act-1994-0-146•Pennsylvania Act 1994-146 — CREDIT UNIONS (17 PA.C.S.) - OMNIBUS AMENDMENTS
Pennsylvania Act 1994-146 — CREDIT UNIONS (17 PA.C.S.) - OMNIBUS AMENDMENTS
act-1994-0-1461994 Pa. Act 146Law
Act text
CREDIT UNIONS (17 PA.C.S.) - OMNIBUS AMENDMENTS
Act of Dec. 12, 1994, P.L. 1067, No. 146 Cl. 17
Session of 1994
No. 1994-146
HB 2563
AN ACT
Amending Title 17 (Credit Unions) of the Pennsylvania
Consolidated Statutes, further providing for definitions, for
bylaws, for powers, for regulation by Department of Banking,
for loans, for reserves, for loan procedures and for
conversion into Federal credit unions.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 103 of Title 17 of the Pennsylvania
Consolidated Statutes is amended by adding definitions to read:
§ 103. Definitions.
The following words and phrases when used in this title shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Retained earnings." Undivided profits.
* * *
"Shares." All savings including regular shares, share
drafts, share certificates and other savings.
"Total equity capital." Regular reserve and undivided
earnings.
"Total equity capital and reserves." Regular reserve,
undivided earnings and all reserve accounts, including the
allowance for loan loss reserve.
"Unimpaired capital." Total shares.
* * *
Section 2. Section 305 and 501(b)(7) and (10) of Title 17
are amended to read:
§ 305. Bylaws.
(a) General rule.--The original bylaws of a credit union
shall be adopted by the incorporators of the credit union and
copies [thereof] shall be transmitted to the Department of
Banking along with the articles of incorporation as provided in
this chapter.
(b) Amendments.--[Thereafter, bylaws] Bylaws may be amended
or repealed either by two-thirds of the members present and
voting or a majority of the board of directors at any regular,
annual or special meeting of the credit union[, or of the board
of directors, as the case may be, if notice thereof is given and
a quorum is established in accordance with the bylaws]. Bylaws
may alternatively be amended or repealed by members through mail
ballot if the bylaws provide for such a procedure and if two-
thirds of the responding member ballots favor the proposed
amendment or repeal.
(c) Restrictions on board of directors.--The board of
directors shall not amend any bylaws fixing their
qualifications, classification, term of office or compensation.
(d) Review by members.--Whenever the board of directors
amends the bylaws, written notice thereof shall be given to the
members prior to the next meeting of the members or within 90
days after such action by the board of directors, whichever is
sooner. Any amendment to the bylaws adopted by the board of
directors may be repealed or amended by the members at [a
meeting] an annual or special meeting or by a mail ballot vote
held at least ten days after the mailing of the notice
[thereof].
(e) Appeal procedure.--In the event that a bylaw amendment
approved by the board of directors is rejected or changed by the
members at an annual or special meeting, the board of directors
may resubmit the original amendment to a vote of the entire
membership through mail ballot procedures. The board of
directors may take such action if the resubmittal motion is
approved by a vote of at least a majority of the board of
directors.
§ 501. Powers.
* * *
(b) Special powers.--Except as set forth in subsection (c),
a credit union shall have the following special powers:
* * *
(7) To invest its funds in the following investments:
(i) Securities, obligations or other instruments of
or fully guaranteed as to principal and interest by the
United States or any agency thereof or in any trust
established for investing directly or collectively in the
same.
(ii) Bonds or other interest-bearing obligations of
the Commonwealth or any political subdivision thereof or
an authority which has been created as a body corporate
and politic under any law of this Commonwealth.
(iii) Shares of any savings and loan association or
credit union, organized under the laws of this
Commonwealth, or of any Federal savings and loan
association or Federal credit union, to the extent to
which the withdrawal or repurchase value of such shares
is insured by any agency of the United States or any
other insurer approved by the Department of Banking.
(iv) Bonds and notes of the Pennsylvania Housing
Agency created by the act of December 3, 1959 (P.L.1688,
No.621), known as the Housing Finance Agency Law.
(v) Capital stock, obligations or other securities
of any service corporation organized under the laws of
this Commonwealth or under the laws of any other state
and duly qualified to do business in this Commonwealth,
if the entire capital stock of such corporation is
available for purchase only by credit unions, organized
and existing under the laws of this Commonwealth and by
Federal credit unions or association of credit unions. A
complete description of the service corporation and its
activities must be furnished to the department and its
approval obtained by the credit union before investing in
such corporation. No credit union may make an investment
in a service corporation if its then aggregate
outstanding investments under this subparagraph would
exceed 1% of its assets.
(vi) Obligations issued by banks for cooperatives,
Federal land banks, Federal intermediate credit banks or
any corporation designated in 31 U.S.C. § 9101(2) and (3)
(relating to definitions) as a "[wholly owned] government
corporation."
(vii) Obligations, participations or other
instruments of or issued by, or fully guaranteed as to
principal and interest by, the Federal National Mortgage
Association or the Government National Mortgage
Association.
(viii) Mortgages, obligations or other securities
which are or ever have been sold by the Federal Home Loan
Mortgage Corporation pursuant to 12 U.S.C. § 1454
(relating to purchase and sale of mortgages; residential
mortgages; conventional mortgages; terms and conditions
of sale or other disposition; authority to enter into,
perform, and carry out transactions) or 1455 (relating to
obligations and securities of the corporation).
(ix) Obligations or other instruments or securities
of the Student Loan Marketing Association.
(x) Participation certificates evidencing beneficial
interests in obligations, or in the right to receive
interest and principal collections therefrom, which
obligations have been subjected by one or more government
agencies to a trust or trusts for which any executive
department, agency or instrumentality of the United
States (or the head thereof) has been named to act as
trustee.
(xi) Bankers' acceptances issued by State banks,
bank and trust companies and savings banks, and national
banking associations the accounts of which are Federally
insured.
Before making the investments described in subparagraphs (vi)
through (xi), a credit union shall [obtain the prior written
approval of the department] be in compliance with investment
standards established by the department.
* * *
(10) To hold, purchase, mortgage, alter, improve and
sell such real property, and furniture and fixtures to be
used therein, as the purposes of the credit union require and
which the credit union occupies or intends to occupy for the
transaction of its business or partly so occupies and partly
leases to others, except that, without the prior written
approval of the department, the cost, at the time of
acquisition, of such real property and furniture and fixtures
therein shall not exceed [in the aggregate 50% of the
unimpaired surplus and undivided earnings of the credit union
or 5% of its unimpaired capital up to $1,000,000, plus 3% of
its capital over $1,000,000, whichever is greater] 5% of
shares and retained earnings.
* * *
Section 3. Section 503(a) of Title 17 is amended and the
section is amended by adding a subsection to read:
§ 503. Regulation by Department of Banking.
(a) General rule.--Credit unions shall be under the
supervision of the Department of Banking. The department is
hereby authorized and empowered to issue general rules and
regulations and specific orders for the protection of members of
credit unions, for insuring the conduct of the business of
credit unions on a safe and sound basis and for the effective
enforcement of this title. Credit unions shall report to the
department as often as may be required by it and at least
annually on blanks supplied by the department for that purpose.
Supplementary reports may be required by the department from
time to time. Credit unions shall be examined as often as may be
required by the department and at least annually, and the
department may use such other methods of assuring itself of the
condition of the credit unions as it shall deem advisable. The
cost of all such examinations and inspections shall be paid by
the credit union. A credit union shall also pay annually its
proportionate share of the overhead expense of the department
determined by regulation of the department. The department shall
give written notice to each credit union of the costs of
examinations, investigations and the credit union's
proportionate share of the overhead expenses of the department.
The credit union shall pay the amount of such costs within 30
days of the notice. If payment is not made within 30 days of the
notice, the department may assess a penalty fee of $150 for that
30-day period and each successive 30-day period of delinquency.
For failure to file reports when due, unless excused for cause,
a credit union shall pay to the department [$5] $100 for each
day of its delinquency.
* * *
(e) Report.--A credit union shall furnish to the department
copies of the report of financial condition, known as the call
report, that the credit union is required to provide to the
National Credit Union Administration.
Section 4. Section 512 of Title 17 is amended to read:
§ 512. Loans.
Except as otherwise provided in this title, a credit union
may make loans to its members only. Loans must be made subject
to the conditions contained in the bylaws. A borrower may repay
his loan, in whole or in part, any day the office of the credit
union is open for business. No director, officer or member of
any committee may obtain or guarantee a loan from the credit
union in which he holds office on terms, rates or conditions
more favorable than those granted to any other member [or
endorse a loan granted by the credit union in which he holds
office].
Section 5. Section 513(a) of Title 17 is amended and the
section is amended by adding subsections to read:
§ 513. Reserves.
(a) General rule.--At the end of each accounting period, the
gross income shall be determined. From this amount, there shall
be set aside[, as a regular reserve against losses on loans and
against such other losses as may be specified by the Department
of Banking, sums in accordance with the following schedule] a
sum in accordance with the following schedule as a regular
reserve:
(1) A credit union in operation for more than four years
and having assets of $500,000 or more shall set aside:
(i) 10% of gross income until the regular reserve
shall equal 4% of the total of outstanding loans and risk
assets; then
(ii) 5% of gross income until the regular reserve
shall equal 6% of the total of outstanding loans and risk
assets.
(2) A credit union in operation less than four years or
having assets of less than $500,000 shall set aside:
(i) 10% of gross income until the regular reserve
shall equal 7.5% of the total of the outstanding loans
and risk assets; then
(ii) 5% of gross income until the regular reserve
shall equal 10% of the total of outstanding loans and
risk assets.
(3) Whenever the regular reserve falls below the stated
percentage of the total of outstanding loans and risk assets,
it shall be replenished by regular contributions in such
amounts as may be needed to maintain the stated reserve
goals.
(4) All entrance fees collected shall be set aside in
the regular reserve fund.
(5) The regular reserve fund thus established shall not
be loaned out to members and shall be deposited as authorized
in section 501(b)(6) (relating to powers) or invested in such
investments as are authorized by section 501(b)(7). The
regular reserve fund shall belong to the credit union and
shall not be distributed except in case of liquidation. [The
board of directors shall decide the loans which are to be
charged off against the regular reserve fund, except that the
Department of Banking may, at the time of examination of a
credit union, recommend for charge-off such loans which in
its opinion are unsound, which loans shall be charged against
the regular reserve fund within 60 days of the receipt of
such recommendation from the department. Any amount received
from the repayment of a loan after it has been charged off
against the regular reserve fund shall be credited back to
the fund.]
(6) The directors are authorized, after the required
reserve has been provided for, to make additional transfers
from undivided earnings to a contingent reserve for other
anticipated losses and expenses, but the members at the
annual meeting may retransfer any part or all of such
contingent reserve to the undivided earnings account.
* * *
(c) Allowance for loan loss.--Each credit union, in addition
to maintaining a regular reserve, shall establish an allowance
for loan loss. The allowance for loan loss reserve shall be
funded in the manner and used for the purposes as designated
from time to time by the Department of Banking. The board of
directors shall decide the loans which are to be charged off
against the allowance for loan loss, except that the Department
of Banking may, at the time of examination of a credit union,
recommend for charge-off such loans which in its opinion are
unsound, which loans shall be charged against the allowance for
loan loss account within 60 days of the receipt of such
recommendation from the department. Any amount received from the
repayment of a loan after it has been charged off against the
allowance for loan loss account shall be credited back to the
account.
(d) Allowance for Investment Loss.--Each credit union, in
addition to maintaining a regular reserve, shall establish an
Allowance for Investment Loss in compliance with Federal or
State laws or regulations as well as Generally Accepted
Accounting Principles. The Allowance for Investment Loss reserve
shall be funded in conformity with such laws, regulations or
Generally Accepted Accounting Principles.
Section 6. Sections 713(b) and (h) and 1101(a)(1) of Title
17 are amended to read:
§ 713. Loan procedures.
* * *
(b) Conflict of interest.--No credit committee member, loan
officer or director of a credit union shall vote on the granting
of any loan in which such official [or] has guaranteed the
repayment of the loan or where a member of his or her immediate
family has a beneficial interest.
* * *
(h) Restrictions.--No individual shall have authority to
disburse funds of the credit union for any loan which has been
approved by such individual in his or her capacity as loan
officer. [Not more than one member of the credit committee may
be appointed as loan officer.]
§ 1101. Conversion into Federal credit union.
(a) General rule.--A credit union may be converted into a
Federal credit union by complying with the following
requirements:
(1) The proposition for such conversion shall first be
approved by a majority vote of the directors of the credit
union who shall also set a date for the vote thereon by the
members. The vote of the members shall be conducted at a
meeting held on such date or by written ballot to be filed on
or before such date. Written notice of the proposition and of
the date set for the vote shall be given each member not more
than 30 nor less than ten days prior to such date. Approval
of the proposition shall be by the affirmative vote of a
majority of the members voting, in person or in writing,
either at a meeting of the credit union or through a mail
ballot vote. In order for a vote to be considered valid,
there must be a quorum established. In the case of a meeting
of the credit union, a quorum shall be established by the
presence of at least 10% of the credit union's membership. In
the case of a mail ballot vote, a quorum shall be established
by the written response of at least 10% of the credit union's
membership.
* * *
Section 7. This act shall take effect in 60 days.
APPROVED--The 12th day of December, A. D. 1994.
ROBERT P. CASEY
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