PRIOR PRINTER'S NOS. 1559, 1938 PRINTER'S NO. 2101
No. 1222 Session of 2001
INTRODUCED BY GREENLEAF, COSTA, MOWERY, SCHWARTZ, TARTAGLIONE,
MELLOW, BOSCOLA, EARLL, ERICKSON, KUKOVICH, LAVALLE, LEMMOND,
O'PAKE, STOUT, WAUGH, M. WHITE, THOMPSON, MURPHY AND WAGNER,
DECEMBER 3, 2001
AS AMENDED ON THIRD CONSIDERATION, JUNE 17, 2002
AN ACT
1 Amending Title 17 (Credit Unions) of the Pennsylvania
2 Consolidated Statutes, relating to credit unions; making
3 revisions, corrections and additions; providing for parity
4 with Federal credit unions and for involuntary dissolution;
5 and making editorial changes.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. As much of Title 17 of the Pennsylvania <--
9 Consolidated Statutes as is hereafter set forth is amended or
10 added to read:
11 SECTION 1. THE DEFINITIONS OF "RETAINED EARNINGS," "SERVICE <--
12 FACILITY," "TOTAL EQUITY CAPITAL AND RESERVES" AND "UNIMPAIRED
13 CAPITAL" IN SECTION 103 OF TITLE 17 OF THE PENNSYLVANIA
14 CONSOLIDATED STATUTES ARE AMENDED AND THE SECTION IS AMENDED BY
15 ADDING DEFINITIONS TO READ:
16 § 103. Definitions.
17 The following words and phrases when used in this title shall
18 have the meanings given to them in this section unless the
1 context clearly indicates otherwise:
2 * * *
3 "Community development credit union." A credit union which
4 is designated as a low-income credit union by the Department of
5 Banking.
6 "Corporate credit union." A credit union which is operated
7 primarily for the purpose of serving other credit unions, which <--
8 is designated by the National Credit Union Administration as a
9 corporate credit union, which is subject to the provisions of <--
10 sections 301(b) (relating to purposes) and 502 (relating to
11 powers of central or corporate credit unions) and which OF THIS <--
12 TITLE AND limits natural person members to the minimum number
13 required to charter and operate the credit union.
14 * * *
15 "Insolvent" or "Insolvency." The condition of a credit union
16 when total shares exceed the present cash value of assets after
17 providing for liabilities.
18 * * *
19 ["Retained earnings." [Undivided profits.] Regular reserves, <--
20 reserves for contingencies, reserves for losses, supplemental
21 reserves and undivided earnings.
22 "Secretary." The Secretary of Banking of the Commonwealth or
23 the secretary's designee.
24 "Service facility." A subsidiary office of the credit union
25 such as an automated teller machine, kiosk or other type of
26 facility as determined by the Department of Banking which is not
27 capable of offering the same or approximately the same level of
28 service that can be found at the principal office of the credit
29 union.
30 * * *
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1 ["Total equity capital and reserves." Regular [reserve] <--
2 reserves, undivided earnings [ and all reserve accounts, <--
3 including the allowance for loan loss reserve.], reserves for <--
4 contingencies, reserves for losses and supplemental reserves.
5 "Unimpaired capital." Total unencumbered shares.
6 * * *
7 SECTION 2. SECTIONS 104 HEADING AND (A) AND (B) AND 304(A), <--
8 (B) AND (C) OF TITLE 17 ARE AMENDED TO READ:
9 § 104. Prohibition on use of words "credit [union," etc.]
10 union."
11 (a) General rule.--Only a credit union subject to this
12 title, a Federal credit union or a corporation organized in
13 accordance with a state credit union statute may assume and use
14 the words "credit union" in its name or title or operate in the
15 manner of a credit union. Only a credit union which has received
16 a low-income designation by the department and the National
17 Credit Union Administration, or a Federal credit union which has
18 received a low-income designation from the National Credit Union
19 Administration, may assume and use the words "community
20 development credit union" or a similar designation in its name
21 or title or operate in the manner of a community development
22 credit union.
23 (b) Penalties.--Any person, other than a credit union
24 subject to this title, a Federal credit union, a corporation
25 organized in accordance with a state credit union statute or an
26 association of credit unions, who violates subsection (a) by
27 using a name or title containing the words "credit union" or any
28 other derivation thereof or so representing itself in its
29 advertising, or otherwise conducting business as a credit union
30 shall, for each offense, be subject to a penalty levied by the
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1 [Department of Banking] department which shall be not less than
2 $1,000 nor more than $10,000. The officers of a corporation
3 shall be liable for such penalty if the offense is committed by
4 a corporation. This section shall be enforced by the department.
5 * * *
6 § 304. Department of Banking consideration of articles.
7 (a) General rule.--The articles of incorporation and two
8 copies of the proposed bylaws for the general governance of the
9 credit union shall be presented to the [Department of Banking]
10 department, together with such reasonable fees as shall be
11 established by the department, including an application fee and
12 other fees for such examination and such investigation as it may
13 deem necessary to ascertain:
14 (1) Whether the character and general fitness of the
15 incorporators, directors and the treasurer named in the
16 articles of incorporation is satisfactory.
17 (2) Whether the character and number of the group
18 proposed to be served affords reasonable promise of
19 sufficient support for the enterprise so as to make the
20 establishment of the proposed credit union economically
21 advisable.
22 (3) Whether the incorporators, directors and group
23 proposed to be served have a common bond of association as
24 provided in section 701 (relating to membership).
25 (4) Whether the proposed credit union unduly encroaches
26 upon the field of membership of any other credit union.
27 (5) Whether the application is in proper form and within
28 the purpose of this title.
29 (6) Whether the savings of members paid for shares will
30 be insured by the National Credit Union Administration or
20010S1222B2101 - 4 -
1 other share insurance fund approved by the department.
2 Nonprofit corporations created by specific legislation of any
3 state to insure share accounts or depository accounts of
4 credit unions shall not be subject to regulation by the
5 Department of Insurance or to the laws of this Commonwealth
6 concerning insurance.
7 Within 60 days after receipt of the articles, the department
8 shall, upon the basis of the facts disclosed by the application
9 and its investigation, either approve or disapprove the
10 articles.
11 (b) Approval action.--If the department approves the
12 articles, it shall endorse its approval thereon and forward the
13 articles to the Department of State. The Department of State
14 shall, upon the receipt of the articles and the required filing
15 fee, file the same. Upon the filing of the article of
16 incorporation, the corporate existence of the credit union shall
17 begin. The articles of incorporation as filed in the Department
18 of State are conclusive evidence of the fact that the credit
19 union has been incorporated.
20 (c) Disapproval action.--If the [Department of Banking]
21 department disapproves the articles, it shall return them to the
22 incorporators, stating in detail its reasons for doing so.
23 * * *
24 SECTION 3. SECTION 305(A), (B) AND (D) OF TITLE 17 ARE <--
25 AMENDED AND THE SECTION IS AMENDED BY ADDING SUBSECTIONS TO
26 READ:
27 § 305. Bylaws.
28 (a) General rule.--The original bylaws of a credit union
29 shall be adopted by the incorporators of the credit union and
30 copies shall be transmitted to the [Department of Banking]
20010S1222B2101 - 5 -
1 department along with the articles of incorporation as provided
2 in this chapter.
3 (b) [Amendments.--] Board initiated bylaw amendments.--
4 (1) Bylaws may be amended or repealed [either by two-
5 thirds of the members present and voting or a majority of the
6 board of directors at any regular, annual or special meeting
7 of the credit union. Bylaws may alternatively be amended or
8 repealed by members through mail ballot if the bylaws provide
9 for such a procedure and if two-thirds of the responding
10 member ballots favor the proposed amendment or repeal.] by
11 the affirmative vote of a majority of directors at any
12 regular or special meeting of the board. Whenever the board
13 of directors amends the bylaws, written notice thereof shall
14 be given to the members prior to the next meeting of the
15 members or within 90 days after such action by the board of
16 directors, whichever is sooner.
17 (2) Any amendment to or repeal of the bylaws adopted by
18 the board of directors may be repealed or amended by a two-
19 thirds vote of the responding members. The member-initiated
20 repeal or amendment of a bylaw passed by the board of
21 directors may be conducted at an annual or special member
22 meeting or conducted by mail ballot, if the bylaws allow such
23 a procedure. The vote must be held at least ten days after
24 the mailing of the notice in paragraph (1).
25 (3) Notwithstanding paragraph (2), the members of a
26 credit union may amend the bylaws pursuant to procedures set
27 forth in subsections (d), (d.1) and (d.2), whichever
28 subsection is appropriate.
29 * * *
30 (d) [Review by members.--Whenever the board of directors
20010S1222B2101 - 6 -
1 amends the bylaws, written notice thereof shall be given to the
2 members prior to the next meeting of the members or within 90
3 days after such action by the board of directors, whichever is
4 sooner. Any amendment to the bylaws adopted by the board of
5 directors may be repealed or amended by the members at an annual
6 or special meeting or by a mail ballot vote held at least ten
7 days after the mailing of the notice.] Member-initiated bylaw
8 amendment or repeal for credit unions with more than 10,000
9 members.--
10 (1) Bylaws of a credit union with more than 10,000
11 members may be amended or repealed upon member-initiated
12 petition and the affirmative vote of two-thirds of the
13 members voting thereon by mail ballot.
14 (2) Written petition signed by 1% of all the members of
15 a credit union with more than 10,000 members shall be the
16 exclusive method by which such members may amend or repeal
17 the bylaws.
18 (3) Whenever the board of directors receives a member-
19 initiated petition to amend or repeal the bylaws, written
20 notice thereof shall be given to all members of the credit
21 union within 90 days and a mail ballot vote of the matter
22 shall be held during a period of at least ten days after the
23 mailing of the notice and ballot.
24 (d.1) Procedure.--
25 (1) To initiate the procedure to amend or repeal the
26 bylaws set forth in subsection (d), a member of a credit
27 union must obtain the petition form from the department. The
28 department shall date the petition form and file a copy of
29 the form.
30 (2) Upon the request of a member, the credit union shall
20010S1222B2101 - 7 -
1 provide the member with a list of all groups and their
2 business addresses that are included as members of the credit
3 union.
4 (3) The member seeking to amend or repeal the bylaws
5 shall have 180 days from the receipt of the petition form
6 from the department to circulate the petition and obtain the
7 requisite number of signatures from members of the credit
8 union. The petition shall be in a form provided by and
9 approved by the department and shall clearly identify the
10 bylaw to be amended or repealed and include the language of
11 the proposed bylaw.
12 (4) On or before 180 days from the date the petition
13 form was obtained from the department, the member seeking to
14 amend or repeal the bylaws must file the petition with the
15 department. The department shall indicate the date of filing
16 on the petition and file the petition in the records of the
17 department. The department shall send a copy of the petition
18 to the secretary of the credit union.
19 (5) The secretary of the credit union shall verify that
20 the signatures on the petition are the signatures of members
21 of the credit union and that the petition contains the
22 requisite number of signatures.
23 (6) The ballot may not be mailed if the credit union
24 determines that any of the following conditions have not been
25 met:
26 (i) signature on the petition does not belong to a <--
27 member of the credit union;
28 (ii) (I) the petition does not contain the requisite <--
29 number of signatures OF MEMBERS OF THE CREDIT UNION; or <--
30 (iii) (II) for any other specified reason. <--
20010S1222B2101 - 8 -
1 If the credit union determines that the ballot will not be
2 mailed, then the secretary of the credit union shall notify
3 in writing the member who initiated the petition drive within
4 ten days of the member's presentation RECEIPT of the petition <--
5 to BY the credit union. The notification shall inform the <--
6 member that the ballot will not be mailed and the reason. It
7 shall also inform the member of right to appeal to the
8 department.
9 (7) Any member seeking to contest a determination by the
10 credit union not to mail the notice and ballot provided for
11 in subsection (d) may file a complaint with the department
12 within 30 days of receiving written notice from the secretary
13 of the credit union's decision not to mail such notice and
14 ballot and the department shall adjudicate the matter.
15 (8) The department may provide any person or
16 governmental entity with a copy of the petition form as well
17 as any complaints filed with the department and other
18 documents related thereto TO THE BALLOT PROCEDURE. <--
19 (9) If the credit union mails the notice and ballot
20 provided for in subsection (d) or is ordered to do so by the
21 department, then the credit union shall send an official
22 notice to all members of the credit union, prepare and mail
23 the ballots, arrange for tallying of the votes and report the
24 results to all members in accordance with subsection (d).
25 (10) The credit union shall bear the reasonable expenses
26 associated with:
27 (i) Verifying that the signatures on the petition
28 are the signatures of members of the credit union and
29 that the petition contains the requisite number of
30 signatures.
20010S1222B2101 - 9 -
1 (ii) Notifying the members.
2 (iii) Preparing and mailing the ballots.
3 (iv) Tallying the vote and reporting the results.
4 (d.2) Member-initiated amendment or repeal of bylaws for
5 credit unions with 10,000 or fewer members.--A credit union with
6 10,000 or fewer members may amend or repeal the bylaws, in
7 accordance with existing bylaws of the credit union, as follows:
8 (1) by following the procedure outlined in subsections
9 (d) and (d.1); or
10 (2) by a two-thirds vote of the members present and
11 voting at a regular, special or annual meeting of the credit
12 union. If the vote is taken at a special meeting:
13 (i) Subsequent to the vote, if a majority of the
14 board of directors vote to resubmit the amendment or
15 repeal by mail ballot to all of the members, it shall be
16 resubmitted.
17 (ii) If the bylaws provide for a mail ballot
18 procedure, then it will require two-thirds of the
19 responding member ballots to sustain the original vote.
20 * * *
21 SECTION 4. SECTION 501(B) INTRODUCTORY PARAGRAPH, (4), <--
22 (7)(III) AND (10) AND (C) OF TITLE 17 ARE AMENDED, SUBSECTION
23 (B) IS AMENDED BY ADDING PARAGRAPHS AND THE SECTION IS AMENDED
24 BY ADDING SUBSECTIONS TO READ:
25 § 501. Powers.
26 * * *
27 (b) Special powers.--[Except as set forth in subsection (c),
28 a] A credit union shall have the following special powers:
29 * * *
30 (4) To make purchase money mortgage loans to members
20010S1222B2101 - 10 -
1 secured by mortgages which are first liens on improved real
2 property situated within the United States, the improvement
3 being an established dwelling house for not more than four
4 families which is owned by the member of the credit union
5 making the mortgage and occupied or to be occupied, in whole
6 or in part, by such member. Purchase money mortgages shall
7 not exceed 90% of the fair market value of the property,
8 except [that shares] as provided in paragraph (4.1).
9 (4.1) The department may grant prior approval of a
10 purchase money mortgage loan policy submitted to the
11 department by the credit union which complies with paragraph
12 (4) and, additionally, provides for private mortgage
13 insurance for each purchase money mortgage and directs that
14 purchase money mortgages shall be written according to
15 secondary market standards, in which case purchase money
16 mortgage loans shall not exceed 100% of the fair market value
17 of the property.
18 (4.2) Shares of the credit union owned by the mortgagor
19 may be assigned or pledged as additional collateral security
20 for the mortgage loan and, in such event, the mortgage loan
21 granted upon such property may be increased by the withdrawal
22 value of the additional pledged shares to an amount not to
23 exceed a maximum total mortgage loan of 100% of the fair
24 market value of such real property, and the credit union may
25 release this additional collateral whenever the mortgage loan
26 meets all of the requirements of this title and could be made
27 legally at the time of release without the requirement of
28 additional collateral. Purchase money mortgage loans shall be
29 amortized by approximately equal payments sufficient in
30 amount to pay all interest and effect full repayment of
20010S1222B2101 - 11 -
1 principal within a period not in excess of 30 years.
2 [Purchase] Except as otherwise provided in this section,
3 purchase money mortgage loans on any one property shall not
4 exceed 90% of the fair market value of the property[, except
5 as provided in this subsection,] or 5% of the [paid-in
6 capital] unimpaired capital of the credit union, whichever is
7 lesser. The aggregate total of mortgage loans shall not
8 exceed 50% of the [paid-in capital] unimpaired capital of the
9 credit union. Without regard to the limitations as to the
10 amount and term of a purchase money mortgage loan or the
11 aggregate amount of all mortgage loans set forth in this
12 paragraph, a credit union may grant any mortgage loan which
13 is insured or guaranteed, in whole or in part, by the United
14 States or any instrumentality thereof, or if there is a
15 commitment to so insure or guarantee.
16 * * *
17 (7) To invest its funds in the following investments:
18 * * *
19 (iii) Shares of any savings and loan association or
20 credit union, organized under the laws of this
21 Commonwealth, or of any Federal savings and loan
22 association or Federal credit union, to the extent to
23 which the withdrawal or repurchase value of such shares
24 is insured by any agency of the United States or any
25 other insurer approved by the [Department of Banking]
26 department.
27 * * *
28 (10) To hold, purchase, mortgage, alter, improve and
29 sell fixed assets, meaning such real property, and furniture
30 and fixtures to be used therein, as the purposes of the
20010S1222B2101 - 12 -
1 credit union require and which the credit union occupies or
2 intends to occupy for the transaction of its business or
3 partly so occupies and partly leases to others, except that,
4 without the prior written approval of the department, the
5 cost, at the time of acquisition, of such real property and
6 furniture and fixtures therein shall not exceed 5% of shares
7 and retained earnings.
8 * * *
9 [(c) Southern Africa investments.--No funds of a credit
10 union shall be invested in any stock or obligation of any
11 corporation doing business, either by itself or through any
12 subsidiary or affiliate, in the Republic of South Africa or
13 Namibia. This prohibition shall have prospective effect from
14 February 20, 1990, and shall not affect existing investments.]
15 (d) Special powers of community development credit unions.--
16 A community development credit union may do any or all of the <--
17 following:
18 (1) Accept payments on shares from any agency,
19 instrumentality, public corporation or other entity of the
20 United States or any state and nonmembers pursuant to THE <--
21 FEDERAL CREDIT UNION ACT (48 STAT. 1216, 12 U.S.C. § 1751 ET
22 SEQ.) AND OTHER APPLICABLE Federal law and requirements of
23 the National Credit Union Administration.
24 (2) Participate in the Community Development Revolving
25 Loan Program under the administration of the National Credit
26 Union Administration.
27 (3) Engage in any other programs or activities permitted
28 by Federal or State law applicable to a community development
29 credit union with the prior written approval of the
30 department upon filing of an application and submittal of a
20010S1222B2101 - 13 -
1 fee.
2 (e) Federal parity.--Notwithstanding any other provisions of
3 this title or any other law, in addition to any other powers as
4 authorized by this title or other law, a credit union shall have
5 the power:
6 (1) To engage in any activity permissible for a Federal
7 credit union as authorized by the Federal Credit Union Act
8 (48 Stat. 1216, 12 U.S.C. § 1751 et seq.), and the rules and
9 regulations of the National Credit Union Administration set <--
10 forth in 12 CFR Pts 700 (relating to definitions) through 795
11 (relating to OMB control numbers assigned pursuant to the
12 paperwork reduction act), subject to reasonable conditions,
13 limitations and restrictions as may be imposed by the
14 department, including, but not limited to, conditions,
15 limitations and restrictions based upon safety and soundness.
16 (2) To engage in the activity of creating, amending or
17 expanding its field of membership as authorized by section
18 109 of the Federal Credit Union Act (48 Stat. 1219, 12 U.S.C.
19 § 1759) subject to reasonable conditions, limitations and
20 restrictions as may be imposed by the department, including,
21 but not limited to, conditions, limitations and restrictions
22 based upon safety and soundness.
23 (3) To control, hold an interest in or participate in a
24 credit union service organization that engages in any
25 activity permissible for a Federal credit union to conduct
26 through a credit union service organization, provided that
27 any activity permissible for a credit union service
28 organization shall be subject to reasonable conditions,
29 limitations and restrictions as may be imposed by the
30 department, including, but not limited to, conditions,
20010S1222B2101 - 14 -
1 limitations and restrictions based upon safety and soundness.
2 (f) Notice to department.--Unless earlier PRIOR approval is <--
3 granted by the department, a credit union shall provide at least
4 30 days' prior written notice to the department before it
5 engages in an activity or acquires an interest permissible under
6 subsection (e). During the review period provided by this
7 subsection, the department may:
8 (1) request further information concerning any proposed
9 activity or interest;
10 (2) impose any conditions, limitations or restrictions
11 upon such interests or activities to the extent authorized by
12 subsection (e); or
13 (3) prohibit the credit union from engaging in any
14 activity or acquiring any interest, if to do so would have a
15 significant adverse impact upon the safety and soundness of
16 the credit union.
17 (g) Approval to be presumed.--Except as otherwise agreed to
18 by a credit union, the department shall be deemed to have
19 granted approval for a credit union to engage in an activity or
20 acquire an interest if within 30 days of receipt of written
21 notice from a credit union the department does not act.
22 SECTION 5. SECTIONS 503, 505(D), 511(A), 513 AND 514(A) OF <--
23 TITLE 17 ARE AMENDED TO READ:
24 § 503. Regulation by [Department of Banking] department.
25 (a) General rule.--Credit unions shall be under the
26 supervision of the [Department of Banking] department. The
27 department is hereby authorized and empowered to issue general
28 rules and regulations and specific orders for the protection of
29 members of credit unions, for insuring the conduct of the
30 business of credit unions on a safe and sound basis and for the
20010S1222B2101 - 15 -
1 effective enforcement of this title. Credit unions shall report
2 to the department as often as may be required by it and at least
3 annually on [blanks] FORMS supplied by the department for that <--
4 purpose. Supplementary reports may be required by the department
5 from time to time. Credit unions shall be examined as often as
6 may be required by the department and at least annually, and the
7 department may use such other methods of assuring itself of the
8 condition of the credit unions as it shall deem advisable. The
9 cost of all such examinations and inspections shall be paid by
10 the credit union. A credit union shall also pay annually its
11 proportionate share of the overhead expense of the department
12 determined by regulation of the department. The department shall
13 give written notice to each credit union of the costs of
14 examinations, investigations and the credit union's
15 proportionate share of the overhead expenses of the department.
16 The credit union shall pay the amount of such costs within 30
17 days of the notice. If payment is not made within 30 days of the
18 notice, the department may assess a penalty fee of $150 for that
19 30-day period and each successive 30-day period of delinquency.
20 For failure to file reports when due, unless excused for cause,
21 a credit union shall pay to the department $100 for each day of
22 its delinquency.
23 (a.1) Fines, removals, prohibition, suspension.--For any
24 violation of this title or regulation issued pursuant to this
25 title, or any final order issued by the department under this
26 title, or any unsafe or unsound practice or breach of fiduciary
27 duty involving a credit union, the department may take any one
28 or more of the following actions:
29 (1) The department may impose a civil penalty of up to
30 $10,000 for each violation of this title against a credit
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1 union or any director, officer, committee member, employee,
2 volunteer or agent of a credit union.
3 (2) The department may immediately suspend any director,
4 officer, committee member, employee, volunteer or agent of a
5 credit union from his or her position at a credit union, and
6 from any further participation in the conduct of the affairs
7 of the credit union, if in the opinion of the department the
8 credit union or its members have suffered or may suffer any
9 significant financial or other damage HARM OR OTHER <--
10 PREJUDICE. To suspend a person pursuant to this paragraph,
11 the department shall provide a notice containing a statement
12 of the facts constituting grounds for removal and shall
13 indicate a time and place for a hearing. The hearing shall be
14 fixed for a date between 30 days and 60 days from the date of
15 service of notice, unless an earlier or later date is set by
16 the department at the request of the person.
17 (3) The department may remove any director, officer,
18 committee member, employee, volunteer or agent of a credit
19 union from his or her position at a credit union and prohibit
20 him or her from participating in the conduct of the affairs
21 of the credit union in any manner for such time as the
22 department deems appropriate.
23 (4) The department may prohibit any director, officer,
24 committee member, employee, volunteer or agent of a credit
25 union UNDER THE JURISDICTION OF THE DEPARTMENT from working <--
26 in any capacity in any and all credit unions for such time as
27 the department determines to be appropriate.
28 (a.2) Hearings and subpoenas.--
29 (1) The department may conduct administrative hearings
30 on any matter pertaining to this title, subject to the
20010S1222B2101 - 17 -
1 provisions of 2 Pa.C.S. Ch. 5 Subch. A (relating to practice
2 and procedure of Commonwealth agencies) and Ch. 7 Subch. A
3 (relating to judicial review of Commonwealth agency action).
4 (2) In connection with any examination, investigation or
5 administrative hearing, the department may issue subpoenas
6 requiring the attendance of or the production of pertinent
7 instruments, documents, accounts, books and records by the
8 directors, officers, committee members, employees,
9 volunteers, agents or members, respectively, of any credit
10 union. In connection with any such examination, investigation
11 or administrative hearing, the department may also question
12 any such witness under oath or affirmation and examine any
13 such instrument, document, accounts, books and records, and
14 retain the records until the proceedings are concluded.
15 (3) The department may administer oaths and affirmations
16 to any person whose testimony is required at any
17 administrative hearing or at any other time authorized by
18 this title.
19 (4) Any privileges available to Federal financial
20 institution regulators under Federal statute, regulation or
21 common law shall be available to the department. The service
22 of a subpoena upon any employee of the department shall not
23 require such person to disclose any information. Such person
24 shall have all rights and privileges to object to production
25 of information.
26 (5) If any credit union or person fails to comply with
27 any subpoena, suspension notice or final order issued under
28 this title, then the department may enforce any of the
29 foregoing in Commonwealth Court. The Commonwealth Court shall
30 enter an order to enforce any such subpoena, suspension
20010S1222B2101 - 18 -
1 notice or final order.
2 [(b) Suspension of personnel.--If, in the opinion of the
3 department, a director, officer or committee member of a credit
4 union has committed a violation of a statute, regulation or
5 cease and desist order which has become final or has engaged in
6 an unsafe or unsound practice involving the credit union or has
7 breached a fiduciary duty and if the department determines that
8 the credit union has suffered or will suffer substantial
9 financial loss or other damage or that the interests of its
10 members could be seriously prejudiced by reason of the
11 violation, practice or breach, the department may suspend the
12 director, officer or committee member upon written notice,
13 pending a hearing to determine whether removal is required. The
14 notice shall contain a statement of the facts constituting
15 grounds for removal and shall indicate a time and place for a
16 hearing. The hearing shall be fixed for a date between 30 and 60
17 days from the date of service of notice, unless an earlier or
18 later date is set by the department at the request of the
19 director, officer or committee member.]
20 (c) Seizure of credit union.--
21 (1) If the department determines that a credit union is:
22 [(1)] (i) violating any of the provisions of this
23 title or any rule or regulation of the department issued
24 under [and within] the authority of this title or any
25 order issued by the department under the authority of
26 this title that has become final;
27 [(2)] (ii) conducting its business in an unsafe
28 manner;
29 [(3)] (iii) in an unsafe [and] or unsound condition
30 to transact its business; [or]
20010S1222B2101 - 19 -
1 (iv) significantly undercapitalized or critically
2 undercapitalized according to the prompt corrective
3 action standards of the National Credit Union
4 Administration consistent with the Federal Credit Union
5 Act (48 Stat. 1216, 12 U.S.C. § 1751 et seq.) and related
6 regulations; or
7 [(4)] (v) insolvent;
8 the department may [serve written notice of its intention to
9 take possession of the credit union. If the condition
10 continues for a period of 15 days after the giving of such
11 notice, the department may, in its discretion], in its
12 discretion, at such time set by the department, take
13 possession of the business and property of the credit union
14 and retain possession until such time as the condition
15 predicating such action is remedied or until the affairs of
16 the credit union are finally liquidated.
17 (2) The department shall take possession of a credit
18 union by serving a written notice of seizure on the credit
19 union's board of directors that contains a statement of the
20 facts constituting grounds for seizure of the credit union
21 and that contains notice of a hearing and an opportunity to
22 be heard. Upon taking possession of a credit union, the
23 department may liquidate the credit union or take any other <--
24 action the department deems appropriate regarding the credit
25 union, appoint the National Credit Union Administration to
26 liquidate the credit union or take any other action the <--
27 department deems appropriate regarding the credit union
28 pursuant to Federal law, or appoint such other agent or
29 employee of the department to liquidate the credit union or
30 take any other action the department deems appropriate
20010S1222B2101 - 20 -
1 regarding the credit union.
2 (3) The department may take similar action if any report
3 is not filed within a period of 15 days after it is due.
4 (4) Any person aggrieved by the action of the department
5 in taking possession of a credit union may appeal within ten
6 days of commencement of the receivership, whereupon the
7 matter shall be set down for hearing de novo [in accordance
8 with the procedures set forth at 10 Pa. Code Ch. 3 (relating
9 to hearings and conferences)].
10 (d) Exchange of reports of examination.--
11 (1) Whenever the shares of a credit union are insured by
12 the National Credit Union Share Insurance Fund or any other
13 share insurance fund approved by the department, the
14 department [is authorized to] may furnish to the
15 Administrator of the National Credit Union Administration or
16 to any other approved insurer any reports of examination made
17 by the department under this section[.] or any credit union
18 board resolution or enforcement document including any order
19 issued by the department regarding the particular credit
20 union.
21 (2) The department may furnish to any outside accountant
22 or trade organization contracted by the credit union or
23 authorized by the department to satisfy the audit
24 requirements in this title or meet specifications as defined
25 in any order any reports of examination made by the
26 department under this section or any credit union board
27 resolution or enforcement document including orders issued by
28 the department.
29 (3) If a Pennsylvania credit union conducts business in
30 another state through the establishment and operation of
20010S1222B2101 - 21 -
1 additional branch offices and service facilities under
2 section 904 (relating to place of business), the department
3 [is authorized to] may furnish to the financial regulatory
4 agency of that state reports of examination [made by the],
5 credit union board resolutions, or any enforcement document
6 including orders issued by the department [for] regarding the
7 particular credit union.
8 (e) Report.--A credit union shall furnish to the department
9 copies of the report of financial condition, known as the call
10 report, in the same form and with the same frequency that the
11 credit union is required to provide the report to the National
12 Credit Union Administration.
13 (f) Disclosure of information.--The department may not
14 disclose any credit union information in its custody that
15 relates to an individual unless that individual consents.
16 However, in its discretion, the department may disclose such
17 credit union information to any Federal, State or local
18 government, agency or instrumentality thereof for official <--
19 purposes.
20 § 505. Capital and shares.
21 * * *
22 (d) Share insurance required.--The shares representing the
23 savings of members shall be insured in such amounts as provided
24 by the National Credit Union Administration or other share
25 insurance fund approved by the [Department of Banking]
26 department to insure the shares of credit unions. A credit union
27 that has not obtained share account insurance from the National
28 Credit Union Administration or other share insurance fund
29 approved by the department may not, without the prior written
30 approval of the department, accept payments from its members for
20010S1222B2101 - 22 -
1 the purchase of shares.
2 § 511. Power to borrow.
3 (a) General rule.--A credit union may borrow from any source
4 a sum not exceeding 50% of its [capital, surplus and undivided]
5 unimpaired capital, regular reserve, contingency reserves and
6 retained earnings for the purpose of meeting the demand for
7 loans to members or for the purpose of meeting demands for share
8 withdrawals.
9 * * *
10 § 513. Reserves.
11 (a) General rule.--[At the end of each accounting period,
12 the gross income shall be determined. From this amount, there
13 shall be set aside a sum in accordance with the following
14 schedule as a regular reserve:
15 (1) A credit union in operation for more than four years
16 and having assets of $500,000 or more shall set aside:
17 (i) 10% of gross income until the regular reserve
18 shall equal 4% of the total of outstanding loans and risk
19 assets; then
20 (ii) 5% of gross income until the regular reserve
21 shall equal 6% of the total of outstanding loans and risk
22 assets.
23 (2) A credit union in operation less than four years or
24 having assets of less than $500,000 shall set aside:
25 (i) 10% of gross income until the regular reserve
26 shall equal 7.5% of the total of the outstanding loans
27 and risk assets; then
28 (ii) 5% of gross income until the regular reserve
29 shall equal 10% of the total of outstanding loans and
30 risk assets.
20010S1222B2101 - 23 -
1 (3) Whenever the regular reserve falls below the stated
2 percentage of the total of outstanding loans and risk assets,
3 it shall be replenished by regular contributions in such
4 amounts as may be needed to maintain the stated reserve
5 goals.
6 (4) All entrance fees collected shall be set aside in
7 the regular reserve fund.
8 (5) The regular reserve fund thus established shall not
9 be loaned out to members and shall be deposited as authorized
10 in section 501(b)(6) (relating to powers) or invested in such
11 investments as are authorized by section 501(b)(7). The
12 regular reserve fund shall belong to the credit union and
13 shall not be distributed except in case of liquidation.
14 (6) The directors are authorized, after the required
15 reserve has been provided for, to make additional transfers
16 from undivided earnings to a contingent reserve for other
17 anticipated losses and expenses, but the members at the
18 annual meeting may retransfer any part or all of such
19 contingent reserve to the undivided earnings account.] Each
20 credit union shall establish and maintain a regular reserve
21 account for the purpose of absorbing losses that exceed <--
22 undivided earnings and other appropriations of undivided
23 earnings to the same extent and in the same manner as
24 required of a Federal credit union.
25 (b) [Changes in reserve requirement.--The department may
26 decrease the reserve requirement set forth in subsection (a)
27 when in its opinion such a decrease is necessary or desirable.
28 The department may also require special reserves to protect the
29 interests of members either by regulation or for an individual
30 credit union in any special case.] Computation of reserve and
20010S1222B2101 - 24 -
1 net worth requirements.--For the purpose of establishing the
2 reserves required by this section and for the provision and
3 maintenance of adequate equity or net worth, a credit union
4 shall compute its reserve and net worth requirements consistent
5 with section 216 of the Federal Credit Union Act (48 Stat. 1216,
6 12 U.S.C. § 1790d and the National Credit Union Administration
7 rules and regulations set forth in 12 CFR Pt. 702 (relating to
8 prompt corrective action).
9 (c) Allowance for loan loss.--Each credit union, in addition
10 to maintaining a regular reserve, shall establish an allowance
11 for loan loss. The allowance for loan loss reserve shall be
12 funded in the manner and used for the purposes as designated
13 from time to time by the [Department of Banking] department. The
14 board of directors shall decide the loans which are to be
15 charged off against the allowance for loan loss, except that the
16 [Department of Banking] department may, at the time of
17 examination of a credit union, recommend for charge-off such
18 loans which in its opinion are unsound, which loans shall be
19 charged against the allowance for loan loss account within 60
20 days of the receipt of such recommendation from the department.
21 Any amount received from the repayment of a loan after it has
22 been charged off against the allowance for loan loss account
23 shall be credited back to the account.
24 [(d) Allowance for investment loss.--Each credit union, in
25 addition to maintaining a regular reserve, shall establish an
26 allowance for investment loss in compliance with Federal or
27 State laws or regulations as well as generally accepted
28 accounting principles. The allowance for investment loss reserve
29 shall be funded in conformity with such laws, regulations or
30 generally accepted accounting principles.]
20010S1222B2101 - 25 -
1 § 514. Dividends.
2 (a) General rule.--The board of directors of a credit union
3 or the members on recommendation of the board of directors,
4 whichever the bylaws provide, may declare dividends to be paid
5 on all shares and share certificates from the net earnings and
6 undivided earnings at such rates and intervals and for such
7 periods as the board of directors may authorize and after
8 provision for the required reserves. [Within the discretion of
9 the board of directors, payments on all shares which are made
10 within the first ten days of a month may be entitled to
11 dividends for the full month in which such payment is made.]
12 Dividends may be added to the credit of the members share
13 accounts, paid in cash, or partially credited to share accounts
14 and partially paid in cash, at the option of the board of
15 directors.
16 * * *
17 SECTION 6. SECTION 701(A) OF TITLE 17 IS AMENDED AND THE <--
18 SECTION IS AMENDED BY ADDING A SUBSECTION TO READ:
19 § 701. Membership.
20 (a) General rule.--Credit union organizations shall be
21 limited to groups having a potential membership of 500 or more
22 adult persons and having a common bond of association within a
23 well-defined community or rural district by reason of occupation
24 or of membership in a religious congregation or fraternal or
25 labor organization or residence within a well-defined community
26 or rural district. A credit union may also retain its original
27 field of membership and, additionally, include in its field of
28 membership other occupational groups, as well as like
29 associational groups having a common bond with the original
30 field of membership, with insufficient number of members to form
20010S1222B2101 - 26 -
1 or conduct the affairs of a separate credit union, if the
2 existing credit union obtains prior permission from the
3 [Department of Banking] department. The membership of a credit
4 union shall be limited to and consist of the incorporators of
5 the credit union and such other persons, having the common bond
6 of association, set forth in the articles of incorporation, as
7 have been duly admitted members, have paid the entrance fee as
8 provided in the bylaws and own and retain one or more shares.
9 Organizations composed principally of the same group as the
10 credit union membership may be members. Employes of credit
11 unions may be members of such credit unions.
12 * * *
13 (f) Effect of certain association formations.--Any
14 association formed primarily to obtain a State credit union
15 charter shall not be considered by the department to have a
16 sufficient common bond.
17 SECTION 7. SECTIONS 706(B), 707, 709, 711(A) AND 713(B) AND <--
18 (D) OF TITLE 17 ARE AMENDED TO READ:
19 § 706. Election of directors and credit and supervisory
20 committee members.
21 * * *
22 (b) Report to department.--A statement in writing of the
23 names and addresses of the members of the board and the
24 committees and the officers, as well as any interim
25 appointments, shall be filed with the [Department of Banking]
26 department within ten days after their election and
27 qualification or interim appointment. For failure to file such
28 statements when due, unless excused for cause, the credit union
29 shall pay to the department [$5] $100 for each day of its
30 delinquency.
20010S1222B2101 - 27 -
1 § 707. Duties of directors generally.
2 (a) General rule.--The directors of a credit union shall
3 have general management of the affairs of the credit union and
4 are specifically required:
5 (1) To act on applications for membership.
6 (2) To determine interest rates on loans.
7 (3) To fix the amount of the surety bond which shall be
8 required of all officers and employees handling money which
9 amount shall be not less than the minimum schedule
10 established by the [Department of Banking] department.
11 (4) To declare dividends or recommend dividends as
12 provided in the bylaws.
13 (5) To transmit or cause to be transmitted to the
14 members all proposed amendments to the bylaws.
15 (6) If the bylaws provide for appointed credit or
16 supervisory committees, to appoint individuals to serve on
17 the credit committee or the supervisory committee and to fill
18 vacancies in the board and in the credit committee until
19 successors are duly chosen and qualified.
20 (7) To determine the maximum individual share holdings
21 and, subject to the limitations contained in this title, the
22 maximum individual loan which can be made with or without
23 security.
24 (8) To have charge of investments, first mortgage loans
25 and loans to other credit unions and Federal credit unions
26 but not loans to members which are under the supervision of
27 the credit committee as otherwise provided in this title. The
28 board may, however, delegate to the credit committee the
29 authority to approve some or all first mortgage loans and to
30 an investment committee or qualified individual the authority
20010S1222B2101 - 28 -
1 to make all or some investments if the board first
2 establishes guidelines and standards for the approval and
3 making of such loans and investments in accordance with the
4 policies of the board of directors.
5 (9) To fix the amount of compensation of directors,
6 officers, committee members, [the loan officer] loan officers
7 and employees.
8 (10) To determine whether, to what extent and to what
9 class or classes of borrowers, if any, an interest refund is
10 to be made in any dividend period. Any such interest refund
11 shall be paid in proportion to the interest paid by each
12 borrower within any class during that dividend period. [No
13 interest refund may be authorized unless a share dividend at
14 the rate of not less than 5% has been declared from the
15 earnings of that dividend period.]
16 (11) To appoint alternate credit committee members as
17 needed to serve during incapacity or absence of the credit
18 committee members.
19 (b) Notice of interest refund to department.--Immediately
20 upon the board deciding to refund any interest pursuant to
21 subsection (a)(10), notice of such decision and a copy of any
22 board resolution and related documents shall forthwith be sent
23 to the department. The department shall, within 30 days after
24 receipt thereof, have the power to disapprove, for any
25 reasonable cause stated in writing, any such interest refund. If
26 the department does not disapprove the interest refund within 30
27 days, the interest refund shall become effective.
28 § 709. Compensation of directors and officers.
29 [A member of the board of directors and members of the credit
30 committee and the supervisory committee may be compensated if
20010S1222B2101 - 29 -
1 the credit union paid a dividend of not less than 3% from the
2 earnings of the last preceding year.] Members of the board of
3 directors, the credit committee and the supervisory committee
4 may be compensated if the credit union pays dividends to its
5 members commensurate with prevailing market rates during the
6 preceding year. A credit union shall be deemed to pay dividends
7 commensurate with prevailing market rates if declared dividend
8 rates on share accounts are competitive with dividend or
9 interest rates offered by other credit unions, Federal credit
10 unions, or other financial institutions authorized to engage in
11 the business of receiving money for deposit. The [Department of
12 Banking] department may prohibit or regulate the payment of
13 compensation of directors, committee members and officers,
14 exclusive of the treasurer, if it deems such compensation
15 excessive or if, in its opinion, the financial condition of the
16 credit union is not such as to warrant the payment of such
17 compensation.
18 § 711. Procedures for approving service by certain persons.
19 (a) General rule.--No person who has been convicted of a
20 misdemeanor or a felony involving dishonesty, breach of trust or
21 violation of this title or corresponding provisions of prior law
22 may serve as an officer, director, committee member [or],
23 employee, volunteer or agent of a credit union unless the
24 person[:
25 (1) in the case of an officer, director or committee
26 member seeking office,] has or obtains the unanimous approval
27 of the [nominating committee] board of directors of the
28 credit union.[;
29 (2) in the case of an employee, has the approval of the
30 officer in charge of operations;
20010S1222B2101 - 30 -
1 (3) in the case of an officer, including an officer in
2 charge of operations, director or committee member seeking
3 office, has the unanimous approval of the board of directors
4 of the credit union; or
5 (4) in the case of an employee, other than an officer in
6 charge of operations, has the approval of the board of
7 directors by a vote of at least two-thirds of the board of
8 directors.]
9 * * *
10 § 713. Loan procedures.
11 * * *
12 (b) Conflict of interest.--No credit committee member, loan
13 officer or director of a credit union shall vote on the granting
14 of any loan in which such official has guaranteed the repayment
15 of the loan or where a member of [his or her] the member's
16 immediate family has a beneficial interest.
17 * * *
18 (d) Approval by credit committee.--
19 (1) If the bylaws provide for a credit committee, at
20 least a majority of the members of the credit committee shall
21 pass on all loans[,] and no loan shall be approved unless it
22 is approved by a majority of the members of the credit
23 committee [present and voting, unless the credit committee
24 has appointed] at a credit committee meeting.
25 (2) Notwithstanding paragraph (1), the credit committee
26 may appoint one or more loan officers and [delegated]
27 delegate to such person or persons the power to approve
28 loans, share withdrawals of amounts previously pledged as
29 security for a loan, releases and substitutions of security,
30 within limits specified by the committee.
20010S1222B2101 - 31 -
1 (3) The appointment and delegation shall be approved by
2 a majority of the credit committee present and voting at a
3 credit committee meeting and shall be recorded in a written
4 resolution signed by the credit committee members who
5 approved the delegation or appointment. The written
6 resolution shall be forwarded to the board of directors prior
7 to the next board meeting.
8 (4) The credit committee shall meet as often as may be
9 necessary after due notice to each member. The credit
10 committee shall keep minutes of each meeting. The minutes
11 shall include a list of loans approved and disapproved by the
12 credit committee.
13 (5) The credit committee shall require any loan officers
14 it appoints to report regularly to the credit committee on
15 any loan approvals or other actions taken by the loan officer
16 in the authority delegated to the loan officer by the credit
17 committee.
18 * * *
19 SECTION 8. SECTION 714 HEADING AND (A)(1), (B) AND (C) OF <--
20 TITLE 17 ARE AMENDED AND THE SECTION IS AMENDED BY ADDING
21 SUBSECTIONS TO READ:
22 § 714. Annual [examination] audit.
23 (a) Supervisory committee.--If the bylaws of the credit
24 union provide for a supervisory committee, the duties of the
25 supervisory committee shall be as follows:
26 (1) To make at least an annual [examination] audit of
27 the affairs of the credit union. The committee shall submit a
28 report to the board of directors and to the members at the
29 next annual meeting of the credit union.
30 * * *
20010S1222B2101 - 32 -
1 (b) Default by supervisory committee.--Whenever the
2 supervisory committee fails to make the [examinations] audits or
3 reports as provided in subsection (a)(1), the board of directors
4 shall remove from office the members of the supervisory
5 committee and appoint a new committee to make such
6 [examinations] audits, or the board may employ the services of a
7 public accountant to make such [examinations] audits. The
8 charges for the services of such public accountants shall be
9 paid by the credit union. If the board of directors under such
10 circumstances fails or refuses to act, the [Department of
11 Banking] department may, in addition to its other powers, remove
12 the members of the supervisory committee and issue an order on
13 the board of directors requiring such [examinations] audits to
14 be made by a public accountant at the expense of the credit
15 union.
16 (c) [Examination] Audit by public accountant.--If the bylaws
17 do not provide for a supervisory committee, the board shall
18 employ the services of a public accountant to make
19 [examinations] audits under subsections (a) and (b). The charges
20 for the services of the public accountant shall be paid by the
21 credit union.
22 (d) Requirement for an outside audit.--
23 (1) A credit union shall obtain an outside, independent
24 audit by a certified public accountant or other approved
25 service for any fiscal year during which any one of the
26 following conditions exist:
27 (i) the supervisory committee of the credit union
28 has not conducted an annual supervisory committee audit;
29 (ii) the annual supervisory committee audit
30 conducted did not meet the audit requirements required by
20010S1222B2101 - 33 -
1 the department; or
2 (iii) the credit union has experienced serious and
3 persistent recordkeeping deficiencies as defined in
4 subsection (e).
5 (2) In the case of an audit required pursuant to
6 paragraph (1)(i) or (ii), the scope of the outside,
7 independent audit shall fully encompass the requirements set
8 forth in the department's audit guidelines. In the case of an
9 audit required pursuant to paragraph (1)(iii), the outside,
10 independent audit must be conducted by a certified public
11 accountant and must be an opinion audit as that term is
12 understood under generally accepted auditing standards.
13 (e) Definition.--As used in subsection (d)(1), "persistent
14 recordkeeping deficiencies" means serious recordkeeping problems
15 which continue to exist past a usual, expected or normal period
16 of time. Persistent recordkeeping deficiencies shall be
17 considered serious if the department has a reasonable doubt:
18 (1) That the financial condition of the credit union is
19 accurately and fairly presented in the credit union's
20 statement.
21 (2) That management practices and procedures of the
22 credit union are sufficient to safeguard members' assets.
23 SECTION 9. SECTIONS 903(A), 904, 1101(A), 1102(A), (B) AND <--
24 (D), 1103(B), 1105(B) AND (E), 1106, 1301 AND 1302(A)(4), (B)
25 AND (C) OF TITLE 17 ARE AMENDED TO READ:
26 § 903. Filing and review of articles of amendment.
27 (a) General rule.--Articles of amendment shall be filed with
28 the [Department of Banking] department. If the department finds
29 that the articles of amendment conform to law, it shall endorse
30 its approval thereon and forward the articles of amendment to
20010S1222B2101 - 34 -
1 the Department of State. Upon receipt of the articles of
2 amendment, the Department of State shall file the same.
3 * * *
4 § 904. Place of business.
5 (a) Change in principal place of business.--A credit union
6 may change its place of business upon the filing of a statement
7 of change of principal place of business with the Department of
8 State and the [Department of Banking] department.
9 (b) Branch offices and service facilities.--If a credit
10 union gives the [Department of Banking] department prior written
11 notification and, in the case of branch offices, receives prior
12 approval from the department, it may establish and maintain, at
13 locations other than its principal place of business, additional
14 branch offices and service facilities to furnish services to its
15 members.
16 (c) Discontinuance of branch offices or service
17 facilities.--If a credit union pursuant to a resolution of its
18 board of directors provides the department prior written
19 notification, the credit union may discontinue the operation of
20 and close branch offices or service facilities.
21 [(c)] (d) Cross reference.--See 15 Pa.C.S. § 134 (relating
22 to docketing statement).
23 § 1101. Conversion into Federal credit union.
24 (a) General rule.--A credit union may be converted into a
25 Federal credit union by complying with the following
26 requirements:
27 (1) The proposition for such conversion shall first be
28 approved by a majority vote of the directors of the credit
29 union who shall also set a date for the vote thereon by the
30 members. The vote of the members shall be conducted at a
20010S1222B2101 - 35 -
1 meeting held on such date, or by written ballot if the bylaws
2 so provide to be filed on or before such date. Written notice
3 of the proposition and of the date set for the vote shall be
4 given each member not more than 30 nor less than ten days
5 prior to such date. Approval of the proposition shall be by
6 the affirmative vote of a majority of the members voting, in
7 person or in writing, either at a meeting of the credit union
8 or through a mail ballot vote. In order for a vote to be
9 considered valid, there must be a quorum established. In the
10 case of a meeting of the credit union, a quorum shall be
11 established by the presence of at least 10% of the credit
12 union's membership. In the case of a mail ballot vote, a
13 quorum shall be established by the written response of at
14 least 10% of the credit union's membership.
15 (2) A statement of the result of the vote, certified by
16 an officer of the credit union, shall be filed with the
17 [Department of Banking] department within ten days after the
18 vote is taken.
19 (3) Promptly after the vote is taken and in no event
20 later than 90 days thereafter, if the proposition for
21 conversion was approved, the credit union shall take such
22 action as may be necessary under the applicable laws of the
23 United States to make it a Federal credit union, and, within
24 ten days after receipt of the Federal credit union charter,
25 it shall file a copy of the charter thus issued with the
26 Department of State which shall furnish a copy thereof to the
27 [Department of Banking] department. Upon such filing with the
28 Department of State, the credit union shall no longer be
29 subject to any of the provisions of this title. The successor
30 Federal credit union shall be vested with all of the assets
20010S1222B2101 - 36 -
1 and shall continue to be responsible for all of the
2 obligations of the credit union thus converted to the same
3 extent as though the conversion had not taken place.
4 * * *
5 § 1102. Conversion from Federal credit union.
6 (a) General rule.--A Federal credit union may be converted
7 into a credit union subject to the provisions of this title by:
8 (1) Complying with all Federal requirements requisite to
9 enabling it to convert to a credit union or to cease being a
10 Federal credit union.
11 (2) Filing with the [Department of Banking] department
12 proof of compliance with such Federal requirements in form
13 satisfactory to the department.
14 (3) Filing with the department, together with such
15 reasonable fees as shall be established by the department
16 including an application fee and fees for such examination
17 and such investigation as it may deem necessary, articles of
18 conversion which shall set forth:
19 (i) The proposed name of the converted credit union.
20 (ii) The exact location of the principal place of
21 business of the credit union into which the Federal
22 credit union plans to become converted.
23 (iii) The number, names and addresses of the persons
24 to be the first directors of the converted credit union.
25 (iv) All other statements required by this title to
26 be set forth in original articles of incorporation in the
27 case of the formation of a credit union in so far as such
28 information is applicable to a Federal credit union
29 proposing to become converted into a credit union.
30 (b) Department [of Banking] review.--Immediately upon the
20010S1222B2101 - 37 -
1 receipt of the articles of conversion, the department shall
2 conduct such examination as may be deemed necessary to ascertain
3 from the best sources of information at its command:
4 (1) Whether the name of the proposed credit union
5 conforms with the requirements of law for the name of a
6 credit union and whether it is the same as one already
7 adopted or reserved by another person or is so similar
8 thereto that it is likely to mislead the public.
9 (2) Whether the conversion is made for legitimate
10 purposes.
11 (3) Whether the interests of members and creditors are
12 adequately protected.
13 (4) Whether the proposed credit union meets all of the
14 requirements of this title and violates none of its
15 prohibitions applicable to a credit union incorporated under
16 this title.
17 (5) Whether the Federal credit union has complied with
18 the requirements of the laws of the United States as they
19 relate to the conversion of a Federal credit union into a
20 credit union.
21 Within 60 days after receipt of the articles of conversion, the
22 [Department of Banking] department shall, upon the basis of the
23 facts disclosed by its investigation, either approve or
24 disapprove such articles.
25 * * *
26 (d) Disapproval action.--If the [Department of Banking]
27 department disapproves the articles of conversion, it shall
28 return them to the Federal credit union desiring to become
29 converted into a credit union stating in detail its reasons for
30 so doing.
20010S1222B2101 - 38 -
1 * * *
2 § 1103. Merger and consolidation authorized.
3 * * *
4 (b) Approvals and conditions.--Before merging or
5 consolidating, the credit unions involved must obtain prior
6 approval from the [Department of Banking] department. In the
7 case of a merger or consolidation with a Federal credit union,
8 the merger or consolidation shall be made pursuant to Federal
9 law in addition to the provisions of this title. In the case of
10 a merger or consolidation with an out-of-State credit union, the
11 merger or consolidation shall be made pursuant to the credit
12 union law of the state of incorporation of the out-of-State
13 credit union or, if credit unions incorporated in different
14 states are involved, pursuant to the credit union laws of the
15 various states of incorporation of the out-of-State credit
16 unions in addition to the provisions of this title.
17 § 1105. Articles of merger or consolidation.
18 * * *
19 (b) Department [of Banking] review.--The articles of merger
20 or consolidation shall be filed with the [Department of Banking]
21 department which, immediately upon receipt thereof, shall
22 conduct such investigation as may be deemed necessary to
23 ascertain from the best sources at its command:
24 (1) Whether, if the articles are articles of
25 consolidation, the name of the proposed new credit union,
26 Federal credit union or out-of-State credit union conforms
27 with the requirements of law for the name of a credit union
28 and whether it is the same as one already adopted or reserved
29 by another corporation or person or is so similar thereto
30 that it is likely to mislead the public.
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1 (2) Whether, if the merger or consolidation includes one
2 or more Federal credit unions, all requirements of the laws
3 of the United States pertaining thereto have been complied
4 with.
5 (3) Whether the interests of members and creditors are
6 adequately protected.
7 (4) Whether the credit unions, including the surviving
8 or new credit union, have met all of the requirements of this
9 title and have violated none of its prohibitions applicable
10 to a credit union incorporated under this title.
11 (5) Whether, if the merger or consolidation includes an
12 out-of-State credit union, there is compliance with the
13 applicable requirements of the law of the state of
14 incorporation of the out-of-State credit union.
15 Within 60 days after receipt of the articles of merger or
16 consolidation, the [Department of Banking] department shall,
17 upon the basis of the facts disclosed by its investigation,
18 either approve or disapprove such articles.
19 * * *
20 * * * <--
21 (e) Disapproval action.--If the [Department of Banking]
22 department shall disapprove the articles, it shall return them
23 to the credit union, Federal credit union or out-of-State credit
24 union from which they were received, stating the reasons for
25 such disapproval.
26 * * *
27 § 1106. Supervisory mergers or consolidations by [Department of
28 Banking] department.
29 Notwithstanding any other provision of this title, the
30 [Department of Banking] department may require a merger or
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1 consolidation of a credit union which is insolvent or is in
2 danger of insolvency with any other credit union, Federal credit
3 union or out-of-State credit union or may authorize a credit
4 union to purchase any of the assets of, or assume any of the
5 liabilities and capital of, any other credit union, Federal
6 credit union or out-of-State credit union if the department is
7 satisfied that:
8 (1) an emergency requiring expeditious action exists
9 with respect to such a credit union;
10 (2) other alternatives are not reasonably available; and
11 (3) the public interest would best be served by approval
12 of such merger, consolidation, purchase or assumption.
13 § 1301. Dissolution authorized.
14 Any credit union may elect to dissolve voluntarily and wind
15 up its affairs in the manner provided in this chapter. However,
16 if it shall appear to the [Department of Banking] department,
17 upon an examination of the business, assets and affairs of the
18 credit union, that its assets will probably be insufficient to
19 pay in full its members and creditors, it shall take possession
20 of the business and property of the credit union and retain
21 possession until its affairs are finally liquidated.
22 § 1302. Approval of voluntary dissolution.
23 (a) General rule.--The procedure for voluntary dissolution
24 shall be as follows:
25 * * *
26 (4) A certificate of election to dissolve signed by a
27 duly authorized officer of the credit union shall be executed
28 and delivered to the [Department of Banking] department. The
29 certificate shall set forth:
30 (i) The name of the credit union.
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1 (ii) The exact location of its place of business.
2 (iii) The names and addresses of its officers and
3 directors.
4 (iv) The number of directors voting for, and the
5 number voting against, the proposed plan of voluntary
6 dissolution.
7 (v) The total number of members and the number of
8 members voting for, and the number voting against, the
9 proposed plan of voluntary dissolution.
10 (vi) The names and addresses of the proposed
11 liquidating trustees and the number of votes received by
12 every candidate for the position of liquidating trustee.
13 (vii) The amount of the bond required to be supplied
14 by each trustee.
15 (viii) A verified statement by each of the proposed
16 liquidating trustees stating that he is willing to serve
17 as liquidating trustee, subject to the provisions of this
18 chapter and to the terms of the proposed plan of
19 voluntary dissolution, that he will, so far as the duty
20 devolves upon him, diligently and honestly liquidate the
21 affairs of the credit union, and will not knowingly
22 violate or permit to be violated any of the provisions of
23 this chapter or of the proposed plan of voluntary
24 liquidation.
25 (ix) The proposed plan of voluntary dissolution.
26 (b) Department [of Banking] review.--Upon receipt of the
27 certificate of election to dissolve, the [Department of Banking]
28 department shall conduct an examination or an investigation, or
29 take such other action as it deems necessary, to determine
30 whether to approve the plan of voluntary dissolution. If the
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1 department determines that the plan of voluntary dissolution
2 does not prejudice the interests of members or creditors, it
3 shall endorse its approval on the certificate of election to
4 dissolve and send it to the Department of State for filing. If
5 the [Department of Banking] department disapproves the plan, it
6 shall return the certificate to the credit union stating in
7 detail its reasons for doing so.
8 (c) Effect of filing certificate.--Upon the filing by the
9 Department of State of the certificate of election to dissolve,
10 the Department of State shall furnish a copy thereof to the
11 [Department of Banking] department and the credit union. Upon
12 such filing, the credit union shall cease to transact its
13 business, and the liquidating trustee or trustees shall commence
14 the liquidation of the credit union. The liquidating trustee or
15 trustees shall thereafter be authorized to carry out, in his own
16 name or in their own names as liquidating trustee or trustees of
17 the credit union, the powers granted to him or them by the plan
18 of voluntary dissolution and may sue and be sued for the purpose
19 of determining and enforcing the debts due the credit union and
20 its obligations.
21 * * *
22 SECTION 10. SECTION 1303(A) OF TITLE 17 IS AMENDED AND THE <--
23 SECTION IS AMENDED BY ADDING A SUBSECTION TO READ:
24 § 1303. Dissolution proceedings.
25 (a) Collection and distribution of assets.--The liquidating
26 trustee or trustees shall proceed in the manner provided by the
27 [Department of Banking] department to gather the assets,
28 determine the liabilities and distribute the assets of the
29 credit union until its affairs are fully adjusted and wound up.
30 Under this section the department shall set forth the order of
20010S1222B2101 - 43 -
1 the distribution of the assets. The provisions of this section
2 on distribution of assets apply whether the dissolution is
3 voluntary or involuntary.
4 * * *
5 (d) Transfer possession.--If the department takes possession
6 of the credit union under section 503(c) (relating to regulation
7 by the department) and appoints the National Credit Union
8 Administration to liquidate the credit union or take other
9 action deemed appropriate regarding the credit union, then the
10 department shall be deemed to have surrendered jurisdiction of
11 the credit union and the department shall have no liability
12 related to such credit union.
13 SECTION 11. SECTIONS 1304 AND 1305(A) OF TITLE 17 ARE <--
14 AMENDED TO READ:
15 § 1304. Department [of Banking] supervision.
16 The [Department of Banking] department shall continue to
17 supervise the credit union, in the hands of the liquidating
18 trustee or trustees, until the liquidation is complete and the
19 affairs of the credit union are fully settled.
20 § 1305. Articles of dissolution.
21 (a) General rule.--When, in the opinion of the [Department
22 of Banking] department, the liquidation of a credit union is
23 complete and its affairs are fully settled, the [Department of
24 Banking] department shall execute and file in the Department of
25 State articles of dissolution, which shall set forth:
26 (1) The name of the credit union.
27 (2) The statute under which the credit union was
28 incorporated and the date of incorporation.
29 (3) A statement that the liquidation of the credit union
30 is complete and its affairs are fully settled.
20010S1222B2101 - 44 -
1 * * *
2 SECTION 12. TITLE 17 IS AMENDED BY ADDING A SECTION TO READ: <--
3 § 1306. Involuntary dissolution.
4 (a) Issuance of certificate of dissolution by department.--
5 In the event the department finds after issuing written notice
6 of a hearing and an opportunity to be heard to a credit union,
7 that the credit union has not exercised any of its powers or
8 opened for business with its proposed members within one year
9 after the date of its incorporation or such longer time as the
10 department may allow, then the department shall issue under its
11 seal a certificate of dissolution reciting the applicable facts
12 and stating that articles of incorporation have been forfeited
13 by reason of such facts and shall file the certificate of
14 dissolution with the Department of State.
15 (b) Effect of certificate of dissolution.--Upon filing of
16 the certificate of dissolution in the Department of State, all
17 rights of the credit union under its articles of incorporation
18 shall cease and its existence shall cease.
19 SECTION 13. SECTIONS 1501(A), 1503 HEADING AND (A) AND 1504 <--
20 OF TITLE 17 ARE AMENDED TO READ:
21 § 1501. Authorization to do business.
22 (a) General rule.--A credit union organized in another state
23 may conduct business as [a] an out-of-State credit union in this
24 Commonwealth with the approval of the [Department of Banking]
25 department as long as a credit union chartered under the laws of
26 this Commonwealth is permitted to do business in the state in
27 which the credit union is organized.
28 * * *
29 § 1503. Supervision by [Department of Banking] department.
30 (a) General rule.--The [Department of Banking] department
20010S1222B2101 - 45 -
1 may examine an out-of-State credit union:
2 (1) to the same extent that a Pennsylvania credit union
3 is examined by the regulatory agency with jurisdiction over
4 credit unions in the state in which the out-of-State credit
5 union is incorporated; or
6 (2) pursuant to an agreement between the department and
7 the regulatory agency with jurisdiction over credit unions in
8 the state in which the out-of-State credit union is
9 incorporated.
10 * * *
11 § 1504. Revocation of authorization to do business.
12 The [Department of Banking] department may revoke the
13 approval of an out-of-State credit union to conduct business as
14 a credit union in this Commonwealth if the department makes any
15 of the following findings:
16 (1) The out-of-State credit union no longer meets the
17 requirements of section 1501 (relating to authorization to do
18 business).
19 (2) The out-of-State credit union has violated
20 Pennsylvania statutes or regulations or orders of the
21 department.
22 (3) The out-of-State credit union has engaged in a
23 pattern of unsafe or unsound credit union practices.
24 (4) Continued operation by the out-of-State credit union
25 is likely to have a substantially adverse impact on the
26 financial, economic or other interests of residents of this
27 Commonwealth served by the out-of-State credit union.
28 Section 2 14. This act shall take effect in 60 days. <--
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