AB 2062: Credit unions.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2024-09-20
Current Status:
Passed
(2024-09-20: Chaptered by Secretary of State - Chapter 305, Statutes of 2024.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
(1)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capital of a credit union, prohibits a credit union from entering into an obligation with any official that exceeds 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize the directors or their delegates to utilize an automated system to be used to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if specified conditions are met, including that the automated system is regularly tested for compliance with specified provisions, including the credit unions field of membership, and applicable laws and regulations. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates that provision liable for each offense in a specified amount.
This bill would revise the amount for which the person is liable. The bill would authorize a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would revise the amount for which the person is liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capital of a credit union, prohibits a credit union from entering into an obligation with any official that exceeds 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize the directors or their delegates to utilize an automated system to be used to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if specified conditions are met, including that the automated system is regularly tested for compliance with specified provisions, including the credit unions field of membership, and applicable laws and regulations. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates that provision liable for each offense in a specified amount.
This bill would revise the amount for which the person is liable. The bill would authorize a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would revise the amount for which the person is liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capital of a credit union, prohibits a credit union from entering into an obligation with any official that exceed 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize the directors or their delegates to utilize an automated system to be used to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if specified conditions are met, including that the automated system is regularly tested for compliance with specified provisions, including the credit unions field of membership, and applicable laws and regulations. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates that provision liable for each offense in a specified amount.
This bill would make a person who violates that provision and the credit union jointly and severally liable and would revise the amount for which the person and the credit union are liable. The bill would authorize a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would revise the amount for which the person and the credit union are liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified, subject to satisfaction of specified requirements. specified.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capitol capital of a credit union, prohibits a credit union from entering into an obligation with any official that exceed 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize the directors or their delegates to utilize an automated system to be used to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if specified conditions are met, including that the automated system is regularly tested for compliance with specified provisions, including the credit unions field of membership, and applicable laws and regulations. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates that provision liable for each offense in a specified amount.
This bill would make a person who violates that provision and the credit union jointly and severally liable and would revise the amount for which the person and the credit union are liable. The bill would authorize a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would revise the amount for which the person and the credit union are liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified, subject to satisfaction of specified requirements.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capitol of a credit union, prohibits a credit union from entering into an obligation with any official that exceed 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize the directors or their delegates to utilize an automated system to be used to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if specified conditions are met, including that the use of the automated system be pursuant to a written membership plan adopted by the board of directors. automated system is regularly tested for compliance with specified provisions, including the credit unions field of membership, and applicable laws and regulations. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates those provisions that provision liable for each offense in a specified amount.
This bill would make those provisions inapplicable to employees and would authorize officers or directors to purchase, or be interested in the purchase of, the credit unions assets if certain requirements are satisfied. The bill would make a person who knowingly violates those provisions that provision and the credit union jointly and severally liable and would revise the amount for which the person and the credit union are liable. The bill would set forth authorize a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would make those provisions inapplicable to employees and would instead make an officer or director of a credit union who knowingly purchases or who is interested in the purchase of any of the credit unions obligations jointly and severally liable, and would revise the amount for which the person and the credit union are liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees, committees and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified, subject to satisfaction of specified requirements.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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)Existing law, the California Credit Union Law, provides for the regulation of credit unions by the Commissioner of Financial Protection and Innovation, and specifies requirement for the management and operation of credit unions. Existing law specifies the manner of deposit for the savings capitol of a credit union, prohibits a credit union from entering into an obligation with any official that exceed 20% of the aggregate dollar amount of all savings capital, and prohibits a credit union policy from permitting a credit union to enter into obligations with a member where the total obligations of the member exceeds 10% of the aggregate dollar amount of the credit unions savings capital. A willful violation of the California Credit Union Law is a crime.
This bill would define savings capital for purposes of those provisions.
(2)Existing law grants specified powers to the board of directors of a credit union, including the power to approve new membership, determine the interest rate on obligations with members, and declare dividends on shares and determine the interest rate paid on certificates for funds.
This bill would authorize an automated system to be used to establish membership eligibility if specified conditions are met, including that the use of the automated system be pursuant to a written membership plan adopted by the board of directors. The bill would authorize the board to delegate specified duties to an asset-liability management committee or similar committee, including the duty to determine the interest rate on obligations with members, declare dividends on shares and determine the interest rate paid on certificates for funds, and determine the dividend rates on share accounts, as specified.
(3)Existing law authorizes a credit union to invest in the shares of stock of a corporation or limited liability company organized for the purposes of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union.
This bill would also authorize a credit union to invest in those entities if the corporation or limited liability company is formed by a corporation or limited liability company organized solely for the purpose of providing services to credit unions pursuant to the above specified provisions. The bill would define credit union service organization.
(4)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions assets for an amount less than their current market value. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would make those provisions inapplicable to employees and would authorize officers or directors to purchase, or be interested in the purchase of, the credit unions assets if certain requirements are satisfied. The bill would make a person who knowingly violates those provisions and the credit union jointly and severally liable and would revise the amount for which the person and the credit union are liable. The bill would set forth a method for determining market value and would exclude from those prohibitions certain gifts from a credit union and the purchase of certain equipment or furnishings by an officer or director.
(5)Existing law prohibits an officer, director, or employee of a credit union from purchasing, or being interested in the purchase of, the credit unions obligations for an amount less than their book value, unless specified requirements are met. Existing law makes a person who violates those provisions liable for each offense in a specified amount.
This bill would make those provisions inapplicable to employees and would instead make an officer or director of a credit union who knowingly purchases or who is interested in the purchase of any of the credit unions obligations jointly and severally liable, and would revise the amount for which the person and the credit union are liable. The bill would set forth a method for determining book value.
(6)Existing law requires the members of a credit union to hold an annual meeting for the election of directors and certain committees, and authorizes special meetings of members to be held upon order of the board of directors in accordance with specified notice and other requirements.
This bill would authorize those meetings to be conducted by remote communication, as specified, subject to satisfaction of specified requirements.
By expanding the scope of a crime, the bill would impose a state-mandated local program.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(A)The chairperson of a membership committee or an executive committee.
(B)An officer, director, committee member, or employee.
(2)The directors or their delegates may utilize an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if all of the following conditions are met:
(A)The automated system is regularly tested for compliance with Section 14800, the credit unions field of membership, and applicable laws and regulations.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the market value of the assets purchased.
(b)In calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions obligations for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the book value of the obligations purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)(1)The members of a credit union shall hold an annual meeting for the election of all of the following:
(A)Directors.
(B)A supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556.
(C)A credit committee, if provided for in its bylaws.
(2)An annual meeting required by this subdivision shall be held at a time and place, and upon notice, as the bylaws provide.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(A)The chairperson of a membership committee or an executive committee.
(B)An officer, director, committee member, or employee.
(2)The directors or their delegates may utilize an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if all of the following conditions are met:
(A)The automated system is regularly tested for compliance with Section 14800, the credit unions field of membership, and applicable laws and regulations.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the market value of the assets purchased.
(b)In calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions obligations for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the book value of the obligations purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)(1)The members of a credit union shall hold an annual meeting for the election of all of the following:
(A)Directors.
(B)A supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556.
(C)A credit committee, if provided for in its bylaws.
(2)An annual meeting required by this subdivision shall be held at a time and place, and upon notice, as the bylaws provide.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(A)The chairperson of a membership committee or an executive committee.
(B)An officer, director, committee member, or employee.
(2)The directors or their delegates may utilize an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if all of the following conditions are met:
(A)The automated system is regularly tested for compliance with Section 14800, the credit unions field of membership, and applicable laws and regulations.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the market value of the assets purchased.
(b)In calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions obligations for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person who violates this section shall be liable to the people of this state for each offense in an amount of up to twice the book value of the obligations purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)(1)The members of a credit union shall hold an annual meeting for the election of all of the following:
(A)Directors.
(B)A supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556.
(C)A credit committee, if provided for in its bylaws.
(2)An annual meeting required by this subdivision shall be held at a time and place, and upon notice, as the bylaws provide.
(b)(1)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the credit union implements reasonable measures to do the following: means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
(A)To provide members and proxyholders, if proxies are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings.(B)If any member or proxyholder, if proxies are allowed, votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records.(C)To verify that each person who has voted remotely is a member or proxyholder, if proxies are allowed.(2)A credit union may conduct a meeting of members solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided that any member unable to participate using the method selected is offered a reasonable alternative method to participate. A de minimis disruption of an audio or audiovisual feed does not require a credit union to end a meeting under, or render the corporation out of compliance with, this subdivision.SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication consistent with subdivision (b) of Section 14804. means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(A)The chairperson of a membership committee or an executive committee.
(B)An officer, director, committee member, or employee.
(2)The directors or their delegates may utilize an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if all of the following conditions are met:
(A)The automated system is regularly tested for compliance with Section 14800, the credit unions field of membership, and applicable laws and regulations.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value. Every person who violates this section, and the credit union from which the purchase was made, section shall be jointly and severally liable to the people of this state for each offense in an amount of up to twice the market value of the assets purchased.
(b)In calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)An officer, as described in Section 14500, a director, or an employee of a credit union shall not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions obligations for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person who violates this section, and a credit union from which the purchase was made, section shall be jointly and severally liable to the people of this state for each offense in an amount of up to twice the book value of the assets obligations purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)(1)The members of a credit union shall hold an annual meeting for the election of all of the following:
(A)Directors.
(B)A supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556.
(C)A credit committee, if provided for in its bylaws.
(2)An annual meeting required by this subdivision shall be held at a time and place, and upon notice, as the bylaws provide.
(b)(1)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the credit union implements reasonable measures to do the following:
(A)To provide members and proxyholders, if proxies are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings.
(B)If any member or proxyholder, if proxies are allowed, votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records.
(C)To verify that each person who has voted remotely is a member or proxyholder, if proxies are allowed.
(2)A credit union may conduct a meeting of members solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided that any member unable to participate using the method selected is offered a reasonable alternative method to participate. A de minimis disruption of an audio or audiovisual feed does not require a credit union to end a meeting under, or render the corporation out of compliance with, this subdivision.
SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication consistent with subdivision (b) of Section 14804.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(A)The chairperson of a membership committee or an executive committee.
(B)An officer, director, committee member, or employee.
(2)An The directors or their delegates may utilize an automated system to establish membership eligibility made pursuant to a written membership plan adopted by the board of directors may be used if all of the following conditions are met:
(A)The automated system ensures is regularly tested for compliance with Section 14800 and 14800, the credit unions field of membership. membership, and applicable laws and regulations.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)No officer or director An officer, as described in Section 14500, a director, or an employee of a credit union shall knowingly not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. value. Every person who knowingly who violates this section section, and the credit union from which the purchase was made made, shall be jointly and severally liable to the people of this state for each offense in an amount of up to twice the difference between the purchase price and the market value of the assets purchased.
(b)The method used for determining market value shall be set forth in a written policy governing the sale of credit union obligations and assets established and approved by the board of directors. The method used shall be the average of the value of the asset as determined by no less than three independent sources recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.(b)In calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director where if the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director where if the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)No officer or director An officer, as described in Section 14500, a director, or an employee of a credit union shall knowingly not purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions obligations for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person who knowingly violates this section section, and a credit union from which the purchase was made made, shall be jointly and severally liable to the people of this state for each offense in an amount of up to twice the difference between the purchase price and the book value of the assets purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)(1)The members of a credit union shall hold an annual meeting for the election of: directors; a supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556; and a credit committee, if provided for in its bylaws. The annual meeting shall be held upon such notice and at such time and place as the bylaws provide. of all of the following:
(A)Directors.
(B)A supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556.
(C)A credit committee, if provided for in its bylaws.
(2)An annual meeting required by this subdivision shall be held at a time and place, and upon notice, as the bylaws provide.
(b)(1)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the credit union implements reasonable measures to do the following:
(A)To provide members and proxyholders, if proxies are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings.
(B)If any member or proxyholder, if proxies are allowed, votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records.
(C)To verify that each person who has voted remotely is a member or proxyholder, if proxies are allowed.
(2)A credit union may conduct a meeting of members solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided that any member unable to participate using the method selected is offered a reasonable alternative method to participate. A de minimis disruption of an audio or audiovisual feed does not require a credit union to end a meeting under, or render the corporation out of compliance with, this subdivision.
SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of members members, including an annual meeting, may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication consistent with subdivision (b) of Section 14804.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section, the following definitions shall apply: section:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
(a)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.
(b)The savings capital of a credit union shall consist of the payments made by members on shares.
SEC. 2.Section 14406 of the Financial Code is amended to read:14406.The savings capital, as defined in Section 14400, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
(a)Commercial banks or trust companies, incorporated under the laws of this state.
(b)National banks doing business in this state.
(c)Shares or periodic certificates for funds received by or any form of evidence of interest or indebtedness issued by any credit union organized under this division or by any other credit union if its member accounts are insured as provided for by Subchapter II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 et seq.), or, alternatively, are insured by other means determined acceptable by the commissioner.
(d)Accounts with, investment certificates or withdrawable shares of, any savings and loan association doing business in this state that is an insured institution pursuant to the Federal Deposit Insurance Corporation Act (12 U.S.C. Sec. 1811 et seq.).
SEC. 3.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)(1)To act upon all applications for membership. The directors may delegate the power to approve applications for new membership to either of the following, pursuant to a written membership plan adopted by the board of directors:
(1)(A)The chairperson of a membership committee or an executive committee.
(2)(B)An officer, director, committee member, or employee.
(2)An automated system to establish membership eligibility made pursuant to a written membership plan adopted by the board of directors may be used if all of the following conditions are met:
(A)The automated system ensures compliance with Section 14800 and the credit unions field of membership.
(B)An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with subparagraph (A).
(C)The written membership plan includes a plan to address an approved application determined not to be in compliance with subparagraph (A).
(b)(1)To expel members for any of the following causes, subject to Section 14801:
(A)Conviction of a criminal offense involving moral turpitude.
(B)Failure to carry out contracts, agreements, or obligations with the credit union.
(C)Refusal to comply with the provisions of this division or of the bylaws.
(D)Abusive, threatening, or harassing behavior toward credit union staff, volunteers, or members, or the abuse of credit union systems or property.
(2)The directors may delegate the power to expel members for cause to a membership committee or an executive committee, pursuant to a written membership plan adopted by the board of directors.
(3)(A)An expulsion pursuant to subparagraph (D) of paragraph (1) may take effect immediately, without advance notice or an opportunity to be heard, if the board of directors, or its designee pursuant to subdivision (b), determines that immediate expulsion is reasonably necessary for the protection of the credit union or its staff, volunteers, or members.
(B)A member expelled pursuant to subparagraph (A) shall be provided written notice within five business days after the effective date of that expulsion.
(C)This paragraph shall not prohibit a member expelled pursuant to subparagraph (A) from appealing that expulsion pursuant to paragraph (4).
(D)An expulsion pursuant to this paragraph shall be deemed to be fair and reasonable pursuant to Section 7341 of the Corporations Code.
(4)(A)A member who is expelled by the board of directors, or its designee, has the right to appeal therefrom to the board of directors, pursuant to reasonable procedures adopted by the board.
(B)For purposes of this paragraph, reasonable procedures shall include, but not be limited to, all of the following:
(i)Written notice to the expelled member of the effective date of the expulsion.
(ii)The right to appeal therefrom and the procedures for doing so.
(iii)Written notice of the boards final determination following an appeal.
(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. The board of directors may delegate this duty pursuant to subdivision (l).
(d)To fix the maximum number of shares that 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 that will be paid on certificates for funds. The board of directors may delegate this duty pursuant to subdivision (l).
(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 prescribe.
(k)For purposes of this section, membership committee means a committee of at least three persons appointed by the board of directors, provided that the number of members on the committee is an odd number, each of whom shall be a member of the credit union. Notwithstanding any other law, a membership committee may be composed of directors, nondirectors, or both directors and nondirectors. No member of the supervisory committee or audit committee may serve on the membership committee.
(l)(1)The board of directors may, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
(A)The duties set forth in subdivisions (c) and (e).
(B)The authority to determine the dividend rates on share accounts pursuant to subdivision (b) of Section 14901.
(2)The asset liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
(3)The asset liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
SEC. 4.Section 14651 of the Financial Code is amended to read:14651.(a)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions.
(b)Every credit union may invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by one or more credit unions, one or more corporations or limited liability companies of the type described in subdivision (a), or any combination thereof.
(b)(c)Every credit union may invest in the securities of a corporation or in membership or economic interests of a limited liability company that is not a corporation or limited liability company of the type described in subdivision (a) and that provides services to credit unions, provided the investment is approved by the commissioner.
(d)A credit union service organization means a corporation or limited liability company described in subdivision (a) or (b).
SEC. 5.Section 14765 of the Financial Code is amended to read:14765.(a)No officer, director, or employee officer or director of a credit union shall knowingly purchase, directly or indirectly, or be interested in the purchase of, any of the credit unions assets for an amount less than the then current market value thereof. value, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person violating who knowingly violates this section and the credit union from which the purchase was made shall be jointly and severally liable to the people of this state for each offense in the an amount of up to twice the difference between the purchase price and the market value of the assets so purchased.
(b)The method used for determining market value shall be set forth in a written policy governing the sale of credit union obligations and assets established and approved by the board of directors. The method used shall be the average of the value of the asset as determined by no less than three independent sources recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
(c)This section shall not apply to the purchase of used credit union equipment or furnishings by an officer or director where the current market value of the asset or assets purchased does not exceed five hundred dollars ($500) in the aggregate.
(d)This section shall not be construed to prohibit the credit union from making a gift to an officer or director where the current market value of the gift or gifts does not exceed five hundred dollars ($500) in the aggregate.
SEC. 6.Section 14766 of the Financial Code is amended to read:14766.(a)No officer, director, or employee officer or director of a credit union, union shall knowingly purchase, directly or indirectly, shall purchase or be interested in the purchase of, any of the credit unions obligations or assets for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the commissioner immediately after adoption. Every person violating who knowingly violates this section and a credit union from which the purchase was made shall be jointly and severally liable to the people of this state for each offense in the an amount of up to twice the difference between the purchase price and the book value of the assets so purchased.
(b)The method used for determining book value shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors. The method used shall be consistent with generally accepted accounting principles.
SEC. 7.Section 14804 of the Financial Code is amended to read:14804.(a)The members of a credit union shall hold an annual meeting for the election of: (a) directors; (b) a supervisory committee, unless the board of directors has appointed an audit committee pursuant to Section 14556; and (c) a credit committee, if provided for in its bylaws. The annual meeting shall be held upon such notice and at such time and place as the bylaws provide.
(b)(1)Unless prohibited by the articles or bylaws of the credit union, a meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the credit union implements reasonable measures to do the following:
(A)To provide members and proxyholders, if proxies are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings.
(B)If any member or proxyholder, if proxies are allowed, votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records.
(C)To verify that each person who has voted remotely is a member or proxyholder, if proxies are allowed.
(2)A credit union may conduct a meeting of members solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided that any member unable to participate using the method selected is offered a reasonable alternative method to participate. A de minimis disruption of an audio or audiovisual feed does not require a credit union to end a meeting under, or render the corporation out of compliance with, this subdivision.
SEC. 8.Section 14805 of the Financial Code is amended to read:14805.(a)Special meetings of members may be held upon order of the board of directors. Special meetings of members shall be held upon the written request of 10 members or 3 percent of the membership, whichever is greater. Notice of special meetings shall be given to all members specifying the date, time, place, and purpose of the meeting.
(b)Unless prohibited by the articles or bylaws of the credit union, a special meeting of members may be conducted, in whole or in part, by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication consistent with subdivision (b) of Section 14804.
SEC. 9.Section 15050 of the Financial Code is amended to read:15050.(a)For purposes of this section, the following definitions shall apply:
(1)Credit manager means any individual, regardless of title, designated pursuant to Section 14600 to fulfill the duties of a credit manager.
(2)Obligation means any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, coborrower, cosigner, endorser, or guarantor.
(3)Officer means an officer, as described in Section 14500, that is employed by the credit union.
(4)Official means a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of a credit union.
(b)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following apply:
(1)The obligation complies with all lawful requirements of this division with respect to obligations permitted for other members of the credit union.
(2)The obligation is not on terms more favorable than those extended to other members of the credit union.
(3)The obligation is entered into in accordance with a written policy adopted by the directors establishing that all officials shall have an equal opportunity to enter into obligations with the credit union.
(c)A credit union shall not enter into any obligation with any official, directly or indirectly, unless all of the following requirements are satisfied:
(1)Upon the making of the obligation, the aggregate amount of obligations outstanding to all officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital capital, as defined in Section 14400, of the credit union.
(2)The obligation, except any portion of an obligation fully secured by shares, shall not exceed the maximum obligation to the credit union set forth in subdivisions (b) and (c) of Section 15100.
(3)Any obligation that would cause the aggregate amount of obligations outstanding to the official to exceed fifty thousand dollars ($50,000), excluding any portion fully secured by shares, shall be approved by the credit committee or the credit manager, and by the board of directors. An official shall not take part in any credit decision, directly or indirectly, for the officials benefit and shall not be present during any portion of any committee or board meeting where the officials credit application is under consideration.
(4)The names of members of the credit committee, the credit manager, and board of directors who voted to authorize or ratify the obligation shall be entered in their respective minutes.
(d)A credit union shall not permit an official to become surety for any obligation created by the credit union for anyone other than a member of the officials immediate family.
(e)A credit union shall not enter into any obligation with any credit manager or any officer employed by the credit union unless the obligation is in compliance with all requirements of this division with respect to obligations permitted for other nonemployee members, and not on terms more favorable than those extended to other employees, and approved by the board of directors.
SEC. 10.Section 15100 of the Financial Code is amended to read:15100.(a)The board of directors shall establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union. The written policies shall set forth the maximum amounts and terms for any obligation offered to the members, including, but not limited to, the following information:
(1)For loans, the written policies shall set out the terms for unsecured loans, the maximum amount and terms for secured loans, the schedule of interest rates established pursuant to Section 15000 for each type or class of unsecured and secured loan offered to members, the maximum maturity for any loan, or, in the case of an open-end loan, the rate of repayment for any type or class of open-end loan, the limitations, if any, which shall be placed on the authority of any loan officer appointed pursuant to Sections 14602 and 14603, and, subject to the provisions of subdivisions (b) and (c), the individual limits on obligations that are applicable to all members of the credit union. Any policy developed pursuant to this section by the board of directors shall, insofar as possible, and, subject to individual creditworthiness, ensure equal access to funds available for obligations with credit union members.
(2)For obligations other than those set out in paragraph (1), the board of directors shall set out the interest rates and essential terms of the obligations offered to the members and any other information as may be required pursuant to regulations that may be adopted by the commissioner.
(b)Notwithstanding subdivision (a), no credit union policy shall permit a credit union to enter into obligations with an individual credit union member whereby the total obligations of that member, exclusive of amounts secured by shares or certificates for funds, exceed 10 percent of the aggregate dollar amount of the credit unions savings capital. capital, as defined in Section 14400.
(c)Notwithstanding subdivision (b), no credit union policy shall permit a credit union to enter into obligations with any one family whereby the total obligations of the family would be greater than the amount permitted by subdivision (b). For purposes of this article, family means the marital couple or any head of household together with those dependents residing with the marital couple or the head of household and those dependents attending school away from the principal residence of the marital couple or head of household.
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.
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Date
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Status
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|---|---|
| Sep 20, 2024 | Chaptered by Secretary of State - Chapter 305, Statutes of 2024. |
| Sep 20, 2024 | Approved by the Governor. |
| Aug 28, 2024 | Enrolled and presented to the Governor at 4 p.m. |
| Aug 22, 2024 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 62. Noes 0. Page 6428.). |
| Aug 20, 2024 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after August 22 pursuant to Assembly Rule 77. |
| Aug 20, 2024 | Read third time. Passed. Ordered to the Assembly. (Ayes 40. Noes 0. Page 5232.). |
| Aug 6, 2024 | Read second time. Ordered to third reading. |
| Aug 5, 2024 | From committee: Be ordered to second reading pursuant to Senate Rule 28.8. |
| Jul 3, 2024 | Read second time and amended. Re-referred to Com. on APPR. |
| Jul 3, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 11. Noes 0.) (July 2). |
| Jun 24, 2024 | Read second time and amended. Re-referred to Com. on JUD. |
| Jun 20, 2024 | From committee: Amend, and do pass as amended and re-refer to Com. on JUD. with recommendation: To Consent Calendar. (Ayes 6. Noes 0.) (June 19). |
| May 22, 2024 | Referred to Coms. on B. & F.I. and JUD. |
| May 9, 2024 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 9, 2024 | Read third time. Passed. Ordered to the Senate. (Ayes 65. Noes 0. Page 5158.) |
| May 2, 2024 | Read second time. Ordered to Consent Calendar. |
| May 1, 2024 | From committee: Do pass. To Consent Calendar. (Ayes 14. Noes 0.) (May 1). |
| Apr 16, 2024 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 9. Noes 0.) (April 15). Re-referred to Com. on APPR. |
| Apr 2, 2024 | Re-referred to Com. on B. & F. |
| Apr 1, 2024 | In committee: Hearing postponed by committee. |
| Apr 1, 2024 | From committee chair, with author's amendments: Amend, and re-refer to Com. on B. & F. Read second time and amended. |
| Feb 12, 2024 | Referred to Com. on B. & F. |
| Feb 2, 2024 | From printer. May be heard in committee March 3. |
| Feb 1, 2024 | 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 22, 2024 | AB 2062 Grayson Concurrence in Senate Amendments | Assembly Floor |
Passed |
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| Aug 20, 2024 | Assembly 3rd Reading AB2062 Grayson By Portantino | Senate Floor |
Passed |
|
| Jul 2, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Judiciary |
Passed |
|
| Jun 19, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Banking and Financial Institutions |
Passed |
|
| Jun 19, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Judiciary] with the recommendation: To Consent Calendar | Senate Standing Committee on Banking and Financial Institutions |
Passed |
|
| May 9, 2024 | AB 2062 Grayson Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| May 1, 2024 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 15, 2024 | Do pass and be re-referred to the Committee on [Appropriations] | 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 |
CONCURRENCE IN SENATE AMENDMENTS
CSA1 Bill Id:AB 2062
Author:(Grayson)
As Amended Ver:July 3, 2024
Majority vote
SUMMARY
Makes assorted changes to California Credit Union Law, including changes related to membership applications, governance structures, sale of credit union assets, and virtual member meetings.
Senate Amendments
Align remote meeting provisions with similar provisions in the Corporations Code and remove a provision making a credit union joint and severally liable for violations of the prohibition on self-dealing.
COMMENTS
A credit union is a not-for-profit cooperative that accepts deposits, makes loans, and offers a variety of financial services and products to its members. Under state law, a credit union is formed for the purposes of "creating a source of credit for [members] at rates of interest set by the board of directors, and providing an opportunity for them to use and control their own money on a democratic basis in order to improve their economic and social condition."
A credit union, like a bank, operates under a dual licensing framework and is chartered (or licensed) by the state or by the federal government. The type of charter determines which agency supervises the credit union, with the National Credit Union Administration (NCUA) regulating federally-chartered credit unions and the Department of Financial Protection and Innovation (DFPI) regulating state-chartered credit unions. California's state charter provides authorities, requirements, and characteristics similar to the federal charter, and as of March 1, 2024, there were 112 state-chartered credit unions operating in California.
At first glance, it is unclear whether there are any direct societal benefits from a dual-charter system. After all, much of the oversight of financial institutions like banks and credit unions occurs at the federal level. The addition of state regulators seems like adding more cooks to a kitchen filled with a mix of regulators with different purviews, interests, and expertise.
However, regulators and industry argue the dual-charter system works well for both consumers and the industry. The availability of a state charter or both banks and credit unions is believed to produce real and tangible benefits by making the federal and state governments "compete" for financial institutions. For example, DFPI's website cites a number of advantages for financial institutions that obtain a California charter. Among the benefits are lower fees and assessments, minimal intrusion of examiners into institutions that are well-managed and well-capitalized, and more direct and timelier contact with the regulator. DFPI states that the "combination of access, low fees, favorable state laws, and expertise and experience of the Department's staff, make the state charter the charter of choice for California financial institutions."
This bill makes a variety of modifications to California's state credit union charter. These changes are meant to update current law to reflect modern industry practices or to achieve more efficiencies. For a detailed analysis of this bill's major provisions, please refer to the Assembly Banking and Finance Committee analysis.
According to the Author
"The California Credit Union League champions a "state-charter modernization bill" every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with both federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their league, and other stakeholders"
Arguments in Support
The California Credit Union League writes:
"Credit unions have the option of either being state-charted or federally chartered entities. Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA) and in California, state-chartered credit unions are regulated by the Department of Financial Protection and Innovation (DFPI). Both federal and state governments periodically update their charters to stay competitive in their appeal and to create an even playing field in the dual charter system. This bill makes necessary updates to the state charter that are outlined below and upholds the incentive for state-chartered credit unions to benefit from having a regulator with a local perspective. AB 2062 allows credit unions to keep up with the ever-changing landscape and best serve their members and communities across California."
Arguments in Opposition
None on file.
FISCAL COMMENTS
According to the Assembly Committee, Minor and absorbable costs to DFPI to update guidance.
VOTES:
ASM BANKING AND FINANCE: 9-0-0
YES: Grayson, Chen, Cervantes, Dixon, Mike Fong, Maienschein, Petrie-Norris, Blanca Rubio, Soria
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
ASSEMBLY FLOOR: 65-0-15
YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk‑Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
ABS, ABST OR NV: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis
SENATE FLOOR: 40-0-0
YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
UPDATED
VERSION: July 3, 2024
CONSULTANT: Luke Reidenbach / B. & F. / (916) 319-3081 FN: 0004298
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | AB 2062 |
THIRD READING
Bill No: AB 2062
Author: Grayson (D)
Amended: 7/3/24 in Senate
Vote: 21
SENATE BANKING & F.I. COMMITTEE: 6-0, 6/19/24
AYES: Limón, Niello, Caballero, Min, Nguyen, Portantino
NO VOTE RECORDED: Bradford
SENATE JUDICIARY COMMITTEE: 11-0, 7/2/24
AYES: Umberg, Wilk, Allen, Ashby, Caballero, Durazo, Laird, Niello, Roth, Stern, Wahab
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 65-0, 5/9/24 (Consent) - See last page for vote
SUBJECT: Credit unions
SOURCE: California Credit Union League
DIGEST:
This bill makes various technical amendments to the California Credit Union Law, including authorizing the board of directors of a credit union to use an automated system to establish membership eligibility and to delegate dividend policy to specified committees, among other changes.
ANALYSIS:
Existing law:
- Provides the California Credit Union Law, administered by the Department of Financial Protection and Innovation (DFPI), which prescribes the rules applicable to any person, other than a federal credit union, that engages in business as a credit union in this state. (Financial Code § 14000 et seq.)
- Specifies the special duties of directors of a credit union, unless the bylaws expressly reserve any such duties to the members. Among the duties of directors are:
- The duty to act upon all applications for membership, though the directors may delegate such power, pursuant to a written membership plan adopted by the board of directors, to the chairperson of a membership committee or an executive committee or to an officer, director, committee member, or employee. (Financial Code § 14456(a))
- The duty to determine from time to time the interest rate on obligations with members to authorize the payment of interest refunds to borrowing members. (Financial Code § 14456(c))
- The duty to declare dividends on shares in accordance with the credit union’s policies and to determine the interest rate or rates that will be paid on certificates for funds.
- Authorizes a credit union to invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company (LLC), organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by a credit union or group of credit unions. (Financial Code § 14651)
- Prohibits an officer, director, or employee of a credit union from purchasing any of the credit union’s assets for an amount less than the current market value or book value or obligations for less than the book value, unless the board approves the purchase, as specified. Provides that a person who violates the prohibition is liable to the people of this state for each offense in an amount of twice the market value or book value of the assets purchased. (Financial Code §14765 and §14766)
- Requires the members of a credit union to hold an annual meeting for the election of directors; a supervisory committee, unless the board has appointed an audit committee; and a credit committee, if provided for in its bylaws. Requires the meeting to be held upon such notice and at such time as the bylaws provide. (Financial Code § 14804)
- Authorizes a credit union to hold a special meeting of members upon order of the board of directors, as specified. (Financial Code § 14805)
- Authorizes, through December 31, 2025, a nonprofit mutual benefit corporation to conduct an annual meeting remotely, as specified. The corporation may provide, in addition to a live audiovisual feed for remote participation, an audio-only means for a shareholder or proxyholder to participate, provided that the choice to participate via the audio-only means is made by the person, not the corporation, and the corporation does not impose any barriers to either mode of participation. (Corporations Code § 7510)
This bill:
- Authorizes the directors or their delegates to use an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board if all of the following conditions are met:
- The automated system is regularly tested for compliance with laws related to admitting persons for members and the credit union’s field of membership.
- An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with applicable laws.
- The written membership plan includes a plan to address an approved application determined not to be in compliance with applicable laws.
- Authorizes the directors to delegate the following duties to an asset-liability management committee or similar committee, as specified: the payment of interest refunds to borrowing members, the declaration of dividends, and the authority to determine the dividend rates on share accounts.
- Authorizes a credit union to invest in the share of stock of a corporation, or in membership or economic interests of an LLC, organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by one or more credit unions, one or more corporations or LLCs formed by a credit union for the purpose of providing services to credit unions, or any combination thereof. Designates such an entity as a “credit union service organization.”
- Provides that, elated to the prohibition on an officer, director, or employee of a credit union purchasing an asset from the credit union below market value or an obligation or asset below book value, provides that such a person who violates the prohibition is liable in an amount up to twice the market value or book value of the assets purchased.
- Provides that, in calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
- Removes the prohibition on an asset being purchased for less than book value, meaning that the prohibition on sales of assets in this context are governed by only the market value of the asset, not both market value and book value.
- Provides that the method for determining book value of an obligation must be set forth in a written policy that is consistent with generally accepted accounting principles and approved by the board.
- Exempts from this prohibition a purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset does not exceed $500.
- Provides that this prohibition shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift does not exceed $500.
- Authorizes a credit union to hold its annual meeting of members or special meetings of members by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, as provided by existing law that applies to nonprofit mutual benefit corporations.
- Adds back into law a provision that specifies that the savings capital of a credit union consists of the payment made by members on shares and makes conforming changes to relevant sections of the Credit Union Law.
Comments
- Purpose. According to the author, “The California Credit Union League champions a “state-charter modernization bill” every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their trade association, and other stakeholders.”
- Background. State and federal law require a business to receive permission from a federal or state supervisory authority, commonly referred to as a charter, prior to engaging in business as a credit union. In California the Department of Financial Protection and Innovation (DFPI) has the authority to issue a charter to a business to operate as a credit union, while at the federal level, similar authority is granted to the National Credit Union Administration (NCUA). A person or group of people who want to open a credit union in California have the choice of seeking a state charter from DFPI or a federal charter from the NCUA. The choice of which charter to seek may be influenced by a variety of factors, including the differences in authorities, permissions, requirements, and prohibitions imposed on a charterholder by the laws, regulations, and guidance associated with the charter.
Periodically, the California Credit Union League sponsors legislation to amend the statutory law that governs credit unions chartered by DFPI. These bills typically contain a mix of technical and clarifying changes, as well as amendments that mimic or otherwise relate to changes in federal law that affect credit unions. This bill is the latest example of such legislation.
- What the bill does. This bill proposes a variety of disparate changes to the California Credit Union Law related to the following topics:
- Applications for membership. Unlike banks, credit unions are required to establish a field of membership and allow members to join the credit union only if they meet the requirements of the credit union’s field of membership. Under California law, the field of membership of a credit union must consist of groups of persons with a common bond beyond obtaining financial services from the credit union. The three basic forms of groups eligible for membership in a credit unions are groups based upon a common bond of occupation, groups based upon a common bond of association, and groups within a well-defined neighborhood, community, or rural district.
Under existing law, the duty to act upon applications for membership is placed on the directors of the credit union, who may delegate power to approve applications to specified persons in the credit union. The law does not expressly authorize the directors or their delegates to use an automated system to establish membership eligibility. This bill provides such express authorization, subject to safeguards to protect against approval decisions that do not comply with applicable law.
- Paying dividends. Credit unions are owned by their members who may receive distributions of the credit union’s surplus income via dividends. In many cases, these dividends are similar to interest paid on deposits and are distributed based, at least in part, on the amount of funds a member has loaned to the credit union. Credit unions often view their dividend policies in a competitive context relative to interest rates paid by banks or other credit issuers. Thus, when interest rates increase on bank deposits or other short-term obligations, a credit union will likely respond by increasing the amount of money distributed through dividends. If the credit union does not provide a competitive dividend rate, their members may move money out of the credit union and into higher yielding assets.
Existing law requires a credit union’s board of directors to set policies related to dividends, and some credit unions are concerned that boards may not move quickly enough to respond to changes in market interest rates. This bill proposes an authorization to allow boards to delegate authority related to dividends to an asset liability management committee or similar committee, within parameters established by the board.
- Virtual member meetings. Catalyzed by societal changes due to the COVID pandemic, some corporations have transitioned their annual shareholder meetings to predominantly online, remote venues, rather than gathering in a physical location. California has enacted several laws in the past three years, codifying authority for for-profit and nonprofit corporations to hold their shareholder or member meetings remotely. This applies to all of the corporation types, including the Nonprofit Mutual Benefit Corporation Law under which all California credit unions are required to be incorporated. The author and sponsor have conformed the authorization in this bill to existing law that applies to all nonprofit mutual benefit corporations organized under state law.
- Investing in credit union service organizations (CUSOs). CUSOs are business entities organized solely for the purpose of providing services to credit unions and are formed by one or more credit unions. Existing law authorizes a credit union to own a CUSO if it was formed by a credit union, but the law is unclear about a credit union owning a CUSO that was formed by another CUSO. This bill clarifies that a CUSO is an acceptable forming entity; in other words, a credit union can own a CUSO that was formed by another CUSO.
- “Savings capital”. Prior to 2019, the California Credit Union Law provided that “savings capital” consists of the payments made by members on shares. In 2018 the California Credit Union League sponsored a bill that deleted that provision, which also included language that was out of sync with related federal law. However, other provisions of the Credit Union Law continued to use the term “savings capital,” which no longer had a definition in the law. This bill reinstates that definition of “savings capital” and makes conforming changes throughout the Credit Union Law to reference this definition.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
SUPPORT: (Verified 8/5/24)
California Credit Union League (source)
OPPOSITION: (Verified 8/5/24)
None received
ARGUMENTS IN SUPPORT: The California Credit Union League, sponsor of the bill, writes:
The California Credit Union League (CCUL) is the proud sponsor of Assembly Bill 2062 and its efforts to update and strengthen the credit union state charter. Credit unions have the option of either being state-charted or federally chartered entities. Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA) and in California, state-chartered credit unions are regulated by the Department of Financial Protection and Innovation (DFPI). Both federal and state governments periodically update their charters to stay competitive in their appeal and to create an even playing field in the dual charter system. This bill makes necessary updates to the state charter… and upholds the incentive for state-chartered credit unions to benefit from having a regulator with a local perspective. AB 2062 allows credit unions to keep up with the ever-changing landscape and best serve their members and communities across California.
ASSEMBLY FLOOR: 65-0, 5/9/24
AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Chen, Connolly, Davies, Dixon, Essayli, Mike Fong, Vince Fong, Friedman, Gallagher, Garcia, Gipson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Quirk-Silva, Ramos, Rendon, Reyes, Rodriguez, Blanca Rubio, Sanchez, Santiago, Soria, Ta, Valencia, Villapudua, Waldron, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas
NO VOTE RECORDED: Bains, Cervantes, Megan Dahle, Flora, Gabriel, Grayson, Haney, Low, Mathis, Stephanie Nguyen, Petrie-Norris, Luz Rivas, Schiavo, Ting, Wallis
Prepared by: Michael Burdick / B. & F.I. /
8/6/24 16:19:10
**** END ****
Senator Thomas Umberg, Chair
2023-2024 Regular Session
Bill No: AB 2062 (Author:Grayson)
Version: June 24, 2024
Hearing Date: July 2, 2024
Fiscal: Yes
Urgency: No
Consultant: AWM
SUBJECT
Credit unions
DIGEST
This bill makes various technical amendments to the California Credit Union Law, including allowing a credit union to hold a regular or special meeting of the members through telephonic or audiovisual means, among other changes.
EXECUTIVE SUMMARY
State and federal law require a business to receive permission from a federal or state supervisory authority, commonly referred to as a charter, prior to engaging in business as a credit union. A person or group of people who wants to open a credit union in California has the choice of seeking a state charter or a federal charter. The choice of which charter to seek may be influenced by a variety of factors, including the differences in authorities, permissions, requirements, and prohibitions imposed on a charterholder by the laws, regulations, and guidance associated with the charter.
Periodically, the California Credit Union League sponsors legislation to amend the statutory law that governs state-chartered credit unions. These bills typically contain a mix of technical and clarifying changes, as well as amendments that mimic or otherwise relate to changes in federal law that affect credit unions. This bill is the latest example of such legislation and addresses a range of topics, including clarifying self-dealing and credit union eligibility provisions. The author has agreed to amend the bill’s provisions authorizing a credit union to hold a member meeting through fully remote means, to conform that authorization to the authorization granted to other corporations under state law.
This bill is sponsored by the California Credit League. The Committee has not received timely opposition to this bill. The Senate Banking and Financial Institutions Committee passed this bill with a vote of 6-0.
PROPOSED CHANGES TO THE LAW
Existing law:
- Establishes the California Credit Union Law, which governs credit unions operating in the state, except for federally chartered credit unions. (Fin. Code, div. 5, §§ 14000 et seq..)
- Provides that, if and to the extent any provision of the Credit Union Law is preempted by federal law, that provision shall not apply and shall not be enforced. (Fin. Code, § 14001.5.)
- Requires a credit union governed by 1) to be incorporated under the Nonprofit Mutual Benefit Corporation Law of the State, and requires a covered credit union to satisfy certain requirements before filing its articles of incorporation with the Secretary of State. (Fin. Code, §§ 14100-14160.)
- Authorizes the Department of Financial Protection and Innovation (DFPI) to administer the Credit Union Law. (Fin. Code, §§ 14200-14319.)
- Provides that the equity capital of a credit union consists of the credit union’s regular reserve account, the undivided earnings account, any appropriated undivided earnings accounts, and other forms of capital approved by the Commissioner of the DFPI. (Fin. Code, § 14400.)
- Provides that the savings capital, undivided profits, and reserve funds of a credit union shall be deposited only in the following:
- Commercial banks or trust companies incorporated under the laws of this state.
- National banks doing business in this state.
- Shares or periodic certificates received by, or any form of evidence of interest or indebtedness issued by, any credit union organized under the Credit Union Law, federal law, or as determined acceptable by the Commissioner of the DFPI. (Fin. Code, § 14406.)
- Provides that the directors of a credit union shall have all of the following duties, unless the bylaws expressly reserve any or all of the duties to the members:
- To act upon all applications for membership; the directors may delegate this power, as specified.
- To expel members for specified causes; the directors may delegate this power, as specified.
- To determine the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing members.
- To fix the maximum number of shares that may be held by, and establish the maximum amount of obligations which may be entered into with, one member.
- To declare dividends on shares in accordance with the credit union’s policies and to determine the interest rate or rates that will be paid on certificates for funds.
- To amend the bylaws, except where membership approval is required.
- To fill vacancies in the credit committee and temporarily fill in vacancies, as specified.
- To direct the deposit or investment of funds, except loans to members.
- To designate alternate members of the credit committee who shall serve in the absence or inability of the regular members to perform their duties.
- 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 prescribe. (Fin. Code, § 14456.)
- Provides that every credit union may invest in the following securities:
- The shares of stock of a corporation, or in membership or economic interests of a limited liability company (LLC), organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by a credit union or group of credit unions.
- The securities of a corporation or in membership or economic interests of an LLC that is not a corporation or LLC of the type described in 8)(a) and that provides services to credit unions, provided that the investment is approved by the Commissioner of the DFPI. (Fin. Code, § 14651.)
- Provides that no officer, director, or employee of a credit union, directly or indirectly, shall purchase or be interested in the purchase of:
- Any of the credit union’s assets for an amount less than the current market value thereof.
- Any of the credit union’s obligations or assets for an amount less than the book value thereof, unless all the directors of the credit union previously approve the purchase by resolution and a copy of the resolution is delivered to the Commissioner of the DFPI immediately after adoption. (Fin. Code, §§ 14765, 14766.)
- Provides that a person violating 9) shall be liable to the people of the State for each offense in the amount of twice the value of the obligation or asset. (Fin. Code, § 14765, 14766.)
- Provides that the members of a credit union shall hold an annual meeting for the election of directors, a supervisory committee, as specified, and a credit committee, if provided for in its bylaws; the annual meeting shall be held upon such notice and such time and place as the bylaws provide. (Fin. Code, § 14804.)
- Provides that special meetings of the members of a credit union may be held upon order of the board of directors, or upon the written request of 10 members or 3 percent of membership, whichever is greater. Notice of special meetings must be given to all members specifying the date, time, place, and purpose of the meeting. (Fin. Code, § 14805.)
- Imposes restrictions on when a credit union may enter into an obligation with an official, including limiting the aggregate amount of all obligations outstanding to officials, except obligations fully secured by shares, shall not exceed 20 percent of the aggregate dollar amount of all savings capital of the credit union.
- An “obligation” is any loan or approved line of credit, including both used and unused portions, on which the official is a borrower, co-borrower, cosigner, endorser, or guarantor.
- An “official” is a director, member of the supervisory committee, member of the audit committee, or member of the credit committee of the credit union. (Fin. Code, § 15050.)
- Requires the board of directors of a credit union to establish written policies which shall set forth the policies of the credit union with respect to any obligation that is offered to the members of the credit union, including the maximum amounts and terms for any obligation offered and other specified terms. (Fin. Code, § 15100.)
This bill:
- Provides that the savings capital of a credit union shall consist of the payments made by members on shares, and adds cross-references to this definition where the Credit Union Law refers to the savings capital.
- Authorizes the directors of a credit union to utilize an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board of directors if all of the following conditions are met:
- The automated system is regularly tested for compliance with the credit union’s membership criteria, the credit union’s field of membership, and applicable laws and regulations.
- An application for new membership approved using an automated system is reviewed by directors or their delegates within five business days to ensure compliance with 2)(a).
- The written membership plan includes a plan to address an approved application determined not to be in compliance with 2)(a).
- Authorizes the board of directors of a credit union to, by resolution, delegate the following to an asset-liability management committee or similar committee, consistent with the policies of the board of directors:
- Determining the interest rate on obligations with members and authorizing the payment of interest refunds to borrowing members.
- Declaring dividends on shares in accordance with the credit union’s policies and determining the interest rate or rates that will be paid on certificates for funds.
- The authority to determine the dividend rates on share accounts, as specified.
- Provides, in connection with a delegation to an asset-liability management committee or similar committee pursuant to 3):
- The asset-liability management committee or similar committee may be composed of directors, nondirector management officials, or both directors and nondirector management officials.
- The asset-liability management committee or similar committee shall provide a report to the board of directors, at least monthly, that specifies any actions taken.
- Provides that a credit union may invest in the shares of stock of a corporation, or in membership or economic interests of an LLC, organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by one or more credit unions, one or more corporations or LLCs.
- Defines a “credit union service organization” to include an organization set forth in 5) or a corporation or LLC defined in the existing Financial Code section 14651(a).
- Clarifies the prohibitions on an officer, director, or employee purchasing the assets or obligations of a credit union, by doing all of the following:
- Removing the references to “assets” from the statute addressing obligations, to create a clear distinction between the restrictions relating to assets and those relating to obligations.
- Providing that, in calculating the fair market value of an asset, the credit union may use the average of value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
- Providing that the method used for determining the book value of an obligation shall be set forth in a written policy governing the sale of credit union obligations established and approved by the board of directors, and must be consistent with generally accepted accounting principles.
- Providing that the prohibition on the purchase of a credit union’s assets does not apply to the purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset or assets purchased does not exceed $500 in the aggregate, and that the prohibition does not prohibit the credit union from making a gift to an officer or director if the current market value of the gift or gifts does not exceed $500 in the aggregate.
- Provides that, unless prohibited by the articles or bylaws of the credit union, an annual meeting or special meeting of the shareholders of a credit union may be conducted in whole or in part by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication if the credit union implements reasonable measures to do the following:
- To provide members and proxyholders, if proxyholders are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings.
- If any member or proxyholder, if proxies are allowed, votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records.
- To verify that each person who has voted remotely is a member or proxyholder, if proxies are allowed.
- Provides that a credit union may conduct a member meeting solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, provided that any member unable to participate using the method selected is offered a reasonable alternative method to participate. A de minimis disruption of an audio or audiovisual feed does not require a credit union to end a meeting under, or render the corporation out of compliance with, this requirement.
COMMENTS
- Author’s comment
According to the author:
The California Credit Union League champions a “state-charter modernization bill” every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their trade association, and other stakeholders.
2. Background on state and federal credit unions
“A credit union is a cooperative, organized for the purposes of promoting thrift and saving among its members, creating a source of credit for them at rates of interest set by the board of directors, and providing an opportunity for them to use and control their own money on a democratic basis in order to improve their economic and social conditions.”[1] Credit unions can be organized under state or federal law. The Federal Credit Union Act governs federally chartered credit unions, under the administration of the National Credit Union Administration (NCUA).[2] Credit unions chartered within this state are governed by the Credit Union Law, which is administered by the DFPI.[3] The State retains its authority to govern state-chartered credit unions except where expressly preempted by federal law.[4]
3. This bill makes a variety of changes to the California Credit Union Law
This bill, which is sponsored by the California Credit Union League, makes a number of changes to the California Credit Union Law. The bill is intended to “clean up” provisions within the California Credit Union Law; the Legislature generally passes such a bill every few years.[5]
This bill would do all of the following:
- Authorize directors or their delegates to use an automated system to establish eligibility for membership in a credit union, provided that the automated membership eligibility applications are reviewed by the directors or their delegates within five business days of the application.
- Authorize boards to delegate authority relating to dividends to an asset liability management committee or similar committee, subject to parameters established by the board. This is intended to permit credit unions to be able to respond more quickly to shifts in market rates, thereby making it easier for credit unions to offer competitive dividend rates.
- Authorize credit unions to hold annual and special meetings through specified remote means. This provision is discussed further in Part 4, and the author has agreed to the amendments set forth in Part 5.
- Authorize a credit union to own a credit union service organization (CSUO) that was formed by a CSUO. Current law allows a credit union to own a CSUO if it was formed by a credit union, but does not expressly permit a credit union to own a CSUO formed by a CSUO.
- Clarify provisions relating to prohibited self-dealing between a credit union and an officer, director, or employee of the credit union. Current law prohibits a credit union from selling assets to its officers, directors, or employees for less than they are worth, but is silent as to how the value of the asset should be calculated. This bill adds methods for determining the market and book values of an asset, and adds an exemption to the self-dealing prohibition for gifts and assets under $500 in the aggregate.
- Reinstate the definition of “savings capital.” This definition was deleted in 2019, in a bill sponsored by the California Credit Union League, as part of the deletion of a broader provision that was no longer consistent with federal law. This bill reinstates that definition, because the term “savings capital” is used elsewhere in the California Credit Union Law.
These provisions are discussed in further detail in the Senate Banking and Financial Institutions Committee’s analysis of this bill, which is incorporated herein by reference.
4. The scope of this bill’s remote meetings provision exceeds what is permitted under state or federal law
Current state law permits corporations—including corporations incorporated under the Nonprofit Mutual Benefit Corporation Law—to hold fully remote shareholder or member meetings, without the consent of the shareholders or members, if one of two conditions are met: (1) the remote meeting is necessary due to a state of emergency, or (2) the meeting is conducted via a live audiovisual feed for the duration of the meeting.[6] The corporation may offer an audio-only feed in addition to the audiovisual feed, and must take certain steps to protect the integrity of the meeting, such as providing means by which shareholders or members can participate and vote in the meeting.[7]
At the federal level, the NCUA has expressly declined to authorize fully remote member meetings for federally chartered credit unions except as an emergency measure during the height of the COVID-19 pandemic.[8] In 2019, prior to the pandemic, the NCUA considered requests to implement a remote-only meeting option to its model federal credit union bylaws and declined, instead implementing the option for a hybrid model.[9] At the time, the NCUA expressed concern that “a movement towards completely virtual meetings in an effort to increase member access to meetings could unintentionally result in member disenfranchisement” and harm “the rights of members who do not have access to electronic devices or who may live in areas without access to broadband internet.”[10] During the COVID-19 pandemic, the NCUA authorized fully remote meetings on an emergency basis; at the end of 2022, however, the NCUA issued guidance requiring federal credit unions to resume in-person or hybrid member meetings beginning in 2023.[11] The NCUA reminded federal credit unions that hybrid meetings remained an option under the current regulations, and that hybrid meetings should be sufficient to preserve credit union resources and reduce the effort required to hold in-person meetings.[12]
This bill would give state-chartered credit unions more leeway to hold fully remote member meetings than is granted to other state corporations or to federally chartered credit unions. Specifically, this bill would allow state-chartered credit unions to hold fully remote annual and specially set member meetings, without the consent of the members, via a telephonic means only. The author has agreed to amend the bill to conform the remote meeting provisions to the provisions in the Nonprofit Mutual Benefit Corporation Law, under which all California credit unions are required to be incorporated.
5. Amendments
To ensure that members of state-chartered credit unions have the same protections relating to remote shareholder meetings as members of other nonprofit corporations in the state, the author has agreed to amend the bill to permit credit unions to hold fully remote shareholder meetings under the same terms as other nonprofit mutual benefit corporations. The amendments are as follows, subject to any nonsubstantive changes the Office of Legislative Counsel may make.
Amendment 1
At page 9, delete lines 3-31 and insert:
“(b) Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.”
Amendment 2
At page 10, delete lines 1-6 and insert:
“(b) Unless prohibited by the articles or bylaws of the credit union, a regular or special meeting of the members, including an annual meeting, may be conducted, in whole or in part, by means of remote communication as set forth in subdivision (f) of Section 7510 of the Corporations Code.”
6. Arguments in support
According to the California Credit League, the bill’s sponsor:
The California Credit Union League (CCUL) is the proud sponsor of Assembly Bill 2062 and its efforts to update and strengthen the credit union state charter. Credit unions have the option of either being state-charted or federally chartered entities. Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA) and in California, state-chartered credit unions are regulated by the Department of Financial Protection and Innovation (DFPI). Both federal and state governments periodically update their charters to stay competitive in their appeal and to create an even playing field in the dual charter system. This bill makes necessary updates to the state charter that are outlined below and upholds the incentive for state-chartered credit unions to benefit from having a regulator with a local perspective. AB 2062 allows credit unions to keep up with the ever-changing landscape and best serve their members and communities across California.
SUPPORT
California Credit Union League (sponsor)
OPPOSITION
None received
RELATED LEGISLATION
Pending Legislation: AB 2908 (Chen, 2024) removes the sunset on the provisions authorizing corporations organized under the General Corporation Law, certain nonprofit corporations, and cooperative corporations to hold fully remote shareholder meetings without the consent of the shareholders. AB 2908 is pending on the Senate Floor.
Prior Legislation:
SB 269 (Portantino, Ch. 762, Stats. 2021) updated provisions of the Credit Union Law and increases parity between state law applicable to state-chartered credit unions and federal law applicable to federally chartered credit unions.
SB 1031 (Portantino, 2020) was substantially similar to SB 269. SB 269 was held in the Senate Banking and Financial Institutions Committee due to COVID-19-related bill limits.
AB 2862 (Limón, Ch. 267, Stats. 2018) made assorted changes to the Credit Union Law in order to increase parity between state-chartered and federally chartered credit unions.
PRIOR VOTES:
Senate Banking and Financial Institutions Committee (Ayes 6, Noes 0)
Assembly Floor (Ayes 65, Noes 0)
Assembly Appropriations Committee (Ayes 14, Noes 0)
Assembly Banking and Finance Committee (Ayes 9, Noes 0)
**************
Fin. Code, § 14002. ↑
12 U.S.C. §§ 1751 et seq. ↑
Fin. Code, div. 5, §§ 14000 et seq. ↑
Id., § 14001.5. ↑
See Prior legislation, infra. ↑
Corp. Code, § 7510. The authorization for fully remote meetings via an audiovisual feed is set to sunset on December 31, 2025; AB 2908 (Chen, 2024), which this Committee passed with a vote of 11-0, would eliminate the sunset. ↑
Corp. Code, § 7510. ↑
See 12 C.F.R. pt. 701, App’x A, art. IV, § 1. ↑
See NCUA final rule, Federal Credit Union Bylaws, 84 Fed. Reg. 53278-01, 53283. ↑
Ibid. ↑
NCUA Letter to Credit Unions 22-FCU-03 (Dec. 7, 2022), available at https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/expiration-emergency-exemption-certain-person-meeting-requirements?utm_medium=email&utm_source=NCUAgovdelivery. Link current as of June 27, 2024. ↑
Ibid. ↑
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Monique Limón, Chair
2023 - 2024 Regular
Bill No: AB 2062 Hearing Date: June 19, 2024
Author: | Grayson | ||
Version: | April 1, 2024 Amended | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Michael Burdick | ||
Subject: Credit unions
SUMMARY
This bill makes various technical amendments to the California Credit Union Law, including authorizing the board of directors of a credit union to use an automated system to establish membership eligibility and to delegate dividend policy to specified committees, among other changes.
EXISTING LAW
- Provides the California Credit Union Law, administered by the Department of Financial Protection and Innovation (DFPI), which prescribes the rules applicable to any person, other than a federal credit union, that engages in business as a credit union in this state. (Financial Code Section 14000 et seq.)
- Specifies the special duties of directors of a credit union, unless the bylaws expressly reserve any such duties to the members. Among the duties of directors are:
- The duty to act upon all applications for membership, though the directors may delegate such power, pursuant to a written membership plan adopted by the board of directors, to the chairperson of a membership committee or an executive committee or to an officer, director, committee member, or employee. (Financial Code Section 14456(a))
- The duty to determine from time to time the interest rate on obligations with members to authorize the payment of interest refunds to borrowing members. (Financial Code Section 14456(c))
- The duty to declare dividends on shares in accordance with the credit union’s policies and to determine the interest rate or rates that will be paid on certificates for funds.
- Authorizes a credit union to invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company (LLC), organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by a credit union or group of credit unions. (Financial Code Section 14651)
- Prohibits an officer, director, or employee of a credit union from purchasing any of the credit union’s assets for an amount less than the current market value or book value or obligations for less than the book value, unless the board approves the purchase, as specified. Provides that a person who violates the prohibition is liable to the people of this state for each offense in an amount of twice the market value or book value of the assets purchased. (Financial Code Sections 14765 and 14766)
- Requires the members of a credit union to hold an annual meeting for the election of directors; a supervisory committee, unless the board has appointed an audit committee; and a credit committee, if provided for in its bylaws. Requires the meeting to be held upon such notice and at such time as the bylaws provide. (Financial Code Section 14804)
- Authorizes a credit union to hold a special meeting of members upon order of the board of directors, as specified. (Financial Code Section 14805)
- Authorizes, through December 31, 2025, a nonprofit mutual benefit corporation to conduct an annual meeting remotely, as specified. The corporation may provide, in addition to a live audiovisual feed for remote participation, an audio-only means for a shareholder or proxyholder to participate, provided that the choice to participate via the audio-only means is made by the person, not the corporation, and the corporation does not impose any barriers to either mode of participation. (Corporations Code Section 7510)
THIS BILL
- Authorizes the directors or their delegates to use an automated system to establish membership eligibility pursuant to a written membership plan adopted by the board if all of the following conditions are met:
- The automated system is regularly tested for compliance with laws related to admitting persons for members and the credit union’s field of membership.
- An application for new membership approved using an automated system is reviewed by the directors or their delegates within five business days to ensure compliance with applicable laws.
- The written membership plan includes a plan to address an approved application determined not to be in compliance with applicable laws.
- Authorizes the directors to delegate the following duties to an asset-liability management committee or similar committee, as specified: the payment of interest refunds to borrowing members, the declaration of dividends, and the authority to determine the dividend rates on share accounts.
- Authorizes a credit union to invest in the share of stock of a corporation, or in membership or economic interests of an LLC, organized solely for the purpose of providing services to credit unions, provided the corporation or LLC is formed by one or more credit unions, one or more corporations or LLCs formed by a credit union for the purpose of providing services to credit unions, or any combination thereof. Designates such an entity as a “credit union service organization.”
- Related to the prohibition on an officer, director, or employee of a credit union purchasing an asset from the credit union below market value or an obligation or asset below book value, provides that such a person who violates the prohibition and the credit union from which the purchase was made are jointly and severally liable in an amount up to twice the market value or book value of the assets purchased.
- Provides that, in calculating the market value of an asset, the credit union may use the average value of two valuations of the asset from two separate third parties recognized in the industry for establishing market value in connection with a private-party purchase and sale of comparable assets.
- Removes the prohibition on an asset being purchased for less than book value, meaning that the prohibition on sales of assets in this context are governed by only the market value of the asset, not both market value and book value.
- Provides that the method for determining book value of an obligation must be set forth in a written policy that is consistent with generally accepted accounting principles and approved by the board.
- Exempts from this prohibition a purchase of used credit union equipment or furnishings by an officer or director if the current market value of the asset does not exceed $500.
- Provides that this prohibition shall not be construed to prohibit the credit union from making a gift to an officer or director if the current market value of the gift does not exceed $500.
- Authorizes a credit union to hold its annual meeting of members or special meetings of members by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, unless prohibited by the articles or bylaws of the credit union.
- For meeting conducted remotely, the credit union must implement reasonable measures to provide members and proxyholders a reasonable opportunity to participate and to vote, to maintain a record of votes or actions in its books and records, and to verify that each person who has voted remotely is a member or proxyholder.
- A credit union must provide a reasonable alternative method to participate in an annual meeting for persons unable to participate by the remote method selected.
- Adds back into law a provision that specifies that the savings capital of a credit union consists of the payment made by members on shares and makes conforming changes to relevant sections of the Credit Union Law.
COMMENTS
- PURPOSE
According to the author:
The California Credit Union League champions a “state-charter modernization bill” every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their trade association, and other stakeholders.
- BACKGROUND
State and federal law require a business to receive permission from a federal or state supervisory authority, commonly referred to as a charter, prior to engaging in business as a credit union. In California the Department of Financial Protection and Innovation (DFPI) has the authority to issue a charter to a business to operate as a credit union, while at the federal level, similar authority is granted to the National Credit Union Administration (NCUA). A person or group of people who want to open a credit union in California have the choice of seeking a state charter from DFPI or a federal charter from the NCUA. The choice of which charter to seek may be influenced by a variety of factors, including the differences in authorities, permissions, requirements, and prohibitions imposed on a charterholder by the laws, regulations, and guidance associated with the charter.
Periodically, the California Credit Union League sponsors legislation to amend the statutory law that governs credit unions chartered by DFPI. These bills typically contain a mix of technical and clarifying changes, as well as amendments that mimic or otherwise relate to changes in federal law that affect credit unions. This bill is the latest example of such legislation.
- WHAT THIS BILL DOES
This bill proposes a variety of disparate changes to the California Credit Union Law related to the following topics:
- Applications for membership
Unlike banks, credit unions are required to establish a field of membership and allow members to join the credit union only if they meet the requirements of the credit union’s field of membership. Under California law, the field of membership of a credit union must consist of groups of persons with a common bond beyond obtaining financial services from the credit union. The three basic forms of groups eligible for membership in a credit unions are groups based upon a common bond of occupation, groups based upon a common bond of association, and groups within a well-defined neighborhood, community, or rural district.
Under existing law, the duty to act upon applications for membership is placed on the directors of the credit union, who may delegate power to approve applications to specified persons in the credit union. The law does not expressly authorize the directors or their delegates to use an automated system to establish membership eligibility. This bill provides such express authorization, subject to safeguards to protect against approval decisions that do not comply with applicable law.
- Paying dividends
Credit unions are owned by their members who may receive distributions of the credit union’s surplus income via dividends. In many cases, these dividends are similar to interest paid on deposits and are distributed based, at least in part, on the amount of funds a member has loaned to the credit union. Credit unions often view their dividend policies in a competitive context relative to interest rates paid by banks or other credit issuers. Thus, when interest rates increase on bank deposits or other short-term obligations, a credit union will likely respond by increasing the amount of money distributed through dividends. If the credit union does not provide a competitive dividend rate, their members may move money out of the credit union and into higher yielding assets.
Existing law requires a credit union’s board of directors to set policies related to dividends, and some credit unions are concerned that boards may not move quickly enough to respond to changes in market interest rates. This bill proposes an authorization to allow boards to delegate authority related to dividends to an asset liability management committee or similar committee, within parameters established by the board.
- Virtual member meetings
Catalyzed by societal changes due to the COVID pandemic, some corporations have transitioned their annual shareholder meetings to predominantly online, remote venues, rather than gathering in a physical location. California has enacted several laws in the past three years, codifying authority for for-profit and nonprofit corporations to hold their shareholder or member meetings remotely.
This bill adopts similar language as those recently enacted laws, except this bill allows audio-only meetings where other laws do not. Existing law authorizes a corporation to offer an audio-only option if the corporation offers an audiovisual one and does not impose any barriers to either mode of participation. This applies to all of the corporation types, including the Nonprofit Mutual Benefit Corporation Law under which all California credit unions are required to be incorporated. The author and sponsor have expressed willingness to conform to existing law and are encouraged to do so in the next committee.
- Investing in credit union service organizations (CUSOs)
CUSOs are business entities organized solely for the purpose of providing services to credit unions and are formed by one or more credit unions. Existing law authorizes a credit union to own a CUSO if it was formed by a credit union, but the law is unclear about a credit union owning a CUSO that was formed by another CUSO. This bill clarifies that a CUSO is an acceptable forming entity; in other words, a credit union can own a CUSO that was formed by another CUSO.
- “Savings capital”
Prior to 2019, the California Credit Union Law provided that “savings capital” consists of the payments made by members on shares. In 2018 the California Credit Union League sponsored a bill that deleted that provision, which also included language that was out of sync with related federal law. However, other provisions of the Credit Union Law continued to use the term “savings capital,” which no longer had a definition in the law. This bill reinstates that definition of “savings capital” and makes conforming changes throughout the Credit Union Law to reference this definition.
- WHO SHOULD BEAR LIABILITY FOR SELF-DEALING
Existing law protects against certain types of self-dealing, where an officer, director, or employee of a credit union purchases an asset or obligation of the credit union below its fair value. A person who violates existing law is strictly liable for twice the fair value of the asset purchased. This bill proposes to make the person who purchased the asset and the credit union jointly and severally liable and allows discretion in assessing the amount of liability, up to twice the fair value of the asset purchased.
A credit union is owned by its members, and these prohibitions on self-dealing are intended to protect the interests of those members. But if an insider at the credit union were to violate this law, the credit union is on the hook given the joint and several liability proposed by this bill. This means that the credit union members could ultimately foot the bill for an insider’s unlawful behavior.
The author and sponsor point out that existing law is inflexible in the required penalty. Take an example where a credit union employee buys a repossessed car from the credit union with a market value of $40,000, but the employee pays only $35,000. As constructed, the penalty is twice the market value of the asset purchased, meaning the employee owes a penalty of $80,000 to DFPI. The sponsor expresses concern that this law may harshly penalize a relatively low-level employee who has no influence over setting the price of the asset, no influence over setting the policies of the credit union in relation to selling assets to insiders, and a low probability of having any knowledge of the prohibition provided by this law.
To protect credit union members from self-dealing while acknowledging the potential inequity in a stringent penalty, Committee staff recommends deleting from these sections the amendments that would make the credit union jointly and severally liable, while retaining the proposed amendment related to the penalty of up to twice the fair value of the asset. Providing flexibility in the penalty amount allows DFPI the ability to consider the facts and circumstances of a violation and to levy a fair penalty reflective of those considerations.
- ARGUMENTS IN SUPPORT
The California Credit Union League, sponsor of the bill, writes:
The California Credit Union League (CCUL) is the proud sponsor of Assembly Bill 2062 and its efforts to update and strengthen the credit union state charter. Credit unions have the option of either being state-charted or federally chartered entities. Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA) and in California, state-chartered credit unions are regulated by the Department of Financial Protection and Innovation (DFPI). Both federal and state governments periodically update their charters to stay competitive in their appeal and to create an even playing field in the dual charter system. This bill makes necessary updates to the state charter… and upholds the incentive for state-chartered credit unions to benefit from having a regulator with a local perspective. AB 2062 allows credit unions to keep up with the ever-changing landscape and best serve their members and communities across California.
- AMENDMENTS
Committee staff recommends and the author has agreed to remove the provision making a credit union joint and severally liable for violations of the prohibition on self-dealing.
- DOUBLE-REFERRAL
This bill is double referred to the Committee on Judiciary.
- PRIOR LEGISLATION
- SB 269 (Portantino, Chapter 762, Statutes of 2021) made assorted changes to California Credit Union Law, including changes related to examinations, the expulsion of members, inactive accounts, and audit committees.
- AB 2862 (Limon, Chapter 267, Statutes of 2018) enacted five provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
- AB 2274 (Dababneh, Chapter 353, Statutes of 2016) enacted six provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Credit Union League (sponsor)
Opposition
None received
-- END --
Date of Hearing: May 1, 2024
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
ABPCA Bill Id:AB 2062
Author:(Grayson) – As Amended Ver:April 1, 2024
Policy Committee: | Banking and Finance | Vote: | 9 - 0 |
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Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill updates various provisions of California Credit Union Law (CCUL).
Specifically, this bill:
- Provides that the savings capital of a credit union consists of the payments made by members on shares.
- Authorizes the board of directors of a credit union to utilize, subject to certain review requirements, an automated system to establish membership eligibility pursuant to an adopted written membership plan and authorizes the board to delegate, by resolution and consistent with board policies, certain duties to an asset-liability management committee.
- Authorizes a credit union to invest in additional credit union services organizations.
- Revises the prohibition of an officer, director, or employee from purchasing a credit union asset or obligation for less than market or book value by: (a) holding the credit union jointly and severally liable for a violation, not just the offending person, (b) prescribing the method the credit union may use to determine the market or book value, and (c) exempting from the asset prohibition any used equipment or furnishings aggregately valued at $500 or less.
- Allows member and board meetings to be conducted virtually, provided certain participation and vote verification requirements are met.
FISCAL EFFECT:
Minor and absorbable costs to the Department of Financial Protection and Innovation (DFPI) to update guidances.
COMMENTS:
- Purpose. According to the author:
The California Credit Union League champions a “state-charter modernization bill” every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with both federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their league, and other stakeholders.
This bill is sponsored by the California Credit Union League.
- Dual Licensing Framework. Credit unions in California operate under a dual licensing framework. Credit unions chartered by the federal government are regulated by the National Credit Union Administration and credit unions chartered by the state are regulated by DFPI. California’s state charter provides similar authorities, requirements and characteristics as the federal charter, but proponents of the dual licensing framework argue this system encourages competition between federal and state regulators that fosters an innovative and safe banking environment. As of March 1, 2024, 112 state-chartered credit unions were operating in California.
This bill reflects updates to state law proposed by state-charted credit unions. Most substantively, this bill: (a) modifies the rules around the sale of credit union assets by establishing a uniform method of calculating market and book values and establishing a $500 de minimis exception, (b) establishes the conditions under which a credit union can use routine automated decision system technology, and (c) authorizes remote meetings if the credit union complies with certain process rules.
- Prior Legislation. SB 269 (Portantino), Chapter 762, Statutes of 2021, updated various provisions of CCUL, including changes related to examinations, the expulsion of members, inactive accounts, and audit committees.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: April 15, 2024
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Timothy Grayson, Chair
ABPCA Bill Id:AB 2062 (
Author:Grayson) – As Amended Ver:April 1, 2024
SUBJECT: Credit unions
SUMMARY: Makes assorted changes to California Credit Union Law (Credit Union Law), including changes related to membership applications, governance structures, sale of credit union assets, and virtual member meetings.
Specifically, this bill:
- Specifies that a credit union’s “savings capital” consists of payments made by members on shares, and makes corresponding changes to references to “savings capital” in the Credit Union Law.
- Allows a credit union to use an automated system to establish membership eligibility if specified conditions are met.
- Authorizes a board of directors to, by resolution, delegate its authority to declare dividends or set dividend rates to an asset-liability management committee consisting of directors, non-director management officials, or both.
- Authorizes a credit union to invest in a credit union services organization (CUSO) where the CUSO is formed by one or more credit unions and one or more CUSOs, or any combination thereof.
- Makes the following changes to provisions prohibiting an officer, director, or employee from purchasing any credit union asset for less than the then-market value:
- Specifies that the method used to determine market value shall be the average of the value of the asset as determined by no less than three independent sources recognized in the industry for establishing market value with a private-party purchase and sale of comparable assets.
- Exempts from the prohibition any used equipment or furnishings that do not exceed $500 in the aggregate
- Allows the annual credit union member meetings to elect directors, a supervisory committee, and a credit meeting, as well as any special meeting held upon the order of the board, to be conducted virtually, as long as specified steps are taken related to participation and vote verification.
EXISTING LAW:
Credit Union Law
- Provides for the California Credit Union Law (Financial Code Section 14000 et. seq.), administered by the Department of Financial Protection and Innovation (DFPI), which prescribes the rules applicable to any person, other than a federal credit union, that engages in business as a credit union in this state. (Financial Code Section 14001.1)
- Authorizes DFPI to investigate the affairs and examine the books, accounts, records, files, and any office within or outside this state that is used in the business of a credit union, and provides that an examination made by the commissioner in conjunction with or with assistance from the National Credit Union Administration (NCUA) or a credit union regulatory agency of another state is deemed to be an examination made by the commissioner. (Financial Code Section 14250)
- Authorizes a credit union to admit to membership a person qualified for membership upon either the purchase of a membership or one or more shares as provided by the credit union’s bylaws or the payment of an entrance fee established by the board of directors. (Financial Code Section 14800)
- Provides the board of directors with the duty to act upon all applications for membership and authorizes directors to delegate the power to approve applications to a membership committee or an executive committee or to an officer, director, committee member, or employee. (Financial Code Section 14456)
- Provides the board of directors with the duty to determine from time to time the interest rate on obligations with members and to authorize the payment of interest refunds to borrowing member and declare dividends on shares in accordance with the credit union’s policies and to determine the interest rate or rates that will be paid on certificates for funds. (Financial Code Section 14456)
- Authorizes a credit union to invest in the shares of stock of a corporation, or in membership or economic interests of a limited liability company, organized solely for the purpose of providing services to credit unions, provided the corporation or limited liability company is formed by a credit union or group of credit unions. (Financial Code Section 14651)
- Prohibits an officer, director, or employee of a credit union from purchasing, directly or indirectly, or being interested in purchasing, any of the credit union’s assets for an amount less than the current market value or any of the credit union’s obligations for an amount less than the book value. (Financial Code Sections 14765 and 14766)
- Requires members of a credit union to hold an annual member meeting for the election of directors, a supervisory committee, and a credit committee, and authorizes a special meeting of the members upon order of the board of directors. (Financial Code Sections 14766 and 148004)
Nonprofit Corporation Law
- Authorizes a board to create one or more committees, consisting of two or more board directors, to have the authority of the board, except with respect to specified duties such as compensation setting and filling board vacancies.
- Allows a nonprofit mutual benefit corporation to conduct a meeting of its members, in whole or in part, by electronic transmission by and to the corporation, under specified conditions. (Corporations Code Section 7510)
FISCAL EFFECT: Unknown. This bill is keyed fiscal by Legislative Counsel.
COMMENTS:
- Purpose.
According to the author:
The California Credit Union League champions a “state-charter modernization bill” every few years to promote governance and management efficiencies and to keep state-chartered credit unions on an even playing field with both federally chartered credit unions. Between modernization clean up bills, the League compiles a list of issues brought to them by their members. AB 2062 is the culmination of many discussions between state-chartered credit unions, their league, and other stakeholders
- How does a credit union work?
A credit union is a not-for-profit cooperative that accepts deposits, makes loans, and offers a variety of financial services and products to its members. Under state law, a credit union is formed for the purposes of “creating a source of credit for [members] at rates of interest set by the board of directors, and providing an opportunity for them to use and control their own money on a democratic basis in order to improve their economic and social condition.”
In many important ways, a credit union functions similarly as a bank and is subject to comparable rules and requirements designed to ensure the safety and soundness of the institution. But, as a cooperative corporation, a credit union is organized and managed much differently than a traditional bank. For example, a credit union is subject to a “field of membership” requirement, meaning that its membership must be limited to groups with a “common bond.” This common bond requirement is the reason a credit union may consist of members of a church or labor union, employees of one company, or residents of a defined geographic area.
A credit union also has unique governance because of its nonprofit cooperative structure. A credit union’s unpaid board of directors is elected by the credit union’s members, who each have a vote regardless of how much money they have held at the credit union. State law also establishes duties and roles for committees and leadership, including the credit committee and the audit committee.
- How is a credit union regulated?
A credit union, like a bank, operates under a dual licensing framework and is chartered (or licensed) by the state or by the federal government. The type of charter determines which agency supervises the credit union, with the National Credit Union Administration (NCUA) regulating federally-chartered credit unions and DFPI regulating state-chartered credit unions. California’s state charter provides similar authorities, requirements, and characteristics as the federal charter, and as of March 1, 2024, there were 112 state-chartered credit unions operating in California.
At first glance, it is unclear whether there are any direct societal benefits from a dual-charter system. After all, much of the oversight of financial institutions like banks and credit unions occurs at the federal level. The addition of state regulators seems like adding more cooks to a kitchen filled with a mix of regulators with different purviews, interests, and expertise.
However, regulators and industry argue the dual-charter system works well for both consumers and industry. The availability of a state charter or both banks and credit unions is believed to produce real and tangible benefits by making the federal and state governments “compete” for financial institutions. For example, DFPI’s website cites a number of advantages for financial institutions that obtain a California charter. Among the benefits are lower fees and assessments, minimal intrusion of examiners into institutions that are well-managed and well-capitalized, and more direct and timelier contact with the regulator. DFPI states that the “combination of access, low fees, favorable state laws, and expertise and experience of the Department’s staff, make the state charter the charter of choice for California financial institutions.”[1]
- Major provisions
As noted above, this bill makes a variety of modifications to California’s state credit union charter. These changes are meant to update current law to reflect modern industry practices or to achieve more efficiencies. In sum, these changes aim to make the state credit union charter more attractive. Proposed changes include:
- Reinserting the definition of “savings capital” into the Law. Prior to 2019, the Credit Union Law required a credit union’s board of directors to establish a written savings capital structure policy to set out the terms and conditions upon which credit union shares may be issued, transferred, or withdrawn, with the goal of avoiding instability in the credit union’s savings capital and ensuring that the credit union has adequate source of funds for loans. However, these requirements predated the enactment of new federal regulations, including Federal Regulation CC, Regulation DD, and 12 CFR Part 707. These regulations, taken together, made California’s savings capital structure rules obsolete. In response, AB 2862 (Limón), Chapter 267, Statutes of 2018, a CCUL-sponsored charter clean-up bill, deleted those requirements.
AB 2062 reinserts a definition of “savings capital” because the Credit Union Law still includes a number of references to the original concept.
- Clarifying that a board can delegate certain authorities to an asset-liability management committee (ALCO) consisting of non-directors. Credit Union Law and the Nonprofit Corporation Law, which applies to credit unions, establish the ways a credit union’s board can delegate certain authorities and duties to committees. For example, under Nonprofit Corporation Law, a board may delegate certain duties to a committee that exercises the authority of the board, so long as that committee consists exclusively of directors. AB 2062 allows a state-chartered credit union to delegate the authority to declare dividends to an ALCO consisting of both directors and non-directors, which the sponsor argues is a reasonable delegation that aligns California’s law with the Illinois chartering law.
- Clarifying investments in credit union service organizations (CUSOs). A CUSO is an entity owned, in whole or in part, by a single or a group of credit unions and primarily serves a credit union. A CUSO generally is allowed to perform only permitted services, such as checking and currency services, clerical services, credit card loan origination services, and payroll processing. According to the National Credit Union Service Organizations (NACUSO), shifts in the marketplace have made CUSOs more common because they help credit unions save operational costs and add alternative income streams. The Credit Union Law currently allows a credit union to invest in a CUSO that is formed by a credit union or a group of credit unions. AB 2062 adds a formal definition for a CUSO, which does not currently exist, and clarifies that a credit union may invest in a CUSO that is formed by one or more credit unions and another CUSO.
- Modifying the rules around the sale of credit union assets. The Credit Union Law imposes a strict penalty on any credit union officer, director, or employee that buys a credit union asset for “less than the then-current market value” or purchases a credit union’s obligations for “less than the book value.” Upon a violation, the person is liable in the amount of twice the market value of the assets purchased.
The purpose behind this prohibition is presumably to prevent insider abuse, but CCUL argues its application is impractical and overly broad. CCUL points to a number of challenges:
First, there are no definitions of market value and book values, which creates ambiguity in whether a transaction is actually a violation.
Second, there is no de minimis exemption, which raises concerns about gifts or small transactions related to the sale of used equipment.
AB 2062 addresses the above issues by establishing a uniform method of calculating market and book values and establishing a $500 exemption.
- Automated Decision Systems (ADS). Credit unions, like many other financial services companies, use ADS to help create efficiencies in their operations. However, amid ongoing state and national conversations about how private sector entities use ADS, the CCUL argues that specific authority to use these systems to help manage member applications would be beneficial. AB 2062 clarifies this process and establishes the conditions in which a credit union can use ADS to help determine if someone is eligible to become a member of the credit union. As is the case under current law, the use of ADS does not allow a credit union to skirt or otherwise ignore its compliance obligations, which AB 2062 also reiterates by requiring the ADS to be regularly tested for compliance with all applicable laws and regulations.
- Remote meetings. Under the Corporations Code, a credit union may hold its annual meeting remotely until December 31, 2025. As noted in Comment #5, pending legislation would remove that sunset date and permanently authorize annual shareholder or member meetings to be conducted remotely. Separately, the Credit Union Law establishes obligations for a credit union to hold an annual meeting as well as a special meeting of the members. AB 2062 would create consistency with the Corporations Code and pending legislation by allowing all these meetings to be conducted remotely, provided the credit union complies with certain process rules.
- Related legislation.
AB 2908 (Chen), of the 2023-24 Legislative Session, removes the December 31, 2025 sunset date for a corporation’s authorization to conduct annual shareholder meetings remotely via electronic means, thereby making that authority permanent. The bill removes the sunset date for similar authority for nonprofit corporations, nonprofit mutual benefit corporations, nonprofit religious corporations, and cooperative corporations. AB 2908 is pending on the Assembly Floor.
- Previous legislation.
- SB 269 (Portantino), Chapter 762, Statutes of 2021, made assorted changes to California Credit Union Law, including changes related to examinations, the expulsion of members, inactive accounts, and audit committees.
- SB 1031 (Portantino), of the 2020-21 Legislative Session, was substantially similar to SB 269, described above. SB 1031 was voluntarily pulled by its author prior to its hearing in the Senate Banking and Financial Institutions Committee, in response to the COVID-19 pandemic and the limited capacity of the Legislature to enact new legislation.
- AB 2862 (Limon), Chapter 267, Statutes of 2018, enacted five provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
- AB 2274 (Dababneh), Chapter 353, Statutes of 2016, enacted six provisions intended to modernize the California Credit Union Law and increase parity between state-chartered and federally-chartered credit unions.
- Support.
AB 2062 is sponsored by CCUL, who writes:
Credit unions have the option of either being state-charted or federally chartered entities. Federally chartered credit unions are regulated by the National Credit Union Administration (NCUA) and in California, state-chartered credit unions are regulated by the Department of Financial Protection and Innovation (DFPI). Both federal and state governments periodically update their charters to stay competitive in their appeal and to create an even playing field in the dual charter system. This bill makes necessary updates to the state charter that are outlined below and upholds the incentive for state-chartered credit unions to benefit from having a regulator with a local perspective. AB 2062 allows credit unions to keep up with the ever-changing landscape and best serve their members and communities across California.
REGISTERED SUPPORT / OPPOSITION:
Support
California Credit Union League (sponsor)
Opposition
None on file.
Analysis Prepared by: Luke Reidenbach / B. & F. / (916) 319-3081
“Advantages of a State Charter,” DFPI (Updated September 2019), available at: https://dfpi.ca.gov/advantages-of-state-charter/ ↑
Discussed in Hearing
54SEC
Assembly Floor
57SEC
Senate Floor
2MIN
Assembly Standing Committee on Banking and Finance
Bill Author
Bill Co-Author(s):