AN ACT CONCERNING CONNECTICUT CREDIT UNIONS.

This bill expands the authority of credit unions by allowing them to do the following:

1. engage in any activity that a federal or out-of-state credit union may do, unless the Department of Banking (DOB) commissioner timely disapproves of it;

2. make mortgage loans secured by a member's one-to-four family personal residence, even if it is not his or her primary residence;

3. invest up to 20%, rather than 5%, of a credit union's total asset value in real estate and improvements without needing commissioner approval; and

4. provide specific additional services such as wire transfer services, prepaid debit cards, and digital wallet services.

The bill decreases how often a credit union's governing board must approve and review its written policies that implement the credit union's powers, from at least annually to only when the policies are amended or as otherwise required by the state's credit union law. But it increases, to at least annually, the frequency of adopting specific written policies on making loans and investments.

The bill also allows credit union members to (1) receive electronic notice of a credit union's annual or special meeting and (2) vote electronically unless the credit union's bylaws prevent it (§ 3).

Lastly, it (1) modifies the subjects of an annual report the commissioner provides to the Banking Committee and (2) makes various technical and conforming changes.

*House Amendment “A” (1) modifies the contents of the commissioner's annual report to the Banking Committee; (2) allows, rather than requires, regulations to address consumer protection issues related to the expansion of credit union activities; (3) adds to the types of residential property that may secure a mortgage loan; (4) increases, from 10% to 20%, the threshold amount of investment in real estate and improvements requiring DOB approval; (5) adds the provisions on loan and investment policies; and (6) makes other minor and technical changes, including removing an incorrect reference to credit union “members.”

The bill generally allows credit unions to engage in activities that are available to federal or out-of-state credit unions under state or federal law, without the DOB commissioner's prior approval that current law requires.

Instead, under the bill, credit unions may engage in these activities if they give the commissioner prior written notice. Identical to the application requirements under current law, the notice must (1) describe the activity and its financial impact on the credit union, (2) cite the legal authority to engage in the activity, (3) describe any restrictions on the activity imposed by law, and (4) include any other information the commissioner may require.

Under the bill, the commissioner has 30 days after the credit union's notice is filed to disapprove of the activity.

The bill allows the commissioner to adopt associated regulations to address consumer protection related to these activities. Current law authorizes him to impose limitations or conditions on them.

The bill allows credit unions to make mortgage loans to members secured by any one-to-four family residence that the member uses as a personal residence. Current law limits credit union mortgage loans by requiring that they be secured by (1) a one-to-four family residence that is the member's primary residence or (2) other real estate if the total loan amount is not greater than $50,000.

Consequently, the bill expands credit union lending authority by allowing mortgage loans to be secured by such things as secondary homes or vacation residences.

The bill increases, from 5% to 20%, the total asset threshold above which a credit union must obtain DOB commissioner approval for investing in real estate and improvements (e.g., furniture, fixtures, equipment). Current law requires a credit union to have commissioner approval to make this type of investment with credit union funds if the investment amount exceeds 5% of the credit union's total assets.

The law specifies what services a credit union may provide. The bill allows them to provide these additional services:

1. wire transfer and Automated Clearing House (ACH) transfers,

2. prepaid debit cards,

3. payroll cards,

4. digital wallet services,

5. coin and currency services,

6. remote deposit capture services, and

7. electronic banking.

The law already allows credit unions to process and service loans, cash member checks and money orders, disburse share withdrawals and loan proceeds, provide money orders, conduct internal audits, and provide ATM services. They may also provide similar services to other state credit unions, federal credit unions, and out-of-state credit unions. The bill explicitly allows them to provide similar services to federally insured financial institutions (i.e., with federal deposit insurance).

A credit union's governing board's powers are set in law and the board is responsible for the credit union's general management (e.g., operations, funds, committee actions, and records). Among its responsibilities, a board must establish and adopt written policies to carry out its authority.

Under current law, these written policies must be reviewed and approved at least annually. The bill instead requires this only when they are amended or as otherwise required by the Connecticut Credit Union Act.

By law, state credit unions must adopt written policies governing the loans and any investments they make. The bill requires each credit union's governing board to adopt these policies on at least an annual basis.

Regarding credit union loans, the bill requires each state credit union to develop and implement internal controls that are reasonably designed to ensure compliance with the loan policy. Existing law provides that the loan policy must require written applications to extend credit and include, among other things, the categories and types of credit available and the process for making and approving loans. The DOB commissioner has the authority to review a loan policy and order revisions.

Under existing law, a credit union's investment policy must, among other things, set standards for making prudent investments. Credit union investments must be consistent with the investment policy. The policies and any investments credit unions make pursuant to those policies are subject to the DOB commissioner's supervision.

The bill requires the banking commissioner to report on his actions to let credit unions engage in (1) activities closely related to the business of credit unions and (2) the same activities as a federal or out-of-state credit union (see above). He must include this information in the annual report he submits to the Banking Committee under existing law.

The bill also (1) reinstates a requirement that the report include information on the commissioner's actions related to Connecticut-chartered banks engaging in closely related activities and (2) eliminates the requirement that it include information on the commissioner's actions related to banks acting as trustees or custodians for manufacturers establishing reinvestment accounts (PA 11-140 eliminated the former, and established the latter requirement).

Yea

Nay

(03/20/2018)