AB 2862: Credit unions: investments and exemptions.
- Session Year: 2017-2018
- House: Assembly
- Latest Version Date: 2018-09-05
(1)The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.
This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill would specify that if a credit union invests in a CDA that satisfies these conditions, then it is not restricted by other investment limitations on credit unions. The bill, among other conditions, would limit the book value of a credit unions investments in all CDAs to no more than 5% of the credit unions net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the accounts total return on assets over a 5-year period to qualified charities, as specified.
The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit unions obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
Existing law authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations. Existing law also permits a credit union to participate in a loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan.
This bill would instead authorize a credit union to purchase and sell loans made to its members from any source. The bill would also authorize a credit union to purchase a loan originated by another credit union, made to a member of the originating credit union, even though the member is not a member of the credit union purchasing the loan. The bill would also permit a credit union to purchase a loan from any source if the purchase will facilitate the purchasing credit unions packaging of a pool of loans to be sold or pledged on the secondary market.
Existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
This bill would eliminate those provisions and make related conforming changes.
To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.
(2)The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies, among others.
This bill would also exempt credit unions from that law.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(1)The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.
This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill would specify that if a credit union invests in a CDA that satisfies these conditions, then it is not restricted by other investment limitations on credit unions. The bill, among other conditions, would limit the book value of a credit unions investments in all CDAs to no more than 5% of the credit unions net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the accounts total return on assets over a 5-year period to qualified charities, as specified.
The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit unions obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
Existing law authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations. Existing law also permits a credit union to participate in a loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan.
This bill would instead authorize a credit union to purchase and sell loans made to its members from any source. The bill would also authorize a credit union to purchase a loan originated by another credit union, made to a member of the originating credit union, even though the member is not a member of the credit union purchasing the loan. The bill would also permit a credit union to purchase a loan from any source if the purchase will facilitate the purchasing credit unions packaging of a pool of loans to be sold or pledged on the secondary market.
Existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
This bill would eliminate those provisions and make related conforming changes.
To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.
(2)The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies, among others.
This bill would also exempt credit unions from that law.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(1)The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.
This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill would specify that if a credit union invests in a CDA that satisfies these conditions, then it is not restricted by other investment limitations on credit unions. The bill, among other conditions, would limit the book value of a credit unions investments in all CDAs to no more than 5% of the credit unions net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the accounts total return on assets over a 5-year period to qualified charities, as specified.
The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit unions obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
Existing law authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations. Existing law also permits a credit union to participate in a loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan.
This bill would instead authorize a credit union to purchase and sell loans made to its members from any source. The bill would also authorize a credit union to purchase a loan originated by another credit union, made to a member of the originating credit union, even though the member is not a member of the credit union purchasing the loan. The bill would also permit a credit union to purchase a loan from any source if the purchase will facilitate the purchasing credit unions packaging of a pool of loans to be sold or pledged on the secondary market.
Existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
This bill would eliminate those provisions and make related conforming changes.
To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.
(2)The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies, among others.
This bill would also exempt credit unions from that law.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(1)The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.
This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill, among other conditions, would limit the book value of a credit unions investments in all CDAs to no more than 5% of the credit unions net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the accounts total return on assets over a 5-year period to qualified charities, as specified.
The bill would also authorize a credit union to purchase, hold, sell, or pledge certain types of eligible obligations, as defined, student loans, and real estate-secured loans, subject to meeting various conditions, and would require the board of directors of a credit union to adopt a policy governing the credit unions purchase of eligible obligations of nonmembers.The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit unions obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
Existing law authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations. Existing law also permits a credit union to participate in a loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan.
This bill would instead authorize a credit union to purchase and sell loans made to its members from any source. The bill would also authorize a credit union to purchase a loan originated by another credit union, made to a member of the originating credit union, even though the member is not a member of the credit union purchasing the loan. The bill would also permit a credit union to purchase a loan from any source if the purchase will facilitate the purchasing credit unions packaging of a pool of loans to be sold or pledged on the secondary market.
Existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
This bill would eliminate those provisions and make related conforming changes.
To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.
(2)The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies, among others.
This bill would also exempt credit unions from that law.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(1)The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.
This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill, among other conditions, would limit the book value of a credit unions investments in all CDAs to no more than 5% of the credit unions net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the accounts total return on assets over a 5-year period to qualified charities, as specified.
The bill would also authorize a credit union to purchase, hold, sell, or pledge certain types of eligible obligations, as defined, student loans, and real estate-secured loans, subject to meeting various conditions, and would require the board of directors of a credit union to adopt a policy governing the credit unions purchase of eligible obligations of nonmembers.
The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit unions obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
Existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
This bill would eliminate those provisions and make related conforming changes.
To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.
(2)The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies, among others.
This bill would also exempt credit unions from that law.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The California Credit Union Law provides for the licensure and regulation of credit unions by the Commissioner of Business Oversight. This bill would rename the California Credit Union Law the California Credit Union Act.The California Credit Union Law provides for the licensure and regulation of credit unions by the Commissioner of Business Oversight.
This bill would rename the California Credit Union Law the California Credit Union Act.
The equity capital of the credit union shall consist of the credit unions regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the commissioner.
SEC. 2.Section 14456 of the Financial Code is amended to read:14456.Unless the bylaws expressly reserve any or all of the following duties to the members, the directors have all of the following special duties:
(a)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to: (1) the chairperson of a membership committee or to an executive committee; or (2) any officer, director, committee member, or employee, pursuant to a written membership plan adopted by the board of directors.
(b)To expel members for any of the following causes:
(1)Conviction of a criminal offense involving moral turpitude.
(2)Failure to carry out contracts, agreements, or obligations with the credit union.
(3)Refusal to comply with the provisions of this division or of the bylaws.
Any members who are expelled by the board of directors have the right to appeal therefrom to the members, in which event, after hearing, the order of suspension may be revoked by a two-thirds vote of the members present at a special meeting to consider the matter.
(c)To determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
(d)To fix the maximum number of shares which may be held by, and, in accordance with Section 15100, establish the maximum amount of obligations which may be entered into with, any one member.
(e)To declare dividends on shares in accordance with the credit unions policies and to determine the interest rate or rates which will be paid on certificates for funds.
(f)To amend the bylaws, except where membership approval is required.
(g)To fill vacancies in the credit committee, and to temporarily fill vacancies caused by the suspension of any or all members of the credit committee, pending a meeting of the members to determine whether to affirm the suspension and vacate the office, or to reinstate the member or members.
(h)To direct the deposit or investment of funds, except loans to members.
(i)To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
(j)To perform or authorize any action not inconsistent with law or regulation and not specifically reserved by the bylaws for the members, and to perform any other duties as the bylaws may prescribe.
SEC. 3.Section 14657 is added to the Financial Code, to read:14657.(a)A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities. If a credit union invests in a CDA that satisfies all of the conditions in subdivision (b), then it may do so free from any other investment limitations of this article.
(b)(1)The book value of a credit unions investments in all CDAs, in the aggregate, as carried on the credit unions statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit unions net worth at all times for the duration of the accounts, as measured every quarterly call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)The parties to the CDA, typically the funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit unions CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)Provide that the credit union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the accounts total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)For purposes of this section, the following definitions apply:
(1)Affiliate means an entity in which the credit union has any ownership interest directly or indirectly. Affiliate does not apply to ownership due to the funding of employee benefits.
(2)Charitable contributions and donations are gifts credit unions provide to assist qualified charities through contributions of staff, equipment, money, or other resources.
(3)Charitable donation account or CDA is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)Distribution in kind means the credit unions acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)Qualified charity means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)Registered investment adviser means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of 1940.
(7)Total return means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
SEC. 4.Section 14659 is added to the Financial Code, to read:14659.(a)A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit unions obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
SEC. 5.Section 14807 of the Financial Code is amended to read:14807.Any member may withdraw from membership in the credit union at any time. A withdrawing member may be required to give 60 days notice of intention to withdraw shares and 30 days notice of intention to withdraw certificates for funds except when a different period of notice is required by the commissioner for the withdrawal of shares or share certificates that may be established by the board of directors.
SEC. 6.Section 14862 of the Financial Code is repealed.SEC. 7.Section 14900 of the Financial Code is amended to read:14900.Dividends need not be paid on a share account having less than the minimum balance prescribed in the bylaws.
SEC. 8.Section 14959 of the Financial Code is amended to read:14959.(a)A credit union may do either or both of the following:
(1)Purchase, in whole or in part, from any source, loans made to its members.
(2)Sell, in whole or in part, to any source, loans made to its members.
(b)A credit union may purchase, in whole or in part, either or both of the following:
(1)A loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union purchasing the loan.
(2)A loan from any source, if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.
(c)A loan purchase that is authorized by this section shall not be an obligation with a nonmember within the meaning of Section 14750.
SEC. 9.Section 17006 of the Financial Code is amended to read:17006.(a)This division does not apply to:
(1)Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies.
(2)Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
(3)Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
(4)Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
(b)The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.
SEC. 10.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The equity capital of the credit union shall consist of the credit unions regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the commissioner.
SEC. 2.Section 14456 of the Financial Code is amended to read:14456.Unless the bylaws expressly reserve any or all of the following duties to the members, the directors have all of the following special duties:
(a)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to: (1) the chairperson of a membership committee or to an executive committee; or (2) any officer, director, committee member, or employee, pursuant to a written membership plan adopted by the board of directors.
(b)To expel members for any of the following causes:
(1)Conviction of a criminal offense involving moral turpitude.
(2)Failure to carry out contracts, agreements, or obligations with the credit union.
(3)Refusal to comply with the provisions of this division or of the bylaws.
Any members who are expelled by the board of directors have the right to appeal therefrom to the members, in which event, after hearing, the order of suspension may be revoked by a two-thirds vote of the members present at a special meeting to consider the matter.
(c)To determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
(d)To fix the maximum number of shares which may be held by, and, in accordance with Section 15100, establish the maximum amount of obligations which may be entered into with, any one member.
(e)To declare dividends on shares in accordance with the credit unions policies and to determine the interest rate or rates which will be paid on certificates for funds.
(f)To amend the bylaws, except where membership approval is required.
(g)To fill vacancies in the credit committee, and to temporarily fill vacancies caused by the suspension of any or all members of the credit committee, pending a meeting of the members to determine whether to affirm the suspension and vacate the office, or to reinstate the member or members.
(h)To direct the deposit or investment of funds, except loans to members.
(i)To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
(j)To perform or authorize any action not inconsistent with law or regulation and not specifically reserved by the bylaws for the members, and to perform any other duties as the bylaws may prescribe.
SEC. 3.Section 14657 is added to the Financial Code, to read:14657.(a)A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities. If a credit union invests in a CDA that satisfies all of the conditions in subdivision (b), then it may do so free from any other investment limitations of this article.
(b)(1)The book value of a credit unions investments in all CDAs, in the aggregate, as carried on the credit unions statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit unions net worth at all times for the duration of the accounts, as measured every quarterly call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)The parties to the CDA, typically the funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit unions CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)Provide that the credit union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the accounts total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)For purposes of this section, the following definitions apply:
(1)Affiliate means an entity in which the credit union has any ownership interest directly or indirectly. Affiliate does not apply to ownership due to the funding of employee benefits.
(2)Charitable contributions and donations are gifts credit unions provide to assist qualified charities through contributions of staff, equipment, money, or other resources.
(3)Charitable donation account or CDA is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)Distribution in kind means the credit unions acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)Qualified charity means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)Registered investment adviser means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of 1940.
(7)Total return means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
SEC. 4.Section 14659 is added to the Financial Code, to read:14659.(a)A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit unions obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
SEC. 5.Section 14807 of the Financial Code is amended to read:14807.Any member may withdraw from membership in the credit union at any time. A withdrawing member may be required to give 60 days notice of intention to withdraw shares and 30 days notice of intention to withdraw certificates for funds except when a different period of notice is required by the commissioner for the withdrawal of shares or share certificates that may be established by the board of directors.
SEC. 6.Section 14862 of the Financial Code is repealed.SEC. 7.Section 14900 of the Financial Code is amended to read:14900.Dividends need not be paid on a share account having less than the minimum balance prescribed in the bylaws.
SEC. 8.Section 14959 of the Financial Code is amended to read:14959.(a)A credit union may do either or both of the following:
(1)Purchase, in whole or in part, from any source, loans made to its members.
(2)Sell, in whole or in part, to any source, loans made to its members.
(b)A credit union may purchase, in whole or in part, either or both of the following:
(1)A loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union purchasing the loan.
(2)A loan from any source, if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.
(c)A loan purchase that is authorized by this section shall not be an obligation with a nonmember within the meaning of Section 14750.
SEC. 9.Section 17006 of the Financial Code is amended to read:17006.(a)This division does not apply to:
(1)Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies.
(2)Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
(3)Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
(4)Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
(b)The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.
SEC. 10.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The equity capital of the credit union shall consist of the credit unions regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the commissioner.
SEC. 2.Section 14456 of the Financial Code is amended to read:14456.Unless the bylaws expressly reserve any or all of the following duties to the members, the directors have all of the following special duties:
(a)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to: (1) the chairperson of a membership committee or to an executive committee; or (2) any officer, director, committee member, or employee, pursuant to a written membership plan adopted by the board of directors.
(b)To expel members for any of the following causes:
(1)Conviction of a criminal offense involving moral turpitude.
(2)Failure to carry out contracts, agreements, or obligations with the credit union.
(3)Refusal to comply with the provisions of this division or of the bylaws.
Any members who are expelled by the board of directors have the right to appeal therefrom to the members, in which event, after hearing, the order of suspension may be revoked by a two-thirds vote of the members present at a special meeting to consider the matter.
(c)To determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
(d)To fix the maximum number of shares which may be held by, and, in accordance with Section 15100, establish the maximum amount of obligations which may be entered into with, any one member.
(e)To declare dividends on shares in accordance with the credit unions policies and to determine the interest rate or rates which will be paid on certificates for funds.
(f)To amend the bylaws, except where membership approval is required.
(g)To fill vacancies in the credit committee, and to temporarily fill vacancies caused by the suspension of any or all members of the credit committee, pending a meeting of the members to determine whether to affirm the suspension and vacate the office, or to reinstate the member or members.
(h)To direct the deposit or investment of funds, except loans to members.
(i)To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
(j)To perform or authorize any action not inconsistent with law or regulation and not specifically reserved by the bylaws for the members, and to perform any other duties as the bylaws may prescribe.
SEC. 3.Section 14657 is added to the Financial Code, to read:14657.(a)A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities. If a credit union invests in a CDA that satisfies all of the conditions in subdivision (b), then it may do so free from any other investment limitations of this article.
(b)(1)The book value of a credit unions investments in all CDAs, in the aggregate, as carried on the credit unions statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit unions net worth at all times for the duration of the accounts, as measured every quarterly call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)The parties to the CDA, typically the funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit unions CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)Provide that the credit union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the accounts total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)For purposes of this section, the following definitions apply:
(1)Affiliate means an entity in which the credit union has any ownership interest directly or indirectly. Affiliate does not apply to ownership due to the funding of employee benefits.
(2)Charitable contributions and donations are gifts credit unions provide to assist qualified charities through contributions of staff, equipment, money, or other resources.
(3)Charitable donation account or CDA is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)Distribution in kind means the credit unions acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)Qualified charity means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)Registered investment adviser means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of 1940.
(7)Total return means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
SEC. 4.Section 14659 is added to the Financial Code, to read:14659.(a)A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit unions obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
SEC. 5.Section 14807 of the Financial Code is amended to read:14807.Any member may withdraw from membership in the credit union at any time. A withdrawing member may be required to give 60 days notice of intention to withdraw shares and 30 days notice of intention to withdraw certificates for funds except when a different period of notice is required by the commissioner for the withdrawal of shares or share certificates that may be established by the board of directors.
SEC. 6.Section 14862 of the Financial Code is repealed.SEC. 7.Section 14900 of the Financial Code is amended to read:14900.Dividends need not be paid on a share account having less than the minimum balance prescribed in the bylaws.
SEC. 8.Section 14959 of the Financial Code is amended to read:14959.(a)A credit union may do either or both of the following:
(1)Purchase, in whole or in part, from any source, loans made to its members.
(2)Sell, in whole or in part, to any source, loans made to its members.
(b)A credit union may purchase, in whole or in part, either or both of the following:
(1)A loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union purchasing the loan.
(2)A loan from any source, if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.
(c)A loan purchase that is authorized by this section shall not be an obligation with a nonmember within the meaning of Section 14750.
SEC. 9.Section 17006 of the Financial Code is amended to read:17006.(a)This division does not apply to:
(1)Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies.
(2)Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
(3)Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
(4)Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
(b)The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.
SEC. 10.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The equity capital of the credit union shall consist of the credit unions regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the commissioner.
SEC. 2.Section 14456 of the Financial Code is amended to read:14456.Unless the bylaws expressly reserve any or all of the following duties to the members, the directors have all of the following special duties:
(a)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to: (1) the chairperson of a membership committee or to an executive committee; or (2) any officer, director, committee member, or employee, pursuant to a written membership plan adopted by the board of directors.
(b)To expel members for any of the following causes:
(1)Conviction of a criminal offense involving moral turpitude.
(2)Failure to carry out contracts, agreements, or obligations with the credit union.
(3)Refusal to comply with the provisions of this division or of the bylaws.
Any members who are expelled by the board of directors have the right to appeal therefrom to the members, in which event, after hearing, the order of suspension may be revoked by a two-thirds vote of the members present at a special meeting to consider the matter.
(c)To determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
(d)To fix the maximum number of shares which may be held by, and, in accordance with Section 15100, establish the maximum amount of obligations which may be entered into with, any one member.
(e)To declare dividends on shares in accordance with the credit unions policies and to determine the interest rate or rates which will be paid on certificates for funds.
(f)To amend the bylaws, except where membership approval is required.
(g)To fill vacancies in the credit committee, and to temporarily fill vacancies caused by the suspension of any or all members of the credit committee, pending a meeting of the members to determine whether to affirm the suspension and vacate the office, or to reinstate the member or members.
(h)To direct the deposit or investment of funds, except loans to members.
(i)To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
(j)To perform or authorize any action not inconsistent with law or regulation and not specifically reserved by the bylaws for the members, and to perform any other duties as the bylaws may prescribe.
SEC. 3.Section 14657 is added to the Financial Code, to read:14657.(a)A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities.
(b)(1)The book value of a credit unions investments in all CDAs, in the aggregate, as carried on the credit unions statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit unions net worth at all times for the duration of the accounts, as measured every quarterly call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)The parties to the CDA, typically the funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit unions CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)Provide that the credit union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the accounts total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)For purposes of this section, the following definitions apply:
(1)Affiliate means an entity in which the credit union has any ownership interest directly or indirectly. Affiliate does not apply to ownership due to the funding of employee benefits.
(2)Charitable contributions and donations are gifts credit unions provide to assist qualified charities through contributions of staff, equipment, money, or other resources.
(3)Charitable donation account or CDA is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)Distribution in kind means the credit unions acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)Qualified charity means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)Registered investment adviser means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of 1940.
(7)Total return means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
SEC. 4.Section 14658 is added to the Financial Code, to read:14658.(a)(1)A credit union may purchase, in whole or in part, eligible obligations and, with regard to eligible obligations described in subparagraph (A) or (B), may hold, in whole or in part, within the limitations of the board of directors written purchase policies, any of the following:(A)Eligible obligations of its members, from any source, if those obligations: (i) are purchased pursuant to Section 14655; (ii) are loans the credit union is empowered to grant; or (iii) are refinanced with the consent of the borrowers, within 60 days after they are purchased, so that they are loans the credit union is empowered to grant.(B)Eligible obligations of a liquidating credit unions individual members, from the liquidating credit union or notes purchased pursuant to Section 14656.(C)Student loans, from any source, if the purchaser is granting student loans on an ongoing basis and if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.(D)Real estate-secured loans from any source, if the purchaser is granting real estate-secured loans consistent with applicable law and regulation on an ongoing basis and if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary mortgage market. A pool must include a substantial portion of the credit unions members loans and must be sold promptly.(2)A credit union that received a composite CAMEL rating of 1 or 2 for the last two full examinations and maintained a net worth classification of well capitalized for the six immediately preceding quarters or, if subject to a risk-based net worth (RBNW) requirement, has remained well capitalized for the six immediately preceding quarters after applying the applicable RBNW requirement, may purchase and hold the following obligations, provided that it would be empowered to grant them:(A)Eligible obligations without regard to whether they are obligations of the credit unions members, provided the obligations are purchased from a credit union and the obligations are either:(i)Loans the purchasing credit union is empowered to grant.(ii)Loans refinanced with the consent of the borrowers, within 60 days after those loans are purchased, if they are loans that the purchasing credit union is empowered to grant.(B)Eligible obligations of a liquidating credit union without regard to whether they are obligations of the liquidating credit unions members.(C)Student loans, provided that those loans are purchased from a credit union only.(D)Real estate-secured loans, provided that those loans are purchased from a credit union only.(3)A credit union may make purchases in accordance with this subdivision, provided:(A)The board of directors or investment committee approves the purchase.(B)A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the purchasers office.(4)The aggregate of the unpaid balance of eligible obligations purchased under paragraph (1) and subparagraph (B) of paragraph (2) shall not exceed 5 percent of the unimpaired capital and surplus of the purchaser. The following may be excluded in calculating this five-percent limitation:(A)Student loans purchased in accordance with subparagraph (C) of paragraph (2).(B)Real estate-secured loans purchased in accordance with subparagraph (D) of paragraph (2).(C)Eligible obligations purchased in accordance with subparagraph (A) of paragraph (1) that are refinanced by the purchaser so that the obligation is a loan the credit union is empowered to grant.(D)An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the credit union makes the final underwriting decision and the sales or lease contract is assigned to the credit union very soon after it is signed by the member and the dealer or the leasing company.(b)A credit union may sell, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with subparagraph (B) of paragraph (1) of subdivision (a), student loans purchased in accordance with subparagraph (C) of paragraph (1) of subdivision (a), and real estate loans purchased in accordance with subparagraph (D) of paragraph (1) of subdivision (a), within the limitations of the board of directors written sale policies, provided both:(1)The board of directors or investment committee approves the sale.(2)A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the sellers office.(c)(1)A credit union may pledge, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with subparagraph (B) of paragraph (1) of subdivision (a), student loans purchased in accordance with subparagraph (C) of paragraph (1) of subdivision (a), and real estate loans purchased in accordance with subparagraph (D) of paragraph (1) of subdivision (a), within the limitations of the board of directors written pledge policies, subject to all of the following conditions:(A)The board of directors or investment committee approves the pledge.(B)Copies of the original loan documents are retained.(C)A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations.(2)The pledge agreement shall identify the eligible obligations covered by the agreement.(d)A credit union may agree to service any eligible obligation it purchases or sells in whole or in part.(e)For purposes of this section:(1)Eligible obligation means a loan or group of loans.(2)Student loan means a loan granted to finance the borrowers attendance at an institution of higher education or at a vocational school, which is secured by and on which payment of the outstanding principal and interest has been deferred in accordance with the insurance or guarantee of the federal government, of a state government, or any agency of either.SEC. 5.SEC. 4.Section 14659 is added to the Financial Code, to read:14659.(a)A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit unions obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
SEC. 6.SEC. 5.Section 14807 of the Financial Code is amended to read:14807.Any member may withdraw from membership in the credit union at any time. A withdrawing member may be required to give 60 days notice of intention to withdraw shares and 30 days notice of intention to withdraw certificates for funds except when a different period of notice is required by the commissioner for the withdrawal of shares or share certificates that may be established by the board of directors.
SEC. 7.SEC. 6.Section 14862 of the Financial Code is repealed.SEC. 8.SEC. 7.Section 14900 of the Financial Code is amended to read:14900.Dividends need not be paid on a share account having less than the minimum balance prescribed in the bylaws.
SEC. 9.Section 14950 of the Financial Code is amended to read:14950.(a)Every credit union may enter into obligations with its members upon the approval of the credit committee or, in the alternative, the credit manager, subject to the terms and conditions established by the board of directors pursuant to Section 15100.(b)(1)The board of directors of a credit union shall adopt a policy governing the acceptance by the credit union of notes receivable from nonmembers as consideration for the sale of assets owned by the credit union through bona fide transactions.(2)No credit union may accept notes receivable from nonmembers as consideration for the sale of assets owned by the credit union except in accordance with a policy adopted by the board of directors pursuant to paragraph (1).(3)Transactions subject to this subdivision shall not be deemed to be loans to nonmembers for purposes of Section 14750.(c)(1)The board of directors of a credit union shall adopt a policy governing the purchase by the credit union of eligible obligations of nonmembers, as defined in Section 14658, and subject to the provisions of that section.(2)A credit union shall not purchase eligible obligations of nonmembers, except in accordance with a policy adopted by the board of directors pursuant to paragraph (1).(3)Transactions subject to this subdivision shall not be deemed to be loans to nonmembers for purposes of Section 14750.(d)Notwithstanding subdivision (a), a credit union may permit a nonmember to participate in an obligation or extension of credit to a member as a joint applicant, co-obligor, coborrower, surety, or guarantor. An obligation or extension of credit made pursuant to this subdivision shall not be deemed a violation of subdivision (b) of Section 14800. Except as otherwise permitted by statute or regulation, the credit union shall not extend any other benefit or service of the credit union to the nonmember solely as a result of participation as a joint applicant, co-obligor, coborrower, surety, or guarantor unless the nonmember is thereafter admitted to membership.SEC. 8.Section 14959 of the Financial Code is amended to read:14959.(a)A credit union may participate in loans made to its members jointly with other credit unions, corporations or financial organizations. do either or both of the following:
(1)Purchase, in whole or in part, from any source, loans made to its members.
(2)Sell, in whole or in part, to any source, loans made to its members.
(b)A credit union may participate in a loan originated by another credit union which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan. A loan participation that is authorized by this subdivision shall not be deemed to be an obligation or a participation in an obligation with a nonmember within the meaning of Section 14750. purchase, in whole or in part, either or both of the following:
(1)A loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union purchasing the loan.
(2)A loan from any source, if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.
(c)A loan purchase that is authorized by this section shall not be an obligation with a nonmember within the meaning of Section 14750.
SEC. 10.SEC. 9.Section 17006 of the Financial Code is amended to read:17006.(a)This division does not apply to:
(1)Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies.
(2)Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
(3)Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
(4)Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
(b)The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.
SEC. 11.SEC. 10.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The equity capital of the credit union shall consist of the credit unions regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the commissioner.
SEC. 2.Section 14456 of the Financial Code is amended to read:14456.Unless the bylaws expressly reserve any or all of the following duties to the members, the directors have all of the following special duties:
(a)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to: (1) the chairperson of a membership committee or to an executive committee; or (2) any officer, director, committee member, or employee, pursuant to a written membership plan adopted by the board of directors.
(b)To expel members for any of the following causes:
(1)Conviction of a criminal offense involving moral turpitude.
(2)Failure to carry out contracts, agreements, or obligations with the credit union.
(3)Refusal to comply with the provisions of this division or of the bylaws.
Any members who are expelled by the board of directors have the right to appeal therefrom to the members, in which event, after hearing, the order of suspension may be revoked by a two-thirds vote of the members present at a special meeting to consider the matter.
(c)To determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
(d)To fix the maximum number of shares which may be held by, and, in accordance with Section 15100, establish the maximum amount of obligations which may be entered into with, any one member.
(e)To declare dividends on shares in accordance with the credit unions written capital structure policy policies and to determine the interest rate or rates which will be paid on certificates for funds.
(f)To amend the bylaws, except where membership approval is required.
(g)To fill vacancies in the credit committee, and to temporarily fill vacancies caused by the suspension of any or all members of the credit committee, pending a meeting of the members to determine whether to affirm the suspension and vacate the office, or to reinstate the member or members.
(h)To direct the deposit or investment of funds, except loans to members.
(i)To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
(j)To perform or authorize any action not inconsistent with law or regulation and not specifically reserved by the bylaws for the members, and to perform any other duties as the bylaws may prescribe.
SEC. 3.Section 14657 is added to the Financial Code, to read:14657.(a)A credit union may invest in charitable donation accounts, or CDAs, in accordance with this section as a means of providing charitable contributions and donations to qualified charities.
(b)(1)The book value of a credit unions investments in all CDAs, in the aggregate, as carried on the credit unions statement of financial condition prepared in accordance with generally accepted accounting principles, shall be limited to no more than 5 percent of the credit unions net worth at all times for the duration of the accounts, as measured every quarterly call report cycle. A credit union shall bring its aggregate accounts into compliance with the maximum aggregate funding limit within 30 days of any breach of this limit.
(2)The assets of a CDA shall be held in a segregated custodial account or special purpose entity and shall be specifically identified as a CDA.
(3)If a credit union chooses to establish a CDA using a trust vehicle, the trustee shall be regulated by a federal regulatory agency, or a state financial regulatory agency. A regulated trustee or other person or entity that is authorized to make investment decisions for a CDA (manager), other than the credit union itself, shall be either: (A) a registered investment adviser; or (B) regulated by a federal regulatory agency or a state financial regulatory agency.
(4)The parties to the CDA, typically the funding credit union and trustee or other manager of the account, shall document the terms and conditions controlling the account in a written agreement. The terms of the agreement shall be consistent with this section. The board of directors shall adopt written policies governing the creation, funding, and management of a CDA that are consistent with this section, shall review the policies annually, and may amend the policies from time to time. A credit unions CDA agreement and policies, at a minimum, shall comply with all of the following:
(A)Provide that the CDA shall make charitable contributions and donations only to qualified charities.
(B)Document the investment strategies and risk tolerances the CDA trustee or other manager is required to follow in administering the account.
(C)Provide that the credit union shall account for all aspects of the CDA, including, but not limited to, distributions to charities and liquidation of the account, in accordance with generally accepted accounting principles.
(D)Indicate the frequency with which the trustee or manager of the CDA shall make distributions to qualified charities, as provided in paragraph (5).
(5)A credit union shall distribute to one or more qualified charities, at least once every five years, and upon termination of a CDA, regardless of the length of its term, a minimum of 51 percent of the accounts total return on assets over the period of up to five years. Other than upon termination, the credit union may choose how frequently CDA distributions to charity shall be made during each period of up to five years. The credit union may choose to make periodic distributions over a period of up to five years, or only a single distribution as required at the end of that period. A credit union may choose to donate in excess of the minimum distribution frequency and amount.
(6)Upon termination of the CDA, the credit union may receive a distribution of the remaining account assets in cash or a distribution in kind of the remaining account assets, but only if those assets are permissible investments for credit unions.
(c)For purposes of this section, the following definitions apply:
(1)Affiliate means an entity in which the credit union has any ownership interest directly or indirectly. Affiliate does not apply to ownership due to the funding of employee benefits.
(2)Charitable contributions and donations are gifts credit unions provide to assist qualified charities through contributions of staff, equipment, money, or other resources.
(3)Charitable donation account or CDA is a hybrid charitable and investment vehicle that satisfies the conditions set forth in subdivision (b).
(4)Distribution in kind means the credit unions acceptance of remaining CDA assets, upon termination of the account, in their original form instead of in cash resulting from the liquidation of the assets.
(5)Qualified charity means a charitable organization or other nonprofit entity recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code.
(6)Registered investment adviser means an investment adviser registered with the Securities Exchange Commission pursuant to the Investment Advisers Act of 1940.
(7)Total return means the actual rate of return on all investments in a CDA over a given period of up to five years, including realized interest, capital gains, dividends, and distributions, but exclusive of account fees and expenses provided they were not paid to the credit union that established the CDA or to any of its affiliates.
SEC. 4.Section 14658 is added to the Financial Code, to read:14658.(a)(1)A credit union may purchase, in whole or in part, eligible obligations and, with regard to eligible obligations described in subparagraph (A) or (B), may hold, in whole or in part, within the limitations of the board of directors written purchase policies, any of the following:
(A)Eligible obligations of its members, from any source, if those obligations: (i) are purchased pursuant to Section 14655; (ii) are loans the credit union is empowered to grant; or (iii) are refinanced with the consent of the borrowers, within 60 days after they are purchased, so that they are loans the credit union is empowered to grant.
(B)Eligible obligations of a liquidating credit unions individual members, from the liquidating credit union or notes purchased pursuant to Section 14656.
(C)Student loans, from any source, if the purchaser is granting student loans on an ongoing basis and if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary market.
(D)Real estate-secured loans from any source, if the purchaser is granting real estate-secured loans consistent with applicable law and regulation on an ongoing basis and if the purchase will facilitate the purchasing credit unions packaging of a pool of those loans to be sold or pledged on the secondary mortgage market. A pool must include a substantial portion of the credit unions members loans and must be sold promptly.
(2)A credit union that received a composite CAMEL rating of 1 or 2 for the last two full examinations and maintained a net worth classification of well capitalized for the six immediately preceding quarters or, if subject to a risk-based net worth (RBNW) requirement, has remained well capitalized for the six immediately preceding quarters after applying the applicable RBNW requirement, may purchase and hold the following obligations, provided that it would be empowered to grant them:
(A)Eligible obligations without regard to whether they are obligations of the credit unions members, provided the obligations are purchased from a credit union and the obligations are either:
(i)Loans the purchasing credit union is empowered to grant.
(ii)Loans refinanced with the consent of the borrowers, within 60 days after those loans are purchased, if they are loans that the purchasing credit union is empowered to grant.
(B)Eligible obligations of a liquidating credit union without regard to whether they are obligations of the liquidating credit unions members.
(C)Student loans, provided that those loans are purchased from a credit union only.
(D)Real estate-secured loans, provided that those loans are purchased from a credit union only.
(3)A credit union may make purchases in accordance with this subdivision, provided:
(A)The board of directors or investment committee approves the purchase.
(B)A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the purchasers office.
(4)The aggregate of the unpaid balance of eligible obligations purchased under paragraph (1) and subparagraph (B) of paragraph (2) shall not exceed 5 percent of the unimpaired capital and surplus of the purchaser. The following may be excluded in calculating this five-percent limitation:
(A)Student loans purchased in accordance with subparagraph (C) of paragraph (2).
(B)Real estate-secured loans purchased in accordance with subparagraph (D) of paragraph (2).
(C)Eligible obligations purchased in accordance with subparagraph (A) of paragraph (1) that are refinanced by the purchaser so that the obligation is a loan the credit union is empowered to grant.
(D)An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the credit union makes the final underwriting decision and the sales or lease contract is assigned to the credit union very soon after it is signed by the member and the dealer or the leasing company.
(b)A credit union may sell, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with subparagraph (B) of paragraph (1) of subdivision (a), student loans purchased in accordance with subparagraph (C) of paragraph (1) of subdivision (a), and real estate loans purchased in accordance with subparagraph (D) of paragraph (1) of subdivision (a), within the limitations of the board of directors written sale policies, provided both:
(1)The board of directors or investment committee approves the sale.
(2)A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the sellers office.
(c)(1)A credit union may pledge, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with subparagraph (B) of paragraph (1) of subdivision (a), student loans purchased in accordance with subparagraph (C) of paragraph (1) of subdivision (a), and real estate loans purchased in accordance with subparagraph (D) of paragraph (1) of subdivision (a), within the limitations of the board of directors written pledge policies, subject to all of the following conditions:
(A)The board of directors or investment committee approves the pledge.
(B)Copies of the original loan documents are retained.
(C)A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations.
(2)The pledge agreement shall identify the eligible obligations covered by the agreement.
(d)A credit union may agree to service any eligible obligation it purchases or sells in whole or in part.
(e)For purposes of this section:
(1)Eligible obligation means a loan or group of loans.
(2)Student loan means a loan granted to finance the borrowers attendance at an institution of higher education or at a vocational school, which is secured by and on which payment of the outstanding principal and interest has been deferred in accordance with the insurance or guarantee of the federal government, of a state government, or any agency of either.
SEC. 5.Section 14659 is added to the Financial Code, to read:14659.(a)A credit union that is investing to fund an employee benefit plan obligation may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit unions obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.
(b) For purposes of this section, specific authorization pursuant to Section 14653.5 is not required.
SEC. 6.Section 14807 of the Financial Code is amended to read:14807.Any member may withdraw from membership in the credit union at any time. A withdrawing member may be required to give 60 days notice of intention to withdraw shares and 30 days notice of intention to withdraw certificates for funds except when a different period of notice is required by the commissioner for the withdrawal of shares or share certificates that may be established by the board of directors pursuant to Section 14862. directors.
SEC. 7.Section 14862 of the Financial Code is repealed.14862.The board of directors shall establish from time to time a written savings capital structure policy which shall set out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. The savings capital structure policy may provide for different rates, maturities and minimum share account balances, subject to the rules of the commissioner for the credit unions savings capital and the terms and conditions on which dividends may be calculated and paid to members purchasing credit union shares. The savings capital structure policy shall have as its goal avoiding instability in the credit unions savings capital and thereby providing that credit union members have an adequate source of funds for loans and receive a fair return on member savings capital.SEC. 8.Section 14900 of the Financial Code is amended to read:14900.(a)The board of directors of any credit union may declare dividends at such intervals, in accordance with such formula, and for such periods as provided in the written savings capital structure policy.(b)Dividends14900.Dividends need not be paid on a share account having less than the minimum balance prescribed in the bylaws.
SEC. 9.Section 14950 of the Financial Code is amended to read:14950.(a)Every credit union may enter into obligations with its members upon the approval of the credit committee or, in the alternative, the credit manager, subject to the terms and conditions established by the board of directors pursuant to Section 15100.
(b)(1)The board of directors of a credit union shall adopt a policy governing the acceptance by the credit union of notes receivable from nonmembers as consideration for the sale of assets owned by the credit union through bona fide transactions.
(2)No credit union may accept notes receivable from nonmembers as consideration for the sale of assets owned by the credit union except in accordance with a policy adopted by the board of directors pursuant to paragraph (1).
(3)Transactions subject to this subdivision shall not be deemed to be loans to nonmembers for purposes of Section 14750.
(c)(1)The board of directors of a credit union shall adopt a policy governing the purchase by the credit union of eligible obligations of nonmembers, as defined in Section 14658, and subject to the provisions of that section.
(2)A credit union shall not purchase eligible obligations of nonmembers, except in accordance with a policy adopted by the board of directors pursuant to paragraph (1).
(3)Transactions subject to this subdivision shall not be deemed to be loans to nonmembers for purposes of Section 14750.
(c)(d)Notwithstanding subdivision (a), a credit union may permit a nonmember to participate in an obligation or extension of credit to a member as a joint applicant, co-obligor, coborrower, surety, or guarantor. An obligation or extension of credit made pursuant to this subdivision shall not be deemed a violation of subdivision (b) of Section 14800. Except as otherwise permitted by statute or regulation, the credit union shall not extend any other benefit or service of the credit union to the nonmember solely as a result of participation as a joint applicant, co-obligor, coborrower, surety, or guarantor unless the nonmember is thereafter admitted to membership.
SEC. 10.Section 17006 of the Financial Code is amended to read:17006.(a)This division does not apply to:
(1)Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies.
(2)Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent.
(3)Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies.
(4)Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
(b)The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.
SEC. 11.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
SECTION 1.Section 14000 of the Financial Code is amended to read:14000.This division shall be known as the California Credit Union Act. Unless the context clearly requires otherwise, any reference to the California Credit Union Law in this code or any other code shall be construed to refer to the California Credit Union Act.This division shall be known as the California Credit Union Law. Act. Unless the context clearly requires otherwise, any reference to the California Credit Union Law in this code or any other code shall be construed to refer to the California Credit Union Act.
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Date
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Status
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|---|---|
| Sep 5, 2018 | Chaptered by Secretary of State - Chapter 267, Statutes of 2018. |
| Sep 5, 2018 | Approved by the Governor. |
| Aug 29, 2018 | Enrolled and presented to the Governor at 4 p.m. |
| Aug 23, 2018 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Aug 14, 2018 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after August 16 pursuant to Assembly Rule 77. |
| Aug 13, 2018 | Read third time. Passed. Ordered to the Assembly. |
| Aug 7, 2018 | Read second time. Ordered to Consent Calendar. |
| Aug 6, 2018 | From committee: Be ordered to second reading file pursuant to Senate Rule 28.8 and ordered to Consent Calendar. |
| Aug 6, 2018 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on APPR. |
| Jun 21, 2018 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 7. Noes 0.) (June 20). Re-referred to Com. on APPR. |
| Jun 11, 2018 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on B. & F.I. |
| May 30, 2018 | In committee: Hearing postponed by committee. |
| May 3, 2018 | Referred to Com. on B. & F.I. |
| Apr 19, 2018 | In Senate. Read first time. To Com. on RLS. for assignment. |
| Apr 19, 2018 | Read third time. Passed. Ordered to the Senate. (Ayes 71. Noes 0.) |
| Apr 12, 2018 | Read second time. Ordered to Consent Calendar. |
| Apr 11, 2018 | From committee: Do pass. To Consent Calendar. (Ayes 15. Noes 0.) (April 11). |
| Apr 3, 2018 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 11. Noes 0.) (April 2). Re-referred to Com. on APPR. |
| Mar 13, 2018 | Re-referred to Com. on B. & F. |
| Mar 12, 2018 | From committee chair, with author's amendments: Amend, and re-refer to Com. on B. & F. Read second time and amended. |
| Mar 8, 2018 | Referred to Com. on B. & F. |
| Feb 17, 2018 | From printer. May be heard in committee March 19. |
| Feb 16, 2018 | Read first time. To print. |
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Date
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Description
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Location
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Votes
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|
|---|---|---|---|---|
| Aug 23, 2018 | AB 2862 LIMÓN Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Aug 13, 2018 | Consent Calendar AB2862 | Senate Floor |
Passed |
|
| Jun 20, 2018 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Banking and Financial Institutions |
Passed |
|
| Apr 19, 2018 | AB 2862 LIMÓN Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| Apr 11, 2018 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 2, 2018 | Do pass and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Banking and Finance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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|---|---|---|
| California Credit Union League | ** Support | Aug 8, 2018 |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2862
Author:(Limón)
As Amended Ver:August 6, 2018
Majority vote
ASSEMBLY: | 71-0 | (April 19, 2018) | SENATE: | 37-0 | (August 13, 2018) |
Original Committee Reference: B. & F.
SUMMARY: Makes changes to the Financial Code to align state law with federal law giving state-chartered credit unions parity with state-chartered banks along with other substantive and conforming changes as specified. Specifically, this bill:
- Provides a clear exemption for Credit Unions in the escrow law giving state-chartered credit unions parity with state-chartered banks.
- Adds new language to the Financial Code covering Charitable Donation Accounts (CDA's) providing state credit unions parity with federal credit unions.
- Allows a credit union to purchase, in whole or in part, eligible loans and obligations as specified, requiring various conditions be met including requiring the board of directors of a credit union to adopted policies governing these purchases.
- Allows a credit union investing to fund an employee benefit plan obligation to make specified purchases without prior approval by the Department of Business Oversight (DBO).
- Updates the savings capital structure policy by repealing and amending specified financial code dealing with the Savings Capital Structure Policy.
The Senate amendments make technical and clarifying changes.
EXISTING LAW: The California Credit Union Law provides for the regulation of credit unions by the Commissioner of DBO. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided a willful or knowing violation of this law is a crime. Additionally, existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, costs are minor and absorbable.
COMMENTS: Credit unions in California operate under a dual licensing framework. Credit unions are chartered or "licensed" by the State of California or by the federal government. Charter type determines what agency the credit union is supervised by, on the federal level the regulator is the National Credit Union Administration (NCUA) and on the state level the regulator is the Department of Business Oversight. DBO and NCUA conduct periodic examinations of California credit unions for safety and soundness as well as consumer protections. The state charter provides similar authorities, requirements and characteristics as the federal charter. In order to remain competitive in the dual chartering system individual states periodically update their charters to meet the needs of state-chartered credit unions and their credit union members.
As of the end of 2017, there were 130 state-chartered credit unions headquartered in California and 188 federally chartered credit unions (total of 318 credit unions). The California credit union charter must be updated through legislation to remain competitive and provide parity with the federal charter and regulations.
Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0003808
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB |
CONSENT
Bill No: AB 2862
:
SENATE BANKING & F.I. COMMITTEE: 7-0, 6/20/18
AYES: Bradford, Vidak, Gaines, Galgiani, Hueso, Lara, Portantino
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 71-0, 4/19/18 (Consent) - See last page for vote
SOURCE: California Credit Union League
DIGEST:
This bill enacts five provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
Existing law:
- Provides for the California Credit Union Law (Financial Code Section 14000 et seq.), administered by the Department of Business Oversight (DBO).
- Requires the board of directors of a credit union to establish a written savings capital structure policy to set out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn, as specified, with the goal of avoiding instability in the credit union’s savings capital and ensuring that credit unions have an adequate source of funds for loans and receive a fair return on member savings capital (Financial Code Section 14862).
- Authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations and to participate in loans made by another credit union, as specified (Financial Code Section 14959).
- Limits, generally, the types of investments credit unions may make to those authorized in statute or regulation or otherwise approved in writing by the Commissioner of Business Oversight (Financial Code Sections 14650 through 14656).
- Provides that the Escrow Law does not apply to any person doing business under any California law or federal law relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies (Financial Code Section 17006).
This bill:
- Authorizes a credit union to invest in charitable donation accounts (CDAs), as specified, as a means of providing charitable contributions and donations to nonprofit entities exempt from taxation under Internal Revenue Code Section 501(c)(3).
- Authorizes a credit union to purchase, in whole or in part, from any source, loans made to its members; to sell, in whole or in part, to any source, loans made to its members; and to purchase, in whole or in part, any of the following: a loan originated by another credit union, which is made to a member of the originating credit union, even though the member is not also a member of the credit union purchasing the loan, and a loan from any source, if the purchase will facilitate the purchasing credit union’s packaging a pool of those loans to be sold or pledged on the secondary market. Clarifies that any of the foregoing loan purchases shall not be deemed to be obligations of nonmembers, as specified.
- Authorizes a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that would otherwise be impermissible, as long as the investment is directly related to the credit union’s obligation or potential obligation under the employee benefit plan, and the credit union holds the investment for only as long as it has an actual or potential obligation under the employee benefit plan.
- Deletes the requirement that the board of directors of a credit union establish a written savings capital structure policy and makes related, conforming changes.
- Adds credit unions to the list of financial institutions that are not subject to the Escrow Law.
Background
Like banks, credit unions operate in California under either federal or state charters. As of December 31, 2017, there were 128 state-chartered and 185 federally-chartered credit unions operating in California. Generally speaking, federally-chartered credit unions are covered by rules enacted by the National Credit Union Administration (NCUA), while state-chartered credit unions are covered by rules contained in California’s Credit Union Law. From time to time, the California Credit Union League sponsors bills to bring California’s rules applicable to state-chartered credit unions into conformity with federal rules applicable to federally-chartered credit unions. Of this bill’s five provisions, three will bring California’s Credit Union Law into conformity with federal rules, while two are technical in nature. Each of the bill’s provisions is briefly described below.
Comments
Greater Flexibility to Invest in Employee Benefit (457(b)) Plans (federal conformity). Existing law authorizes credit unions to invest in employee benefit plans, but requires credit unions to obtain approval from DBO to make these investments, because they are technically held on the credit union’s books. This bill’s sponsor asserts that money in employee benefit plans may have to be held on a credit union’s balance sheet pursuant to Internal Revenue Service regulations, but does not pose a risk to the credit union; the only potential risk is borne by the individual who owns the plan. NCUA Rule 701.19(c) states that a federal credit union “investing to fund an employee benefit plan obligation is not subject to the investment limitations of this Act and part 703 or, as applicable, part 704, of this chapter and may purchase an investment that would otherwise be impermissible if the investment is directly related to the...obligation...under the employee benefit plan.” This bill enacts a similar requirement applicable to state-chartered credit unions.
Authority to Invest in CDAs (federal conformity). CDAs are hybrid charitable and investment vehicles that credit unions may fund as a way to provide charitable contributions and donations to 501(c)(3) organizations. Federally-chartered credit unions are authorized to invest in CDAs without the need to request permission from the NCUA, as long as they comply with specified conditions contained in 12 CFR Section 721.3(b)(2). Existing California law requires state-chartered credit unions to apply to DBO for permission to invest in CDAs. This bill authorizes state-chartered credit unions to invest in CDAs without the need to request permission from DBO, as long as those credit unions comply with the same requirements applicable to federally-chartered credit unions that invest in these accounts.
Authority to Purchase, Sell, or Pledge Whole Loans (federal conformity). Existing law limits state-chartered credit unions to purchasing parts of loans; it does not permit the purchase of whole loans. Federally-chartered credit unions are authorized to purchase, in whole or in part, within the limitations of their board of directors’ written purchase policies, eligible obligations of their members, eligible obligations of a liquidating credit union’s members, student loans, and real-estate secured loans. Federally-chartered credit unions are also authorized to sell, service, or pledge those obligations (NCUA Rule 701.23). This bill provides the same authority to state-chartered credit unions.
Deletion of the Requirement to Develop a Savings Capital Structure Policy (technical). The requirement that each credit union develop a savings capital structure policy predates enactment of federal Regulation CC (the Federal Reserve Board regulation governing the availability of funds and collection of checks), Regulation DD (the Federal Reserve Board regulation implementing the Truth in Savings Act of 1991), and 12 CFR Part 707 (NCUA Rules and Regulations implementing Truth in Savings Act of 1991). This bill’s sponsor asserts that, when considered together with safety and soundness requirements and with liquidity and asset/liability management policies maintained by credit unions, the existing law requirement that credit unions develop savings capital structure policies is obsolete. This bill deletes this requirement and makes several conforming changes.
Escrow Law exemption (technical). California’s Escrow Law does not apply to a variety of different types of financial institutions, including banks, trust companies, building and loan associations, savings and loan associations, and insurance companies. This bill corrects an unintentional oversight by adding credit unions to the list of financial institutions that are not subject to the Escrow Law.
FISCAL EFFECT: Appropriation: Fiscal Com.: Local:
California Credit Union League (source)
None received
ASSEMBLY FLOOR: 71-0, 4/19/18
AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Brough, Burke, Caballero, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk-Silva, Reyes, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon
NO VOTE RECORDED: Calderon, Cristina Garcia, Eduardo Garcia, Melendez, Mullin, Quirk, Rodriguez
8/8/18 10:34:45
**** END ****
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Steven Bradford, Chair
2017 - 2018 Regular
Bill No: Hearing Date: June 20, 2018
Author: | |||
Version: | Amended | ||
Urgency: | Fiscal: | ||
Consultant: | |||
Subject:
SUMMARY
This bill enacts five provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
EXISTING LAW
- Provides for the California Credit Union Law (Financial Code Section 14000 et seq.), administered by the Department of Business Oversight (DBO).
- Requires the board of directors of a credit union to establish a written savings capital structure policy to set out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn, as specified, with the goal of avoiding instability in the credit union’s savings capital and ensuring that credit unions have an adequate source of funds for loans and receive a fair return on member savings capital (Financial Code Section 14862).
- Authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or financial organizations and to participate in loans made by another credit union, as specified (Financial Code Section 14959).
- Generally limits the types of investments credit unions may make to those authorized in statute or regulation or otherwise approved in writing by the Commissioner of Business Oversight (commissioner; Financial Code Sections 14650 through 14656).
- Provides that the Escrow Law does not apply to any person doing business under any California law or federal law relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies (Financial Code Section 17006).
DESCRIPTION
- Authorizes a credit union to invest in charitable donation accounts (CDAs), as specified, as a means of providing charitable contributions and donations to nonprofit entities exempt from taxation under Internal Revenue Code Section 501(c)(3).
- Authorizes a credit union to purchase, in whole or in part, from any source, loans made to its members; to sell, in whole or in part, to any source, loans made to its members; and to purchase, in whole or in part, any of the following: a loan originated by another credit union, which is made to a member of the originating credit union, even though the member is not also a member of the credit union purchasing the loan, and a loan from any source, if the purchase will facilitate the purchasing credit union’s packaging a pool of those loans to be sold or pledged on the secondary market. Clarifies that any of the foregoing loan purchases shall not be deemed to be obligations of nonmembers, as specified.
- Authorizes a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that would otherwise be impermissible, as long as the investment is directly related to the credit union’s obligation or potential obligation under the employee benefit plan, and the credit union holds the investment for only as long as it has an actual or potential obligation under the employee benefit plan.
- Deletes the requirement that the board of directors of a credit union establish a written savings capital structure policy and makes related, conforming changes.
- Adds credit unions to the list of financial institutions that are not subject to the Escrow Law.
COMMENTS
- Purpose: This bill is sponsored by the California Credit Union League (CCUL) to modernize the state credit union charter.
- Background: Like banks, credit unions operate in California under either federal or state charters. As of December 31, 2017, there were 128 state-chartered and 185 federally-chartered credit unions operating in California. Generally speaking, federally-chartered credit unions are covered by rules enacted by the National Credit Union Association, while state-chartered credit unions are covered by rules contained in California’s Credit Union Law. From time to time, CCUL sponsors bills to bring California’s rules applicable to state-chartered credit unions into conformity with federal rules applicable to federally-chartered credit unions. Of this bill’s five provisions, three will bring California’s Credit Union Law into conformity with federal rules, while two are technical in nature. Each of the bill’s provisions is briefly described below.
Greater Flexibility to Invest in Employee Benefit (457(b)) Plans (federal conformity). Existing law authorizes credit unions to invest in employee benefit plans, but requires credit unions to obtain approval from DBO to make these investments, because they are technically held on the credit union’s books. This bill’s sponsor asserts that money in employee benefit plans may have to be held on a credit union’s balance sheet pursuant to Internal Revenue Service regulations, but does not pose a risk to the credit union; the only potential risk is borne by the individual who owns the plan. NCUA Rule 701.19(c) states that a federal credit union “investing to fund an employee benefit plan obligation is not subject to the investment limitations of this Act and part 703 or, as applicable, part 704, of this chapter and may purchase an investment that would otherwise be impermissible if the investment is directly related to the...obligation...under the employee benefit plan.” This bill enacts a similar requirement applicable to state-chartered credit unions.
Authority to Invest in Charitable Donation Accounts (federal conformity). CDAs are hybrid charitable and investment vehicles that credit unions may fund as a way to provide charitable contributions and donations to 501(c)(3) organizations. Federally-chartered credit unions are authorized to invest in CDAs without the need to request permission from the NCUA, as long as they comply with specified conditions contained in 12 CFR Section 721.3(b)(2). Existing California law requires state-chartered credit unions to apply to DBO for permission to invest in CDAs. This bill authorizes state-chartered credit unions to invest in CDAs without the need to request permission from DBO, as long as those credit unions comply with the same requirements applicable to federally-chartered credit unions that invest in these accounts.
Authority to Purchase, Sell, or Pledge Whole Loans (federal conformity). Existing law limits state-chartered credit unions to purchasing parts of loans; it does not permit the purchase of whole loans. Federally-chartered credit unions are authorized to purchase, in whole or in part, within the limitations of their board of directors’ written purchase policies, eligible obligations of their members, eligible obligations of a liquidating credit union’s members, student loans, and real-estate secured loans. Federally-chartered credit unions are also authorized to sell, service, or pledge those obligations (NCUA Rule 701.23). This bill provides the same authority to state-chartered credit unions.
Deletion of the Requirement to Develop a Savings Capital Structure Policy (technical). The requirement that each credit union develop a savings capital structure policy predates enactment of federal Regulation CC (the Federal Reserve Board regulation governing the availability of funds and collection of checks), Regulation DD (the Federal Reserve Board regulation implementing the Truth in Savings Act of 1991), and 12 CFR Part 707 (NCUA Rules and Regulations implementing Truth in Savings Act of 1991). This bill’s sponsor asserts that, when considered together with safety and soundness requirements and with liquidity and asset/liability management policies maintained by credit unions, the existing law requirement that credit unions develop savings capital structure policies is obsolete. This bill deletes this requirement and makes several conforming changes.
Escrow Law exemption (technical). California’s Escrow Law does not apply to a variety of different types of financial institutions, including banks, trust companies, building and loan associations, savings and loan associations, and insurance companies. This bill corrects an unintentional oversight by adding credit unions to the list of financial institutions that are not subject to the Escrow Law.
- Support: The California Credit Union League is sponsoring this bill for the reasons stated above.
- Opposition: None received.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Credit Union League (sponsor)
Opposition
None received
-- END --
Date of Hearing: April 11, 2018
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez Fletcher, Chair
ABPCA Bill Id:AB 2862
Author:(Limón) – As Amended Ver:March 12, 2018
Policy Committee: | Banking and Finance | Vote: | 11 - 0 |
Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill makes assorted substantive or technical changes to the Financial Code regarding state-chartered credit unions. Specifically, this bill:
- Authorizes credit unions to invest in charitable donation accounts (CDAs), if certain conditions apply.
- Authorizes a credit union to purchase an investment without prior authorization from the Department of Business Oversight (DBO) if the investment is directly related to funding an employee benefit plan obligation.
- Allows a credit union to purchase, in whole or in part, eligible loans and obligations made to members and nonmembers, as specified.
- Makes other assorted technical or clarifying changes to the Financial Code.
FISCAL EFFECT:
Negligible state costs.
COMMENTS:
- Background and purpose. California credit unions can be chartered either by the National Credit Union Administration (NCUA) or their state supervisory agency, DBO. As of 2017, there were 130 state-chartered credit unions in California and 188 federally chartered credit unions.
AB 2862 is sponsored by the California Credit Union League (CCUL) and is intended to give state-chartered credit unions parity with federal credit unions. For example, this bill allows state-chartered credit unions to invest in a CDA, an investment vehicle designed for the purpose of charitable giving. Since 2013, federally chartered credit unions have been able to use CDAs for the purpose of charity, as long as the account balance does not exceed a certain size and at least 51% of investment earnings go toward a qualified charity.
- Recent legislation. AB 2274 (Dababneh), Chapter 353, Statues of 2016, made assorted changes to California Credit Union Law.
Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081
Date of Hearing: April 2, 2018
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Monique Limón, Chair
ABPCA Bill Id:AB 2862 (
Author:Limón) – As Introduced Ver:February 16, 2018
SUBJECT: Credit unions
SUMMARY: Makes changes to the Financial Code to align state law with federal law giving state-chartered credit unions parity with state-chartered banks along with other substantive and conforming changes as specified. Specifically, this bill:
- Provides a clear exemption for Credit Unions in the escrow law giving state-chartered credit unions parity with state-chartered banks.
- Adds new language to the Financial Code covering Charitable Donation Accounts (CDA’s) providing state credit unions parity with federal credit unions.
- Allows a credit union to purchase, in whole or in part, eligible loans and obligations as specified, requiring various conditions be met including requiring the board of directors of a credit union to adopted policies governing these purchases.
- Allows a credit union investing to fund an employee benefit plan obligation to make specified purchases without prior approval by the Department of Business Oversight (DBO).
- Updates the savings capital structure policy by repealing and amending specified financial code dealing with the Savings Capital Structure Policy.
EXISTING LAW: The California Credit Union Law provides for the regulation of credit unions by the Commissioner of DBO. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided a willful or knowing violation of this law is a crime. Additionally, existing law requires the board of directors of a credit union to establish a written savings capital structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.
FISCAL EFFECT: Unknown
COMMENTS: Credit unions in California operate under a dual licensing framework. Credit unions are chartered or “licensed” by the State of California or by the federal government. Charter type determines what agency the credit union is supervised by, on the federal level the regulator is the National Credit Union Administration (NCUA) and on the state level the regulator is the Department of Business Oversight. DBO and NCUA conduct periodic examinations of California credit unions for safety and soundness as well as consumer protections. The state charter provides similar authorities, requirements and characteristics as the federal charter. In order to remain competitive in the dual chartering system individual states periodically update their charters to meet the needs of state-chartered credit unions and their credit union members.
As of the end of 2017, there were 130 state-chartered credit unions headquartered in California and 188 federally chartered credit unions (total of 318 credit unions). The California credit union charter must be updated through legislation to remain competitive and provide parity with the federal charter and regulations.
REGISTERED SUPPORT / OPPOSITION:
Support
National Credit Union League (sponsor)
Opposition
None on file
Analysis Prepared by: William Herms / B. & F. / (916) 319-3081
Bill Author
Bill Co-Author(s):