--
20 (1) Whenever the shares of a credit union are insured by
21 the National Credit Union Share Insurance Fund or any other
22 share insurance fund approved by the department, the
23 department [is authorized to] may furnish to the
24 Administrator of the National Credit Union Administration or
25 to any other approved insurer any reports of examination made
26 by the department under this section[.] or any credit union
27 board resolution or enforcement document including any order
28 issued by the department regarding the particular credit
29 union.
30 (2) The department may furnish to any outside accountant
20010S1222B1559 - 22 -
1 or trade organization contracted by the credit union or
2 authorized by the department to satisfy the audit
3 requirements in this title or meet specifications as defined
4 in any order any reports of examination made by the
5 department under this section or any credit union board
6 resolution or enforcement document including orders issued by
7 the department.
8 (3) If a Pennsylvania credit union conducts business in
9 another state through the establishment and operation of
10 additional branch offices and service facilities under
11 section 904 (relating to place of business), the department
12 [is authorized to] may furnish to the financial regulatory
13 agency of that state reports of examination [made by the],
14 credit union board resolutions, or any enforcement document
15 including orders issued by the department [for] regarding the
16 particular credit union.
17 (e) Report.--A credit union shall furnish to the department
18 copies of the report of financial condition, known as the call
19 report, in the same form and with the same frequency that the
20 credit union is required to provide the report to the National
21 Credit Union Administration.
22 (f) Disclosure of information.--
23 (1) No record or item of information concerning an
24 individual which is contained in a system of records
25 maintained by the department shall be disclosed by any means
26 of communication to any person, or to another agency, without
27 the prior consent of the individual to whom the record or
28 item of information pertains, unless:
29 (i) The disclosure would be to another agency or to
30 an instrumentality of any governmental jurisdiction
20010S1222B1559 - 23 -
1 within or under the control of the Commonwealth of
2 Pennsylvania or its instrumentalities or of the United
3 States for a civil or criminal law enforcement activity
4 authorized by law.
5 (ii) The head of the agency or instrumentality or
6 his designee has made a written request to the department
7 specifying the particular portion desired and the law
8 enforcement activity for which the record or item is
9 sought.
10 (2) Notwithstanding the provisions of paragraph (1), the
11 service of a subpoena upon the secretary, deputy, examiner,
12 clerk or other employee of the department shall not be
13 construed as requiring such person to disclose any
14 information but such person shall have all the rights and
15 privileges as any other subpoenaed party to object to
16 production of information on the same basis as provided in
17 the Pennsylvania Rules of Civil Procedure, State law or
18 common law.
19 § 505. Capital and shares.
20 * * *
21 (d) Share insurance required.--The shares representing the
22 savings of members shall be insured in such amounts as provided
23 by the National Credit Union Administration or other share
24 insurance fund approved by the [Department of Banking]
25 department to insure the shares of credit unions. A credit union
26 that has not obtained share account insurance from the National
27 Credit Union Administration or other share insurance fund
28 approved by the department may not, without the prior written
29 approval of the department, accept payments from its members for
30 the purchase of shares.
20010S1222B1559 - 24 -
1 § 511. Power to borrow.
2 (a) General rule.--A credit union may borrow from any source
3 a sum not exceeding 50% of its [capital, surplus and undivided]
4 unimpaired capital, regular reserve, contingency reserves and
5 retained earnings for the purpose of meeting the demand for
6 loans to members or for the purpose of meeting demands for share
7 withdrawals.
8 * * *
9 § 513. Reserves.
10 (a) General rule.--[At the end of each accounting period,
11 the gross income shall be determined. From this amount, there
12 shall be set aside a sum in accordance with the following
13 schedule as a regular reserve:
14 (1) A credit union in operation for more than four years
15 and having assets of $500,000 or more shall set aside:
16 (i) 10% of gross income until the regular reserve
17 shall equal 4% of the total of outstanding loans and risk
18 assets; then
19 (ii) 5% of gross income until the regular reserve
20 shall equal 6% of the total of outstanding loans and risk
21 assets.
22 (2) A credit union in operation less than four years or
23 having assets of less than $500,000 shall set aside:
24 (i) 10% of gross income until the regular reserve
25 shall equal 7.5% of the total of the outstanding loans
26 and risk assets; then
27 (ii) 5% of gross income until the regular reserve
28 shall equal 10% of the total of outstanding loans and
29 risk assets.
30 (3) Whenever the regular reserve falls below the stated
20010S1222B1559 - 25 -
1 percentage of the total of outstanding loans and risk assets,
2 it shall be replenished by regular contributions in such
3 amounts as may be needed to maintain the stated reserve
4 goals.
5 (4) All entrance fees collected shall be set aside in
6 the regular reserve fund.
7 (5) The regular reserve fund thus established shall not
8 be loaned out to members and shall be deposited as authorized
9 in section 501(b)(6) (relating to powers) or invested in such
10 investments as are authorized by section 501(b)(7). The
11 regular reserve fund shall belong to the credit union and
12 shall not be distributed except in case of liquidation.
13 (6) The directors are authorized, after the required
14 reserve has been provided for, to make additional transfers
15 from undivided earnings to a contingent reserve for other
16 anticipated losses and expenses, but the members at the
17 annual meeting may retransfer any part or all of such
18 contingent reserve to the undivided earnings account.] Each
19 credit union shall establish and maintain a regular reserve
20 account for the purpose of absorbing losses that exceed
21 undivided earnings and other appropriations of undivided
22 earnings to the same extent and in the same manner as
23 required of a Federal credit union.
24 (b) [Changes in reserve requirement.--The department may
25 decrease the reserve requirement set forth in subsection (a)
26 when in its opinion such a decrease is necessary or desirable.
27 The department may also require special reserves to protect the
28 interests of members either by regulation or for an individual
29 credit union in any special case.] Computation of reserve and
30 net worth requirements.--For the purpose of establishing the
20010S1222B1559 - 26 -
1 reserves required by this section and for the provision and
2 maintenance of adequate equity or net worth, a credit union
3 shall compute its reserve and net worth requirements consistent
4 with section 216 of the Federal Credit Union Act (48 Stat. 1216,
5 12 U.S.C. § 1790d and the National Credit Union Administration
6 rules and regulations set forth in 12 CFR Pt. 702 (relating to
7 prompt corrective action).
8 (c) Allowance for loan loss.--Each credit union, in addition
9 to maintaining a regular reserve, shall establish an allowance
10 for loan loss. The allowance for loan loss reserve shall be
11 funded in the manner and used for the purposes as designated
12 from time to time by the [Department of Banking] department. The
13 board of directors shall decide the loans which are to be
14 charged off against the allowance for loan loss, except that the
15 [Department of Banking] department may, at the time of
16 examination of a credit union, recommend for charge-off such
17 loans which in its opinion are unsound, which loans shall be
18 charged against the allowance for loan loss account within 60
19 days of the receipt of such recommendation from the department.
20 Any amount received from the repayment of a loan after it has
21 been charged off against the allowance for loan loss account
22 shall be credited back to the account.
23 [(d) Allowance for investment loss.--Each credit union, in
24 addition to maintaining a regular reserve, shall establish an
25 allowance for investment loss in compliance with Federal or
26 State laws or regulations as well as generally accepted
27 accounting principles. The allowance for investment loss reserve
28 shall be funded in conformity with such laws, regulations or
29 generally accepted accounting principles.]
30 § 514. Dividends.
20010S1222B1559 - 27 -
1 (a) General rule.--The board of directors of a credit union
2 or the members on recommendation of the board of directors,
3 whichever the bylaws provide, may declare dividends to be paid
4 on all shares and share certificates from the net earnings and
5 undivided earnings at such rates and intervals and for such
6 periods as the board of directors may authorize and after
7 provision for the required reserves. [Within the discretion of
8 the board of directors, payments on all shares which are made
9 within the first ten days of a month may be entitled to
10 dividends for the full month in which such payment is made.]
11 Dividends may be added to the credit of the members share
12 accounts, paid in cash, or partially credited to share accounts
13 and partially paid in cash, at the option of the board of
14 directors.
15 * * *
16 § 701. Membership.
17 (a) General rule.--Credit union organizations shall be
18 limited to groups having a potential membership of 500 or more
19 adult persons and having a common bond of association within a
20 well-defined community or rural district by reason of occupation
21 or of membership in a religious congregation or fraternal or
22 labor organization or residence within a well-defined community
23 or rural district. A credit union may also retain its original
24 field of membership and, additionally, include in its field of
25 membership other occupational groups, as well as like
26 associational groups having a common bond with the original
27 field of membership, with insufficient number of members to form
28 or conduct the affairs of a separate credit union, if the
29 existing credit union obtains prior permission from the
30 [Department of Banking] department. The membership of a credit
20010S1222B1559 - 28 -
1 union shall be limited to and consist of the incorporators of
2 the credit union and such other persons, having the common bond
3 of association, set forth in the articles of incorporation, as
4 have been duly admitted members, have paid the entrance fee as
5 provided in the bylaws and own and retain one or more shares.
6 Organizations composed principally of the same group as the
7 credit union membership may be members. Employes of credit
8 unions may be members of such credit unions.
9 * * *
10 (f) Effect of certain association formations.--Any
11 association formed primarily to obtain a State credit union
12 charter shall not be considered by the department to have a
13 sufficient common bond.
14 § 706. Election of directors and credit and supervisory
15 committee members.
16 * * *
17 (b) Report to department.--A statement in writing of the
18 names and addresses of the members of the board and the
19 committees and the officers, as well as any interim
20 appointments, shall be filed with the [Department of Banking]
21 department within ten days after their election and
22 qualification or interim appointment. For failure to file such
23 statements when due, unless excused for cause, the credit union
24 shall pay to the department [$5] $100 for each day of its
25 delinquency.
26 § 707. Duties of directors generally.
27 (a) General rule.--The directors of a credit union shall
28 have general management of the affairs of the credit union and
29 are specifically required:
30 (1) To act on applications for membership.
20010S1222B1559 - 29 -
1 (2) To determine interest rates on loans.
2 (3) To fix the amount of the surety bond which shall be
3 required of all officers and employees handling money which
4 amount shall be not less than the minimum schedule
5 established by the [Department of Banking] department.
6 (4) To declare dividends or recommend dividends as
7 provided in the bylaws.
8 (5) To transmit or cause to be transmitted to the
9 members all proposed amendments to the bylaws.
10 (6) If the bylaws provide for appointed credit or
11 supervisory committees, to appoint individuals to serve on
12 the credit committee or the supervisory committee and to fill
13 vacancies in the board and in the credit committee until
14 successors are duly chosen and qualified.
15 (7) To determine the maximum individual share holdings
16 and, subject to the limitations contained in this title, the
17 maximum individual loan which can be made with or without
18 security.
19 (8) To have charge of investments, first mortgage loans
20 and loans to other credit unions and Federal credit unions
21 but not loans to members which are under the supervision of
22 the credit committee as otherwise provided in this title. The
23 board may, however, delegate to the credit committee the
24 authority to approve some or all first mortgage loans and to
25 an investment committee or qualified individual the authority
26 to make all or some investments if the board first
27 establishes guidelines and standards for the approval and
28 making of such loans and investments in accordance with the
29 policies of the board of directors.
30 (9) To fix the amount of compensation of directors,
20010S1222B1559 - 30 -
1 officers, committee members, [the loan officer] loan officers
2 and employees.
3 (10) To determine whether, to what extent and to what
4 class or classes of borrowers, if any, an interest refund is
5 to be made in any dividend period. Any such interest refund
6 shall be paid in proportion to the interest paid by each
7 borrower within any class during that dividend period. [No
8 interest refund may be authorized unless a share dividend at
9 the rate of not less than 5% has been declared from the
10 earnings of that dividend period.]
11 (11) To appoint alternate credit committee members as
12 needed to serve during incapacity or absence of the credit
13 committee members.
14 (b) Notice of interest refund to department.--Immediately
15 upon the board deciding to refund any interest pursuant to
16 subsection (a)(10), notice of such decision and a copy of any
17 board resolution and related documents shall forthwith be sent
18 to the department. The department shall, within 30 days after
19 receipt thereof, have the power to disapprove, for any
20 reasonable cause stated in writing, any such interest refund. If
21 the department does not disapprove the interest refund within 30
22 days, the interest refund shall become effective.
23 § 709. Compensation of directors and officers.
24 [A member of the board of directors and members of the credit
25 committee and the supervisory committee may be compensated if
26 the credit union paid a dividend of not less than 3% from the
27 earnings of the last preceding year.] Members of the board of
28 directors, the credit committee and the supervisory committee
29 may be compensated if the credit union pays dividends to its
30 members commensurate with prevailing market rates during the
20010S1222B1559 - 31 -
1 preceding year. A credit union shall be deemed to pay dividends
2 commensurate with prevailing market rates if declared dividend
3 rates on share accounts are competitive with dividend or
4 interest rates offered by other credit unions, Federal credit
5 unions, or other financial institutions authorized to engage in
6 the business of receiving money for deposit. The [Department of
7 Banking] department may prohibit or regulate the payment of
8 compensation of directors, committee members and officers,
9 exclusive of the treasurer, if it deems such compensation
10 excessive or if, in its opinion, the financial condition of the
11 credit union is not such as to warrant the payment of such
12 compensation.
13 § 711. Procedures for approving service by certain persons.
14 (a) General rule.--No person who has been convicted of a
15 misdemeanor or a felony involving dishonesty, breach of trust or
16 violation of this title or corresponding provisions of prior law
17 may serve or seek to serve as an officer, director, committee
18 member or employee of a credit union unless the person[:
19 (1) in the case of an officer, director or committee
20 member seeking office,] has or obtains the unanimous approval
21 of the [nominating committee] board of directors of the
22 credit union.[;
23 (2) in the case of an employee, has the approval of the
24 officer in charge of operations;
25 (3) in the case of an officer, including an officer in
26 charge of operations, director or committee member seeking
27 office, has the unanimous approval of the board of directors
28 of the credit union; or
29 (4) in the case of an employee, other than an officer in
30 charge of operations, has the approval of the board of
20010S1222B1559 - 32 -
1 directors by a vote of at least two-thirds of the board of
2 directors.]
3 * * *
4 § 713. Loan procedures.
5 * * *
6 (b) Conflict of interest.--No credit committee member, loan
7 officer or director of a credit union shall vote on the granting
8 of any loan in which such official has guaranteed the repayment
9 of the loan or where a member of [his or her] the member's
10 immediate family has a beneficial interest.
11 * * *
12 (d) Approval by credit committee.--
13 (1) If the bylaws provide for a credit committee, at
14 least a majority of the members of the credit committee shall
15 pass on all loans[,] and no loan shall be approved unless it
16 is approved by a majority of the members of the credit
17 committee [present and voting, unless the credit committee
18 has appointed] at a credit committee meeting.
19 (2) Notwithstanding paragraph (1), the credit committee
20 may appoint one or more loan officers and [delegated]
21 delegate to such person or persons the power to approve
22 loans, share withdrawals of amounts previously pledged as
23 security for a loan, releases and substitutions of security,
24 within limits specified by the committee.
25 (3) The appointment and delegation shall be approved by
26 a majority of the credit committee present and voting at a
27 credit committee meeting and shall be recorded in a written
28 resolution signed by the credit committee members who
29 approved the delegation or appointment. The written
30 resolution shall be forwarded to the board of directors prior
20010S1222B1559 - 33 -
1 to the next board meeting.
2 (4) The credit committee shall meet as often as may be
3 necessary after due notice to each member. The credit
4 committee shall keep minutes of each meeting. The minutes
5 shall include a list of loans approved and disapproved by the
6 credit committee.
7 (5) The credit committee shall require any loan officers
8 it appoints to report regularly to the credit committee on
9 any loan approvals or other actions taken by the loan officer
10 in the authority delegated to the loan officer by the credit
11 committee.
12 * * *
13 § 714. Annual [examination] audit.
14 (a) Supervisory committee.--If the bylaws of the credit
15 union provide for a supervisory committee, the duties of the
16 supervisory committee shall be as follows:
17 (1) To make at least an annual [examination] audit of
18 the affairs of the credit union. The committee shall submit a
19 report to the board of directors and to the members at the
20 next annual meeting of the credit union.
21 * * *
22 (b) Default by supervisory committee.--Whenever the
23 supervisory committee fails to make the [examinations] audits or
24 reports as provided in subsection (a)(1), the board of directors
25 shall remove from office the members of the supervisory
26 committee and appoint a new committee to make such
27 [examinations] audits, or the board may employ the services of a
28 public accountant to make such [examinations] audits. The
29 charges for the services of such public accountants shall be
30 paid by the credit union. If the board of directors under such
20010S1222B1559 - 34 -
1 circumstances fails or refuses to act, the [Department of
2 Banking] department may, in addition to its other powers, remove
3 the members of the supervisory committee and issue an order on
4 the board of directors requiring such [examinations] audits to
5 be made by a public accountant at the expense of the credit
6 union.
7 (c) [Examination] Audit by public accountant.--If the bylaws
8 do not provide for a supervisory committee, the board shall
9 employ the services of a public accountant to make
10 [examinations] audits under subsections (a) and (b). The charges
11 for the services of the public accountant shall be paid by the
12 credit union.
13 (d) Requirement for an outside audit.--
14 (1) A credit union shall obtain an outside, independent
15 audit by a certified public accountant or other approved
16 service for any fiscal year during which any one of the
17 following conditions exist:
18 (i) the supervisory committee of the credit union
19 has not conducted an annual supervisory committee audit;
20 (ii) the annual supervisory committee audit
21 conducted did not meet the audit requirements required by
22 the department; or
23 (iii) the credit union has experienced serious and
24 persistent recordkeeping deficiencies as defined in
25 subsection (e).
26 (2) In the case of an audit required pursuant to
27 paragraph (1)(i) or (ii), the scope of the outside,
28 independent audit shall fully encompass the requirements set
29 forth in the department's audit guidelines. In the case of an
30 audit required pursuant to paragraph (1)(iii), the outside,
20010S1222B1559 - 35 -
1 independent audit must be conducted by a certified public
2 accountant and must be an opinion audit as that term is
3 understood under generally accepted auditing standards.
4 (e) Definition.--As used in subsection (d)(1), "persistent
5 recordkeeping deficiencies" means serious recordkeeping problems
6 which continue to exist past a usual, expected or normal period
7 of time. Persistent recordkeeping deficiencies shall be
8 considered serious if the department has a reasonable doubt:
9 (1) That the financial condition of the credit union is
10 accurately and fairly presented in the credit union's
11 statement.
12 (2) That management practices and procedures of the
13 credit union are sufficient to safeguard members' assets.
14 § 903. Filing and review of articles of amendment.
15 (a) General rule.--Articles of amendment shall be filed with
16 the [Department of Banking] department. If the department finds
17 that the articles of amendment conform to law, it shall endorse
18 its approval thereon and forward the articles of amendment to
19 the Department of State. Upon receipt of the articles of
20 amendment, the Department of State shall file the same.
21 * * *
22 § 904. Place of business.
23 (a) Change in principal place of business.--A credit union
24 may change its place of business upon the filing of a statement
25 of change of principal place of business with the Department of
26 State and the [Department of Banking] department.
27 (b) Branch offices and service facilities.--If a credit
28 union gives the [Department of Banking] department prior written
29 notification and, in the case of branch offices, receives prior
30 approval from the department, it may establish and maintain, at
20010S1222B1559 - 36 -
1 locations other than its principal place of business, additional
2 branch offices and service facilities to furnish services to its
3 members.
4 (c) Discontinuance of branch offices or service
5 facilities.--If a credit union pursuant to a resolution of its
6 board of directors provides the department prior written
7 notification, the credit union may discontinue the operation of
8 and close branch offices or service facilities.
9 [(c)] (d) Cross reference.--See 15 Pa.C.S. § 134 (relating
10 to docketing statement).
11 § 1101. Conversion into Federal credit union.
12 (a) General rule.--A credit union may be converted into a
13 Federal credit union by complying with the following
14 requirements:
15 (1) The proposition for such conversion shall first be
16 approved by a majority vote of the directors of the credit
17 union who shall also set a date for the vote thereon by the
18 members. The vote of the members shall be conducted at a
19 meeting held on such date, or by written ballot if the bylaws
20 so provide to be filed on or before such date. Written notice
21 of the proposition and of the date set for the vote shall be
22 given each member not more than 30 nor less than ten days
23 prior to such date. Approval of the proposition shall be by
24 the affirmative vote of a majority of the members voting, in
25 person or in writing, either at a meeting of the credit union
26 or through a mail ballot vote. In order for a vote to be
27 considered valid, there must be a quorum established. In the
28 case of a meeting of the credit union, a quorum shall be
29 established by the presence of at least 10% of the credit
30 union's membership. In the case of a mail ballot vote, a
20010S1222B1559 - 37 -
1 quorum shall be established by the written response of at
2 least 10% of the credit union's membership.
3 (2) A statement of the result of the vote, certified by
4 an officer of the credit union, shall be filed with the
5 [Department of Banking] department within ten days after the
6 vote is taken.
7 (3) Promptly after the vote is taken and in no event
8 later than 90 days thereafter, if the proposition for
9 conversion was approved, the credit union shall take such
10 action as may be necessary under the applicable laws of the
11 United States to make it a Federal credit union, and, within
12 ten days after receipt of the Federal credit union charter,
13 it shall file a copy of the charter thus issued with the
14 Department of State which shall furnish a copy thereof to the
15 [Department of Banking] department. Upon such filing with the
16 Department of State, the credit union shall no longer be
17 subject to any of the provisions of this title. The successor
18 Federal credit union shall be vested with all of the assets
19 and shall continue to be responsible for all of the
20 obligations of the credit union thus converted to the same
21 extent as though the conversion had not taken place.
22 * * *
23 § 1102. Conversion from Federal credit union.
24 (a) General rule.--A Federal credit union may be converted
25 into a credit union subject to the provisions of this title by:
26 (1) Complying with all Federal requirements requisite to
27 enabling it to convert to a credit union or to cease being a
28 Federal credit union.
29 (2) Filing with the [Department of Banking] department
30 proof of compliance with such Federal requirements in form
20010S1222B1559 - 38 -
1 satisfactory to the department.
2 (3) Filing with the department, together with such
3 reasonable fees as shall be established by the department
4 including an application fee and fees for such examination
5 and such investigation as it may deem necessary, articles of
6 conversion which shall set forth:
7 (i) The proposed name of the converted credit union.
8 (ii) The exact location of the principal place of
9 business of the credit union into which the Federal
10 credit union plans to become converted.
11 (iii) The number, names and addresses of the persons
12 to be the first directors of the converted credit union.
13 (iv) All other statements required by this title to
14 be set forth in original articles of incorporation in the
15 case of the formation of a credit union in so far as such
16 information is applicable to a Federal credit union
17 proposing to become converted into a credit union.
18 (b) Department [of Banking] review.--Immediately upon the
19 receipt of the articles of conversion, the department shall
20 conduct such examination as may be deemed necessary to ascertain
21 from the best sources of information at its command:
22 (1) Whether the name of the proposed credit union
23 conforms with the requirements of law for the name of a
24 credit union and whether it is the same as one already
25 adopted or reserved by another person or is so similar
26 thereto that it is likely to mislead the public.
27 (2) Whether the conversion is made for legitimate
28 purposes.
29 (3) Whether the interests of members and creditors are
30 adequately protected.
20010S1222B1559 - 39 -
1 (4) Whether the proposed credit union meets all of the
2 requirements of this title and violates none of its
3 prohibitions applicable to a credit union incorporated under
4 this title.
5 (5) Whether the Federal credit union has complied with
6 the requirements of the laws of the United States as they
7 relate to the conversion of a Federal credit union into a
8 credit union.
9 Within 60 days after receipt of the articles of conversion, the
10 [Department of Banking] department shall, upon the basis of the
11 facts disclosed by its investigation, either approve or
12 disapprove such articles.
13 * * *
14 (d) Disapproval action.--If the [Department of Banking]
15 department disapproves the articles of conversion, it shall
16 return them to the Federal credit union desiring to become
17 converted into a credit union stating in detail its reasons for
18 so doing.
19 * * *
20 § 1103. Merger and consolidation authorized.
21 * * *
22 (b) Approvals and conditions.--Before merging or
23 consolidating, the credit unions involved must obtain prior
24 approval from the [Department of Banking] department. In the
25 case of a merger or consolidation with a Federal credit union,
26 the merger or consolidation shall be made pursuant to Federal
27 law in addition to the provisions of this title. In the case of
28 a merger or consolidation with an out-of-State credit union, the
29 merger or consolidation shall be made pursuant to the credit
30 union law of the state of incorporation of the out-of-State
20010S1222B1559 - 40 -
1 credit union or, if credit unions incorporated in different
2 states are involved, pursuant to the credit union laws of the
3 various states of incorporation of the out-of-State credit
4 unions in addition to the provisions of this title.
5 § 1105. Articles of merger or consolidation.
6 * * *
7 (b) Department [of Banking] review.--The articles of merger
8 or consolidation shall be filed with the [Department of Banking]
9 department which, immediately upon receipt thereof, shall
10 conduct such investigation as may be deemed necessary to
11 ascertain from the best sources at its command:
12 (1) Whether, if the articles are articles of
13 consolidation, the name of the proposed new credit union,
14 Federal credit union or out-of-State credit union conforms
15 with the requirements of law for the name of a credit union
16 and whether it is the same as one already adopted or reserved
17 by another corporation or person or is so similar thereto
18 that it is likely to mislead the public.
19 (2) Whether, if the merger or consolidation includes one
20 or more Federal credit unions, all requirements of the laws
21 of the United States pertaining thereto have been complied
22 with.
23 (3) Whether the interests of members and creditors are
24 adequately protected.
25 (4) Whether the credit unions, including the surviving
26 or new credit union, have met all of the requirements of this
27 title and have violated none of its prohibitions applicable
28 to a credit union incorporated under this title.
29 (5) Whether, if the merger or consolidation includes an
30 out-of-State credit union, there is compliance with the
20010S1222B1559 - 41 -
1 applicable requirements of the law of the state of
2 incorporation of the out-of-State credit union.
3 Within 60 days after receipt of the articles of merger or
4 consolidation, the [Department of Banking] department shall,
5 upon the basis of the facts disclosed by its investigation,
6 either approve or disapprove such articles.
7 * * *
8 * * *
9 (e) Disapproval action.--If the [Department of Banking]
10 department shall disapprove the articles, it shall return them
11 to the credit union, Federal credit union or out-of-State credit
12 union from which they were received, stating the reasons for
13 such disapproval.
14 * * *
15 § 1106. Supervisory mergers or consolidations by [Department of
16 Banking] department.
17 Notwithstanding any other provision of this title, the
18 [Department of Banking] department may require a merger or
19 consolidation of a credit union which is insolvent or is in
20 danger of insolvency with any other credit union, Federal credit
21 union or out-of-State credit union or may authorize a credit
22 union to purchase any of the assets of, or assume any of the
23 liabilities and capital of, any other credit union, Federal
24 credit union or out-of-State credit union if the department is
25 satisfied that:
26 (1) an emergency requiring expeditious action exists
27 with respect to such a credit union;
28 (2) other alternatives are not reasonably available; and
29 (3) the public interest would best be served by approval
30 of such merger, consolidation, purchase or assumption.
20010S1222B1559 - 42 -
1 § 1301. Dissolution authorized.
2 Any credit union may elect to dissolve voluntarily and wind
3 up its affairs in the manner provided in this chapter. However,
4 if it shall appear to the [Department of Banking] department,
5 upon an examination of the business, assets and affairs of the
6 credit union, that its assets will probably be insufficient to
7 pay in full its members and creditors, it shall take possession
8 of the business and property of the credit union and retain
9 possession until its affairs are finally liquidated.
10 § 1302. Approval of voluntary dissolution.
11 (a) General rule.--The procedure for voluntary dissolution
12 shall be as follows:
13 * * *
14 (4) A certificate of election to dissolve signed by a
15 duly authorized officer of the credit union shall be executed
16 and delivered to the [Department of Banking] department. The
17 certificate shall set forth:
18 (i) The name of the credit union.
19 (ii) The exact location of its place of business.
20 (iii) The names and addresses of its officers and
21 directors.
22 (iv) The number of directors voting for, and the
23 number voting against, the proposed plan of voluntary
24 dissolution.
25 (v) The total number of members and the number of
26 members voting for, and the number voting against, the
27 proposed plan of voluntary dissolution.
28 (vi) The names and addresses of the proposed
29 liquidating trustees and the number of votes received by
30 every candidate for the position of liquidating trustee.
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1 (vii) The amount of the bond required to be supplied
2 by each trustee.
3 (viii) A verified statement by each of the proposed
4 liquidating trustees stating that he is willing to serve
5 as liquidating trustee, subject to the provisions of this
6 chapter and to the terms of the proposed plan of
7 voluntary dissolution, that he will, so far as the duty
8 devolves upon him, diligently and honestly liquidate the
9 affairs of the credit union, and will not knowingly
10 violate or permit to be violated any of the provisions of
11 this chapter or of the proposed plan of voluntary
12 liquidation.
13 (ix) The proposed plan of voluntary dissolution.
14 (b) Department [of Banking] review.--Upon receipt of the
15 certificate of election to dissolve, the [Department of Banking]
16 department shall conduct an examination or an investigation, or
17 take such other action as it deems necessary, to determine
18 whether to approve the plan of voluntary dissolution. If the
19 department determines that the plan of voluntary dissolution
20 does not prejudice the interests of members or creditors, it
21 shall endorse its approval on the certificate of election to
22 dissolve and send it to the Department of State for filing. If
23 the [Department of Banking] department disapproves the plan, it
24 shall return the certificate to the credit union stating in
25 detail its reasons for doing so.
26 (c) Effect of filing certificate.--Upon the filing by the
27 Department of State of the certificate of election to dissolve,
28 the Department of State shall furnish a copy thereof to the
29 [Department of Banking] department and the credit union. Upon
30 such filing, the credit union shall cease to transact its
20010S1222B1559 - 44 -
1 business, and the liquidating trustee or trustees shall commence
2 the liquidation of the credit union. The liquidating trustee or
3 trustees shall thereafter be authorized to carry out, in his own
4 name or in their own names as liquidating trustee or trustees of
5 the credit union, the powers granted to him or them by the plan
6 of voluntary dissolution and may sue and be sued for the purpose
7 of determining and enforcing the debts due the credit union and
8 its obligations.
9 * * *
10 § 1303. Dissolution proceedings.
11 (a) Collection and distribution of assets.--The liquidating
12 trustee or trustees shall proceed in the manner provided by the
13 [Department of Banking] department to gather the assets,
14 determine the liabilities and distribute the assets of the
15 credit union until its affairs are fully adjusted and wound up.
16 Under this section the department shall set forth the order of
17 the distribution of the assets. The provisions of this section
18 on distribution of assets apply whether the dissolution is
19 voluntary or involuntary.
20 * * *
21 (d) Transfer possession.--If the department takes possession
22 of the credit union under section 503(c) (relating to regulation
23 by the department) and appoints the National Credit Union
24 Administration to liquidate or otherwise resolve the credit
25 union, then Federal law shall apply to the credit union and
26 neither this section nor the remainder of this title shall be
27 applicable except as provided in Federal law.
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
20010S1222B1559 - 45 -
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 § 1306. Involuntary dissolution.
16 (a) Issuance of certificate of dissolution by department.--
17 In the event the department finds after issuing written notice
18 of a hearing and an opportunity to be heard to a credit union,
19 that the credit union has not exercised any of its powers or
20 opened for business with its proposed members within one year
21 after the date of its incorporation or such longer time as the
22 department may allow, then the department shall issue under its
23 seal a certificate of dissolution reciting the applicable facts
24 and stating that articles of incorporation have been forfeited
25 by reason of such facts and shall file the certificate of
26 dissolution with the Department of State.
27 (b) Effect of certificate of dissolution.--Upon filing of
28 the certificate of dissolution in the Department of State, all
29 rights of the credit union under its articles of incorporation
30 shall cease and its existence shall cease.
20010S1222B1559 - 46 -
1 § 1501. Authorization to do business.
2 (a) General rule.--A credit union organized in another state
3 may conduct business as [a] an out-of-State credit union in this
4 Commonwealth with the approval of the [Department of Banking]
5 department as long as a credit union chartered under the laws of
6 this Commonwealth is permitted to do business in the state in
7 which the credit union is organized.
8 * * *
9 § 1503. Supervision by [Department of Banking] department.
10 (a) General rule.--The [Department of Banking] department
11 may examine an out-of-State credit union:
12 (1) to the same extent that a Pennsylvania credit union
13 is examined by the regulatory agency with jurisdiction over
14 credit unions in the state in which the out-of-State credit
15 union is incorporated; or
16 (2) pursuant to an agreement between the department and
17 the regulatory agency with jurisdiction over credit unions in
18 the state in which the out-of-State credit union is
19 incorporated.
20 * * *
21 § 1504. Revocation of authorization to do business.
22 The [Department of Banking] department may revoke the
23 approval of an out-of-State credit union to conduct business as
24 a credit union in this Commonwealth if the department makes any
25 of the following findings:
26 (1) The out-of-State credit union no longer meets the
27 requirements of section 1501 (relating to authorization to do
28 business).
29 (2) The out-of-State credit union has violated
30 Pennsylvania statutes or regulations or orders of the
20010S1222B1559 - 47 -
1 department.
2 (3) The out-of-State credit union has engaged in a
3 pattern of unsafe or unsound credit union practices.
4 (4) Continued operation by the out-of-State credit union
5 is likely to have a substantially adverse impact on the
6 financial, economic or other interests of residents of this
7 Commonwealth served by the out-of-State credit union.
8 Section 2. This act shall take effect in 60 days.
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