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S.B. 237

             1     

UTAH CREDIT UNION ACT AMENDMENTS

             2     
1999 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: L. Alma Mansell

             5      Ron Allen
             6      Peter C. Knudson
Pete Suazo
Terry R. Spencer


             7      AN ACT RELATING TO FINANCIAL INSTITUTIONS; AMENDING DEFINITIONS;
             8      ADDRESSING ADVERTISEMENT; ADDRESSING FORMATION OF CREDIT UNIONS;
             9      ADDRESSING CONTENTS OF BYLAWS; ADDRESSING LOAN LIMITATIONS OF CREDIT
             10      UNIONS; ADDRESSING MERGERS; ADDRESSING LIMITED FIELD OF MEMBERSHIP
             11      OF CREDIT UNIONS; ADDRESSING INSURANCE REQUIREMENTS; ADDRESSING
             12      PUBLICATIONS; PROVIDING FOR GRANDFATHERING; AND MAKING TECHNICAL
             13      CHANGES.
             14      This act affects sections of Utah Code Annotated 1953 as follows:
             15      AMENDS:
             16          7-9-3, as last amended by Chapter 8, Laws of Utah 1983
             17          7-9-5, as last amended by Chapter 200, Laws of Utah 1994
             18          7-9-6, as last amended by Chapter 182, Laws of Utah 1996
             19          7-9-11, as enacted by Chapter 16, Laws of Utah 1981
             20          7-9-12, as last amended by Chapter 182, Laws of Utah 1996
             21          7-9-16, as last amended by Chapter 8, Laws of Utah 1983
             22          7-9-20, as last amended by Chapter 200, Laws of Utah 1994
             23          7-9-37, as enacted by Chapter 8, Laws of Utah 1983
             24          7-9-39, as last amended by Chapter 200, Laws of Utah 1994
             25          7-9-45, as last amended by Chapter 49, Laws of Utah 1995
             26          7-9-48, as last amended by Chapter 200, Laws of Utah 1994
             27      ENACTS:


             28          7-9-39.5, Utah Code Annotated 1953
             29          7-9-51, Utah Code Annotated 1953
             30          7-9-52, Utah Code Annotated 1953
             31          7-9-53, Utah Code Annotated 1953
             32          7-9-54, Utah Code Annotated 1953
             33      REPEALS:
             34          7-9-41, as last amended by Chapter 182, Laws of Utah 1996
             35      Be it enacted by the Legislature of the state of Utah:
             36          Section 1. Section 7-9-3 is amended to read:
             37           7-9-3. Definitions.
             38          As used in this chapter:
             39          (1) "Association" means a group of persons that:
             40          (a) have a similar:
             41          (i) interest;
             42          (ii) profession;
             43          (iii) occupation; or
             44          (iv) formal association with an identifiable purpose; or
             45          (b) are employed by a common employer.
             46          [(1)] (2) "Capital and surplus" means:
             47          (a) shares[,];
             48          (b) deposits[,];
             49          (c) reserves[,]; and
             50          (d) undivided earnings.
             51          [(2)] (3) "Corporate credit union" means any credit union organized pursuant to any state
             52      or federal act for the purpose of serving other credit unions.
             53          [(3)] (4) "Deposits" means that portion of the capital paid into the credit union by members
             54      on which a specified rate of interest will be paid.
             55          [(4)] (5) "Immediate family" means parents, spouse, surviving spouse, children, and
             56      siblings of the member.
             57          [(5)] (6) "Limited field of membership" means persons [belonging to a group or persons]
             58      designated as eligible for credit union membership [who:] in accordance with Section 7-9-51 or


             59      7-9-53 .
             60          [(a) have a similar interest, profession, occupation, or formal association with an
             61      identifiable purpose;]
             62          [(b) reside within an identifiable neighborhood, community, rural district, or county;]
             63          [(c) are employed by a common employer;]
             64          [(d) are employed within a defined business district, industrial park or shopping center;]
             65          [(e) are employed by the credit union; or]
             66          [(f) are members of the immediate family of persons within the above groups.]
             67          (7) (a) "Member-business loan" means any loan, line of credit, or letter of credit, the
             68      proceeds of which will be used for:
             69          (i) a commercial purpose;
             70          (ii) other business investment property or venture purpose; or
             71          (iii) an agricultural purpose.
             72          (b) "Member-business loan" does not include an extension of credit:
             73          (i) that is fully secured by a lien on a one- to four- family dwelling that is the primary
             74      residence of a member;
             75          (ii) that is fully secured by:
             76          (A) shares or deposits in the credit union making the extension of credit; or
             77          (B) deposits in other financial institutions;
             78          (iii) the repayment of which is fully insured or fully guaranteed by, or where there is an
             79      advance commitment to purchase in full by, an agency of:
             80          (A) the federal government;
             81          (B) a state; or
             82          (C) a political subdivision of a state; or
             83          (iv) that is granted by a corporate credit union to another credit union.
             84          (8) "Service center" means a single location at which multiple credit unions can provide
             85      products or services directly to their members.
             86          [(6)] (9) "Share drafts," "deposit drafts," and "transaction accounts" mean accounts from
             87      which owners are permitted to make withdrawals by negotiable or transferable instruments or other
             88      orders for the purpose of making transfers to other persons or to the owner.
             89          [(7)] (10) "Shares" means that portion of the capital paid into the credit union by members


             90      on which dividends may be paid.
             91          Section 2. Section 7-9-5 is amended to read:
             92           7-9-5. Powers of credit unions.
             93          In addition to the powers specified elsewhere in this chapter, a credit union may:
             94          (1) make contracts;
             95          (2) sue and be sued;
             96          (3) acquire, lease, or hold fixed assets, including real property, furniture, fixtures, and
             97      equipment as the directors consider necessary or incidental to the operation and business of the
             98      credit union, but the value of the real property may not exceed 7% of credit union assets, unless
             99      approved by the commissioner;
             100          (4) pledge, hypothecate, sell, or otherwise dispose of real or personal property, either in
             101      whole or in part, necessary or incidental to its operation;
             102          (5) incur and pay necessary and incidental operating expenses;
             103          (6) require an entrance or membership fee;
             104          (7) receive the funds of its members in payment for:
             105          (a) shares[,];
             106          (b) share certificates[,];
             107          (c) deposits[,];
             108          (d) deposit certificates[,];
             109          (e) share drafts[,];
             110          (f) NOW accounts[,]; and
             111          (g) other instruments;
             112          (8) allow withdrawal of shares and deposits, as requested by a member orally to a third
             113      party with prior authorization in writing, including, but not limited to, drafts drawn on the credit
             114      union for payment to the member or any third party, in accordance with the procedures established
             115      by the board of directors, including, but not limited to, drafts, third-party instruments, and other
             116      transaction instruments, as provided in the bylaws;
             117          (9) charge fees for its services;
             118          (10) extend credit to its members, at rates established in accordance with the bylaws or by
             119      the board of directors;
             120          (11) extend credit secured by real estate;


             121          (12) make loan participation arrangements with other credit unions, credit union
             122      organizations, or financial organizations in accordance with written policies of the board of
             123      directors, if the credit union that originates a loan for which participation arrangements are made
             124      retains an interest of at least 10% of the loan;
             125          (13) sell and pledge eligible obligations in accordance with written policies of the board
             126      of directors;
             127          (14) engage in activities and programs of the federal government or this state or any
             128      agency or political subdivision of the state, when approved by the board of directors and not
             129      inconsistent with this chapter;
             130          (15) act as fiscal agent for and receive payments on shares and deposits from the federal
             131      government, this state, or its agencies or political subdivisions not inconsistent with the laws of
             132      this state;
             133          (16) borrow money and issue evidence of indebtedness for a loan or loans for temporary
             134      purposes in the usual course of its operations;
             135          (17) discount and sell notes and obligations;
             136          (18) sell all or any portion of its assets to another credit union or purchase all or any
             137      portion of the assets of another credit union;
             138          (19) invest funds as provided in this title and in its bylaws;
             139          (20) maintain deposits in insured depository institutions as provided in this title and in its
             140      bylaws;
             141          (21) (a) hold membership in corporate credit unions organized under this chapter or under
             142      other state or federal statutes[,]; and
             143          (b) hold membership or equity interest in associations and organizations of credit unions,
             144      including credit union service organizations;
             145          (22) declare and pay dividends on shares, contract for and pay interest on deposits, and pay
             146      refunds of interest on loans as provided in this title and in its bylaws;
             147          (23) collect, receive, and disburse funds in connection with the sale of negotiable or
             148      nonnegotiable instruments and for other purposes that provide benefits or convenience to its
             149      members, as provided in this title and in its bylaws;
             150          (24) make donations for the members' welfare or for civic, charitable, scientific, or
             151      educational purposes as authorized by the board of directors or provided in its bylaws;


             152          (25) act as trustee of funds permitted by federal law to be deposited in a credit union as
             153      a deferred compensation or tax deferred device, including, but not limited to, individual retirement
             154      accounts as defined by Section 408, Internal Revenue Code;
             155          (26) purchase reasonable disability insurance, including accidental death benefits, for
             156      directors and committee members through insurance companies licensed in this state as provided
             157      in its bylaws;
             158          (27) provide reasonable protection through insurance or other means to protect board
             159      members, committee members, and employees from liability arising out of consumer legislation
             160      such as, but not limited to, truth-in-lending and equal credit laws and as provided in its bylaws;
             161          (28) reimburse directors and committee members for reasonable and necessary expenses
             162      incurred in the performance of their duties;
             163          (29) participate in systems which allow the transfer, withdrawal, or deposit of funds of
             164      credit unions or credit union members by automated or electronic means and hold membership in
             165      entities established to promote and effectuate these systems, if:
             166          (a) the participation is not inconsistent with the law and rules of the department[,]; and [if]
             167          (b) any credit union participating in any system notifies the department as provided by law;
             168          (30) issue credit cards and debit cards to allow members to obtain access to their shares,
             169      deposits, and extensions of credit;
             170          (31) provide any act necessary to obtain and maintain membership in the credit union;
             171          (32) exercise incidental powers necessary to carry out the purpose for which a credit union
             172      is organized;
             173          (33) undertake other activities relating to its purpose as its bylaws may provide;
             174          (34) engage in other activities, exercise other powers, and enjoy other rights, privileges,
             175      benefits, and immunities authorized by rules of the commissioner; [and]
             176          (35) act as trustee, custodian, or administrator for Keogh plans, individual retirement
             177      accounts, credit union employee pension plans, and other employee benefit programs[.]; and
             178          (36) advertise to the general public the products and services offered by the credit union
             179      if the advertisement prominently discloses that to use the products or services of the credit union
             180      a person is required to:
             181          (a) be eligible for membership in the credit union; and
             182          (b) become a member of the credit union.


             183          Section 3. Section 7-9-6 is amended to read:
             184           7-9-6. Formation of corporation to conduct credit union -- Approval of
             185      commissioner.
             186          (1) (a) Ten or more incorporators belonging to the same group of 200 persons or more
             187      having a limited field of membership may, with the approval of the commissioner, form a
             188      corporation to conduct a credit union under:
             189          (i) this chapter[,];
             190          (ii) Title 16, Chapter 10a, Utah Revised Business Corporation Act[,]; and
             191          (iii) Chapter 1.
             192          (b) This chapter takes precedence over conflicting provisions of other state law governing:
             193          (i) the formation of the corporation; and [governing]
             194          (ii) the duties and obligations of:
             195          (A) the corporation[, and of its];
             196          (B) the corporation's officers; and [stockholders or]
             197          (C) the corporation's shareholders or members.
             198          (2) [Except for regional and community groups, the] The commissioner may grant the
             199      approval referenced in Subsection (1) [when satisfied] if the commissioner finds that:
             200          (a) the proposed limited field of [operation] membership is favorable to the success of the
             201      credit union [and that];
             202          (b) the standing of the proposed membership will give assurance that its affairs will be
             203      administered in accordance with this chapter[.];
             204          (c) the proposed credit union has a reasonable promise of financial viability; and
             205          (d) to do so would not result in a substantial adverse financial impact on an existing credit
             206      union having the same or substantially the same limited field of membership.
             207          (3) (a) [If] Except as provided in Subsection (3)(b) and in addition to the requirements of
             208      Subsections (1) and (2), Section 7-1-704 governs the formation of a credit union.
             209          (b) Notwithstanding Subsection (3)(a):
             210          (i) if the [applicant is not a regional or community group, the applicant is] proposed credit
             211      union has a limited field of membership that does not base eligibility on residence in a county, the
             212      persons seeking formation of the proposed credit union are not required to provide the notice
             213      required under Subsection 7-1-704 (3); and


             214          (ii) a credit union may not be required to obtain federal insurance if the credit union
             215      complies with Subsection 7-9-45 (2).
             216          [(4) The commissioner may grant approval to a financially viable applicants, unless the
             217      commissioner finds that to do so would result in a substantial adverse financial impact on an
             218      existing credit union having the same or substantially the same limited field of membership.]
             219          Section 4. Section 7-9-11 is amended to read:
             220           7-9-11. Bylaws and amendments to be approved.
             221          (1) [No] A credit union [shall] may not receive payments on shares, deposits, or
             222      certificates, or make any loans or other transactions, until its bylaws have been approved in writing
             223      by the commissioner.
             224          (2) [Amendments] An amendment to [its] a credit union's bylaws [shall] does not become
             225      operative until the amendment to the bylaws [have been] is approved by the commissioner.
             226          (3) (a) If the amendment to the bylaws of a credit union expands the limited field of
             227      membership of a credit union as described in Subsection 7-9-52 (1), the commissioner's approval
             228      of the amendment is subject to Section 7-9-52 .
             229          (b) If the amendment to the bylaws of a credit union terminates the grandfathering of a
             230      limited field of membership under Section 7-9-54 , the commissioner's approval of the amendment
             231      is subject to Section 7-9-54 .
             232          (c) If the bylaws or an amendment to the bylaws of a credit union adds an association to
             233      the limited field of membership of the credit union, the commissioner may require that the credit
             234      union provide written confirmation from the association that the association has agreed to be
             235      served by the credit union.
             236          Section 5. Section 7-9-12 is amended to read:
             237           7-9-12. Contents of bylaws.
             238          The bylaws of a credit union shall specify at least the following:
             239          (1) the name of the credit union;
             240          (2) the purpose for which it was formed;
             241          (3) [the conditions of domicile or vocation which qualify persons or co-operative societies
             242      for] a limited field of membership of the credit union that complies with Section 7-9-51 or 7-9-53 ;
             243          (4) the number of directors and procedures for their election;
             244          (5) the term of directors;


             245          (6) whether a credit manager, credit committee, or combination of both shall be
             246      responsible for credit functions of the credit union;
             247          (7) the duties of the officers;
             248          (8) the time of year of the annual meeting of members;
             249          (9) the manner in which members shall be notified of meetings;
             250          (10) the number of members which shall constitute a quorum at meetings;
             251          (11) the manner of amending;
             252          (12) the manner in which officers may act as surety; and
             253          (13) such other matters, rules, and regulations as the board of directors consider necessary.
             254          Section 6. Section 7-9-16 is amended to read:
             255           7-9-16. Members -- Eligibility -- Liability -- Grounds for closing account -- Denial
             256      of membership.
             257          (1) [Any] A person within the limited field of membership of a credit union may be
             258      admitted to membership, upon:
             259          (a) payment of any required entrance or membership fee;
             260          (b) payment for one or more shares; and
             261          (c) compliance with this chapter and the bylaws of the [corporate] credit union.
             262          (2) A member who is eligible for membership in the credit union at the time the member
             263      is admitted as a member but who is no longer in the limited field of membership of a credit union
             264      may retain membership in the credit union unless otherwise provided in the bylaws of the credit
             265      union.
             266          [(2) Members] (3) A member of the credit union may not be held personally or
             267      individually liable for payment of the credit union's debts.
             268          [(3)] (4) The credit union may close the account of any member whose actions have
             269      resulted in any financial loss to the credit union.
             270          [(4)] (5) Denial of membership is not considered a denial of credit.
             271          Section 7. Section 7-9-20 is amended to read:
             272           7-9-20. Board of directors -- Powers and duties -- Loan limitations.
             273          (1) At annual meetings the members shall elect from their number a board of directors
             274      consisting of an odd number of not less than five members.
             275          (2) The bylaws may provide balloting by:


             276          (a) mail [or];
             277          (b) ballot box[,]; or
             278          (c) both mail and ballot box.
             279          (3) Voting may not be by proxy.
             280          (4) Members of the board of directors shall hold office for the terms prescribed in the
             281      bylaws.
             282          (5) The board of directors shall meet at least monthly.
             283          (6) The board of directors shall have the general management of the affairs, funds, and
             284      records of the credit union. In particular, [they] the board of directors shall:
             285          (a) act upon applications for membership;
             286          (b) act upon expulsion of members;
             287          (c) fix the amount of surety bond required of each officer or employee having custody of
             288      funds;
             289          (d) determine the rate of interest or dividend allowed on shares and deposits;
             290          (e) determine the terms and conditions of credit granted to members;
             291          (f) lend money, borrow money, and pledge security for any borrowing;
             292          (g) fill vacancies in the board of directors or in the credit committee, if applicable, or in
             293      the supervisory committee until the election and qualification of officers to fill those vacancies;
             294          (h) appoint up to two alternate directors as provided in the bylaws;
             295          (i) fix the amount of the entrance fee;
             296          (j) declare dividends and their amount;
             297          (k) make recommendations to meetings of the members relative to amendments to the
             298      articles of incorporation, and transact any other business of the credit union; and
             299          (l) fix the maximum amount of credit, secured and unsecured, that may be extended to
             300      any one member, up to the [limit] limitations described in Subsection (7).
             301          (7) (a) [Except as provided in Subsection (7)(b), and unless the board of directors sets a
             302      lower limit, the maximum amount of] The credit that may be outstanding or available [to any one
             303      member] by a credit union at any one time [may not exceed] is subject to the limitations described
             304      in Subsections (7)(b) and (c):
             305          (i) except as provided in Subsection (7)(d) through (7)(f); or
             306          (ii) unless the board of directors:


             307          (A) sets a lower limit than the limit in Subsection (7)(b)(i) or (7)(b)(ii)(B); or
             308          (B) requires that the person described in Subsection (7)(b)(ii)(A) be a member of the credit
             309      union for more than six months before the date a member-business loan is extended.
             310          (b) (i) A credit union may not extend credit that is not a member-business loan to a
             311      member if as a result of that extension of credit the total credit that is not a member-business loan
             312      that the credit union has issued to that member exceeds at any one time:
             313          [(i)] (A) for a credit union with less than $2,000,000 in capital and surplus, the greater of:
             314          (I) $1,000; or
             315          (II) 15% of capital and surplus up to a total of $25,000 [for a credit union with less than
             316      $2,000,000 in capital and surplus]; or
             317          [(ii)] (B) for a credit union with $2,000,000 or more in capital and surplus, the greater of:
             318          (I) $25,000[,];
             319          (II) 1% of capital and surplus[,]; or
             320          (III) 25% of the regular reserve [for a credit union with $2,000,000 or more in capital and
             321      surplus].
             322          (ii) Beginning May 3, 1999, a credit union may not extend a member-business loan to a
             323      person:
             324          (A) (I) if the person is a business entity, unless at least one individual having a controlling
             325      interest in that business entity has been a member of the credit union for at least six months prior
             326      to the date of the extension of the member-business loan; or
             327          (II) unless the person is an individual who is a member of the credit union for at least six
             328      months prior to the date of the extension of the member-business loan; or
             329          (B) if as a result of the extension of the member-business loan, the total amount
             330      outstanding for all member-business loans that the credit union has extended to that person at any
             331      one time exceeds the lesser of:
             332          (I) 10% of the credit union's capital and surplus; or
             333          (II) $250,000.
             334          (c) (i) Beginning May 3, 1999, a credit union may not extend a member-business loan if
             335      as a result of that member-business loan the credit union's aggregate member-business loan amount
             336      calculated under Subsection (7)(c)(ii) at any one time exceeds 1.25 times the sum of:
             337          (A) the actual undivided earnings; and


             338          (B) the actual reserves other than the regular reserves.
             339          (ii) For purposes of Subsection (7)(c)(i), the aggregate member-business loan amount of
             340      a credit union equals:
             341          (A) the sum of the total amount financed under all member-business loans outstanding at
             342      the credit union; minus
             343          (B) the amount of the member-business loans described in Subsection (7)(c)(ii)(A):
             344          (I) that is secured by share or deposit savings in the credit union; or
             345          (II) for which the repayment is insured or guaranteed by, or there is an advance
             346      commitment to purchase by an agency of the federal government, a state, or a political subdivision
             347      of the state.
             348          [(b)] (d) A credit union may [loan to a member] extend credit that is not a
             349      member-business loan in an amount [in excess of] that exceeds the limits described in Subsection
             350      (7)[(a)](b)(i) only if the excess portion is fully secured by share or deposit savings in the credit
             351      union.
             352          (e) (i) Except as provided in Subsection (7)(e)(ii), a credit union may extend a
             353      member-business loan in an amount that exceeds the limits described in Subsection (7)(b)(i)(B)
             354      only if:
             355          (A) that portion that is in excess of the limits described in Subsection (7)(b)(i)(B) is
             356      secured by share or deposit savings in the credit union; or
             357          (B) the repayment of that portion that is in excess of the limits described in Subsection
             358      (7)(b)(i)(B) is insured or guaranteed by, or there is an advance commitment to purchase that excess
             359      portion by, an agency of:
             360          (I) the federal government;
             361          (II) a state; or
             362          (III) a political subdivision of the state.
             363          (ii) Notwithstanding Subsection (7)(e)(i), a credit union may not extend a
             364      member-business loan if the total amount financed by the credit union as part of the
             365      member-business loan exceeds $1,000,000.
             366          (f) For a member-business loan that is extended through a loan participation arrangement
             367      in accordance with Subsection 7-9-5 (12):
             368          (i) in applying the limitation of Subsection (7)(e), each credit union participating in the


             369      member-business loan may extend up to $1,000,000 of the amount financed; and
             370          (ii) the requirement of Subsection (7)(c)(i)(A) applies to membership in any credit union
             371      that participates in the loan participation arrangement for the member-business loan.
             372          (8) As provided in this chapter or in the credit union bylaws, the board of directors:
             373          (a) within 30 days following the annual meeting of the members, shall appoint a
             374      supervisory committee consisting of not less than three members;
             375          (b) within 30 days after the annual meeting of the members, shall appoint:
             376          (i) a credit committee consisting of not less than three members[,]; or [may appoint]
             377          (ii) a credit manager[,] in lieu of a credit committee;
             378          (c) shall appoint a president to serve as general manager;
             379          (d) shall have an executive committee;
             380          (e) may appoint an investment officer;
             381          (f) shall elect a secretary;
             382          (g) may appoint other officers and committees that it considers necessary;
             383          (h) shall establish written credit policies, loan security requirements, loan investment,
             384      personnel, and collection policies; and
             385          (i) on or before January 31 of each year, shall provide for:
             386          (i) share insurance for the shares and deposits of the credit union from the National Credit
             387      Union Administration or successor federal agency[.]; or
             388          (ii) security expressly pledged for the payment of the shares and deposits in accordance
             389      with Section 7-9-45 .
             390          (9) [No] A person may not be a member of more than one committee except as otherwise
             391      provided in this chapter or in the credit union bylaws.
             392          (10) The president and secretary may not be the same person.
             393          Section 8. Section 7-9-37 is amended to read:
             394           7-9-37. Transfer of members of dissolved, merged, consolidated, transferred, or
             395      acquired credit union.
             396          Members of a dissolved, merged, consolidated, transferred, or acquired credit union may
             397      become members of another existing credit union with a related limited field of membership [or
             398      geographical location] as approved by the commissioner.
             399          Section 9. Section 7-9-39 is amended to read:


             400           7-9-39. Voluntary merger.
             401          (1) Any credit union may merge with another credit union under the existing charter of the
             402      other credit union when all of the following have occurred:
             403          (a) the majority of the directors of each merging credit union votes in favor of the merger
             404      plan;
             405          (b) the commissioner approves the merger plan;
             406          (c) the majority of the members of each merging credit union present at a meeting called
             407      for the purpose of considering the merger plan votes to approve [it] the merger plan, but a vote of
             408      the membership of the surviving credit union is not required if its board of directors determines
             409      that the merger will not have any significant effect on the organization, membership, or financial
             410      condition of the credit union; and
             411          (d) (i) the National Credit Union Administration or its successor federal deposit insurance
             412      agency approves the merger plan and commits to insure deposits of the [serving] surviving credit
             413      union[.]; or
             414          (ii) the commissioner approves the surviving credit union to operate without federal
             415      deposit insurance in accordance with Section 7-9-45 .
             416          (2) Upon merger, the chair of the board and secretary of each credit union shall execute,
             417      and file with the department, a certificate of merger setting forth:
             418          (a) the time and place of the meeting of the board of directors at which the plan was
             419      approved;
             420          (b) the vote by which the directors approved the plan;
             421          (c) a copy of the resolution or other action by which the plan was approved;
             422          (d) the time and place of the meeting of the members at which the plan was approved;
             423          (e) the vote by which the members approved the plan; and
             424          (f) the effective date of the merger, which shall be:
             425          (i) the date on which the last approval or vote required under Subsection (1) was
             426      obtained[,]; or
             427          (ii) a later date specified in the merger plan.
             428          (3) On the effective date of any merger[,]:
             429          (a) all property, property rights, and interests of the merged credit union shall vest in the
             430      surviving credit union without deed, endorsement, or other instrument of transfer[,]; and


             431          (b) all debts, obligations, and liabilities of the merged credit union are considered to have
             432      been assumed by the surviving credit union.
             433          (4) Except as provided in Subsection (5)(b), if the surviving credit union is chartered under
             434      this chapter, the limited field of membership of the merging credit union may not be added to the
             435      limited field of membership of the surviving credit union, except that the surviving credit union:
             436          (a) may admit as a member any member of the merging credit union that is not in the
             437      limited field of membership of the surviving credit union if the member of the merging credit
             438      union was a member of that credit union at the time of merger; and
             439          (b) may service any member-business loans of the merging credit union until the
             440      member-business loan is paid in full.
             441          [(4)] (5) (a) This section shall be interpreted, whenever possible, to permit a credit union
             442      chartered under this chapter to merge with a credit union chartered under any other law[, regardless
             443      of commonality,] if the preservation of membership interest is concerned.
             444          (b) The commissioner may under Subsection (1)(b) approve a merger plan that includes
             445      the addition of all or part of the limited field of membership of the merging credit union to the
             446      limited field of membership of the surviving credit union if the commissioner finds that:
             447          (i) the expansion of the limited field of membership of the surviving credit union is
             448      necessary for that credit union's safety and soundness; and
             449          (ii) the expanded limited field of membership of the surviving credit union meets the
             450      criteria stated in Subsection 7-9-52 (3)(c).
             451          (6) If the commissioner approves a merger plan under Subsection (5)(b) under which the
             452      surviving credit union's limited filed of membership after the merger will include residents of more
             453      than one county, Subsections (6)(a) through (e) apply to the surviving credit union.
             454          (a) The domicile-county of the surviving credit union is:
             455          (i) if the credit union does not have a grandfathered limited field of membership under
             456      Subsection 7-9-53 (2)(d), the county in which the credit union has located the greatest number of
             457      branches as of the date the merger is effective; or
             458          (ii) if the credit union has a grandfathered limited field of membership under Subsection
             459      7-9-53 (2)(d), the county that is the domicile-county of the surviving credit union under Section
             460      7-9-53 ;
             461          (b) Within the surviving credit union's domicile-county, the surviving credit union may


             462      establish, relocate, or otherwise change the physical location of the credit union's:
             463          (i) main office; or
             464          (ii) branch.
             465          (c) Within a county other than the domicile-county that is in the limited field of
             466      membership of the surviving credit union after the merger, the surviving credit union may not:
             467          (i) establish a main office or branch if the main office or branch was not located in the
             468      county as of the date that the merger is effective;
             469          (ii) participate in a service center in which it does not participate as of the date that the
             470      merger is effective; or
             471          (iii) relocate the surviving credit union's main office or a branch located in the county as
             472      of the date that the merger is effective unless the commissioner finds that the main office or branch
             473      is being relocated with a three-mile radius of the original location of the main office or branch.
             474          (d) Within a county that is not in the surviving credit union's limited field of membership
             475      as of the date that the merger is effective, the surviving credit union may establish, relocate, or
             476      otherwise change the physical location of a main office or branch, if the main office or branch
             477      serves only members of the surviving credit union that belong to an association that is in the credit
             478      union's limited field of membership.
             479          (e) After the merger, the surviving credit union may admit as a member:
             480          (i) a person in the surviving credit union's limited field of membership after the date that
             481      the merger is effective; or
             482          (ii) a person belonging to an association that:
             483          (A) is added to the limited field of membership of the credit union; and
             484          (B) resides in the domicile-county of the surviving credit union, as defined in Section
             485      7-9-53 .
             486          Section 10. Section 7-9-39.5 is enacted to read:
             487          7-9-39.5. Supervisory merger.
             488          If a credit union is merged with another credit union as a result of a supervisory action
             489      under Chapter 2 or 19, the commissioner may permit the surviving credit union to have a limited
             490      field of membership that is larger than a limited field of membership permitted under Section
             491      7-9-51 .
             492          Section 11. Section 7-9-45 is amended to read:


             493           7-9-45. Insurance of shares and deposits -- Security shares and deposits.
             494          (1) [Each] Except as provided in Subsection (2), a credit union [or branch] subject to the
             495      jurisdiction of the department shall obtain and maintain insurance on shares and deposits from the
             496      National Credit Union Administration or successor federal deposit insurance agency.
             497          (2) Notwithstanding Section 7-1-704 and Subsection (1), a credit union may not be
             498      required to obtain federal insurance on shares and deposits if:
             499          (a) the commissioner approves the credit union's election not to obtain federal insurance
             500      on shares and deposits;
             501          (b) as security for the shares and deposits, the credit union maintains securities:
             502          (i) that are issued by or directly and unconditionally guaranteed by:
             503          (A) the United States; or
             504          (B) an agency of the United States;
             505          (ii) that are held in an account with a primary reporting dealer that is:
             506          (A) recognized by the Federal Reserve Bank of New York; and
             507          (B) independent of the credit union;
             508          (iii) that are held in accordance with Title 70A, Chapter 8, Uniform Commercial Code -
             509      Investment Securities; and
             510          (iv) in which the department has an express and exclusive security interest; and
             511          (c) the aggregate value of the securities described in Subsection (2)(b) is at all times equal
             512      to or greater than 1.5 times the aggregate amount of the shares and deposits of the credit union.
             513          [(2)] (3) The commissioner may appoint the administrator of the National Credit Union
             514      Administration as liquidating agent of an insured credit union.
             515          [(3)] (4) Failure to [maintain share and deposit insurance] comply with this section
             516      constitutes grounds for supervisory action under Chapter 2 or 19.
             517          Section 12. Section 7-9-48 is amended to read:
             518           7-9-48. Disclosure of share and deposit insurance -- Disclosure if secured through
             519      securities.
             520          [Credit unions] (1) A credit union shall comply with all share and deposit insurance
             521      disclosure requirements of the National Credit Union Administration or its successor agency.
             522          (2) In addition to the disclosure requirements described in Subsection (1), a credit union
             523      that in accordance with Subsection 7-9-45 (2) is not insured by the National Credit Union


             524      Administration or successor federal deposit insurance agency shall notify the members of the credit
             525      union, as prescribed by rule or order, that deposits and shares in the credit union are not insured
             526      by a federal deposit insurance agency.
             527          Section 13. Section 7-9-51 is enacted to read:
             528          7-9-51. Limited field of membership.
             529          (1) Except as provided in Subsection (3), the limited field of membership of a credit union
             530      may not be larger than:
             531          (a) the immediate family of a member of the credit union;
             532          (b) the employees of the credit union;
             533          (c) residents of a single county; and
             534          (d) one or more associations.
             535          (2) A credit union may have a limited field of membership that is more restrictive than the
             536      limited field of membership described in Subsection (1).
             537          (3) A credit union may have a limited field of membership less restrictive than the limited
             538      field of membership described in Subsection (1) if the limited field of membership of the credit
             539      union:
             540          (a) is determined under Subsection 7-9-53 (2)(c) or (2)(d);
             541          (b) is approved by the commissioner after a merger under Subsection 7-9-39 (5); or
             542          (c) is permitted by the commissioner after a merger in accordance with Section 7-9-39.5
             543          (4) If the credit union includes the residents of one county in its limited field of
             544      membership, the credit union may not change its limited membership to include a different county
             545      than the county that is first included in the limited field of membership of the credit union.
             546          Section 14. Section 7-9-52 is enacted to read:
             547          7-9-52. Expansion of a limited field of membership.
             548          (1) The commissioner shall comply with Subsection (2) if the commissioner receives a
             549      request to approve an amendment to the bylaws of a credit union that expands the credit union's
             550      limited field of membership to include:
             551          (a) residents of one county; or
             552          (b) an association consisting of 50 or more persons.
             553          (2) If the conditions of Subsection (1) are met, the commissioner shall:
             554          (a) give notice of the request in the manner and to the extent the commissioner considers


             555      appropriate to institutions subject to the jurisdiction of the department that:
             556          (i) are located in the county, if the limited field of membership is being expanded to
             557      include residents of a county; or
             558          (ii) serve or may serve the association described in Subsection (1)(b) if that association is
             559      being added to the limited field of membership; and
             560          (b) cause a supervisor to examine and submit written findings and recommendations to
             561      the commissioner as to whether:
             562          (i) the credit union is adequately capitalized;
             563          (ii) the credit union has the financial capacity to serve the financial needs of the expanded
             564      limited field of membership in a safe and sound manner;
             565          (iii) the credit union has the managerial expertise to serve the financial needs of the
             566      expanded limited field of membership in a safe and sound manner; and
             567          (iv) any potential harm the expansion of the limited field of membership may have on the
             568      institutions described in Subsection (2)(a) clearly outweighs the probable beneficial effect of the
             569      expansion.
             570          (3) The commissioner may approve the amendment to the bylaws described in Subsection
             571      (1) if the commissioner:
             572          (a) has given the notice required under Subsection (2)(a);
             573          (b) received the written findings and recommendations of the supervisor under Subsection
             574      (2)(b); and
             575          (c) finds that:
             576          (i) the credit union is adequately capitalized;
             577          (ii) the credit union has the financial capacity to serve the financial needs of the expanded
             578      limited field of membership in a safe and sound manner;
             579          (iii) the credit union has the managerial expertise to serve the financial needs of the
             580      expanded limited field of membership in a safe and sound manner; and
             581          (iv) any potential harm the expansion of the limited field of membership may have on
             582      other institutions subject to the jurisdiction of the department does not clearly outweigh the
             583      probable beneficial effect of the expansion.
             584          (4) In accordance with Section 7-1-309 , the commissioner may hold a hearing on the
             585      expansion of a credit union limited field of membership.


             586          (5) This section may not be interpreted to permit a credit union to:
             587          (a) expand its limited field of membership to include residents of more than one county;
             588      or
             589          (b) change the county included in the limited field of membership of a credit union, if any.
             590          Section 15. Section 7-9-53 is enacted to read:
             591          7-9-53. Grandfathering.
             592          (1) As used in this section and Section 7-9-54 :
             593          (a) "Association that resides in a domicile-county" means an association that:
             594          (i) operates a place of business or other physical location in the domicile-county; or
             595          (ii) has at least 100 members that are residents of the domicile-county.
             596          (b) "Domicile-county" means the county:
             597          (i) in the limited field of membership of the credit union as of January 1, 1999; and
             598          (ii) in which the credit union has located the greatest number of branches as of January 1,
             599      1999.
             600          (c) "Grandfathered limited field of membership" means the limited field of membership
             601      as of May 3, 1999, of a credit union described in Subsection (2)(d).
             602          (2) For each credit union formed before January 1, 1999, its limited field of membership
             603      as of May 3, 1999, is determined as follows:
             604          (a) if the limited field of membership stated in the bylaws of the credit union as of January
             605      1, 1999, complies with Section 7-9-51 , the credit union's limited field of membership is the limited
             606      field of membership indicated in its bylaws;
             607          (b) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             608      in Subsection (2)(b)(ii) if:
             609          (A) the limited field of membership stated in the bylaws of the credit union as of January
             610      1, 1999, includes the residents of more than one county; and
             611          (B) as of January 1, 1999, the credit union's main office and any of its branches are located
             612      in only one county in its limited field of membership;
             613          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             614      Subsection (2)(b)(i) is:
             615          (A) the immediate family of a member of the credit union;
             616          (B) the employees of the credit union;


             617          (C) residents of the one county in which the credit union has its main office or branches
             618      as of January 1, 1999, and
             619          (D) any association that as of January 1, 1999, is in the limited field of membership of the
             620      credit union;
             621          (c) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             622      in Subsection (2)(c)(ii) if:
             623          (A) the limited field of membership of a credit union stated in the bylaws of the credit
             624      union as of January 1, 1999, includes residents of more than one county;
             625          (B) as of January 1, 1999, the credit union has a main office or branch in more than one
             626      county; and
             627          (C) the addition of at least one of the counties in the limited field of membership of the
             628      credit union was as a result of a merger pursuant to a supervisory action under Chapter 2 or 19;
             629          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             630      Subsection (2)(c)(i) is the same limited field of membership that the credit union would have had
             631      under Subsection (2)(d); and
             632          (d) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             633      in Subsection (2)(d)(ii) if:
             634          (A) the limited field of membership stated in the bylaws of the credit union as of January
             635      1, 1999, includes the residents of more than one county; and
             636          (B) as of January 1, 1999, the credit union has a main office or branch in more than one
             637      county;
             638          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             639      Subsection (2)(d)(i) is:
             640          (A) the immediate family of a member of the credit union;
             641          (B) the employees of the credit union;
             642          (C) residents of the credit union's domicile-county;
             643          (D) the residents of any county other than the domicile-county:
             644          (I) if, as of January 1, 1999, the county is in the limited field of membership of the credit
             645      union; and
             646          (II) in which, as of January 1, 1994, the credit union had located its main office or a
             647      branch; and


             648          (E) any association that as of January 1, 1999, is in the limited field of membership of the
             649      credit union.
             650          (3) If a credit union's limited field of membership is as described in Subsection (2)(d),
             651      beginning May 3, 1999, the credit union:
             652          (a) within the credit union's domicile-county, may establish, relocate, or otherwise change
             653      the physical location of the credit union's:
             654          (i) main office; or
             655          (ii) branch;
             656          (b) within a county other than a domicile-county that is in the credit union's grandfathered
             657      limited field of membership, may not:
             658          (i) establish a main office or branch that:
             659          (A) was not located in the county as of January 1, 1999; or
             660          (B) for which the credit union has not received by January 1, 1999, approval or conditional
             661      approval of a site plan for the main office or branch from the planning commission of the
             662      municipality where the main office or branch will be located;
             663          (ii) participate in a service center in which it does not participate as of January 1, 1999;
             664      or
             665          (iii) relocate the credit union's main office or a branch located in the county as of January
             666      1, 1999, unless the commissioner finds that the main office or branch is relocated within a
             667      three-mile radius of where it was originally located;
             668          (c) within a county that is not in the credit union's grandfathered limited field of
             669      membership, may establish, relocate, or otherwise change the physical location of a main office
             670      or branch, if the commissioner finds that the main office or branch is to be established, relocated,
             671      or otherwise changed solely for the purpose of serving members of the credit union that belong to
             672      an association that is in the credit union's limited field of membership; and
             673          (d) may only admit as a member:
             674          (i) a person in the credit union's grandfathered limited field of membership; or
             675          (ii) a person belonging to an association that:
             676          (A) is added to the limited field of membership of the credit union; and
             677          (B) resides in the domicile-county of the credit union.
             678          (4) (a) If a credit union's limited field of membership is as described in Subsection (2)(b),


             679      as of May 3, 1999, the credit union may operate as a credit union having a limited field of
             680      membership under Section 7-9-51 .
             681          (b) If a credit union's limited field of membership is as described in Subsection (2)(c), as
             682      of May 3, 1999, the credit union may operate as a credit union having a limited field of
             683      membership under Subsection 7-9-51 , except that the credit union may admit as members residents
             684      of any county that is included in the limited field of membership of the credit union under
             685      Subsection (2)(c)(ii).
             686          (5) (a) Notwithstanding Subsections (1) through (3), after May 3, 1999, a credit union
             687      described in Subsection (2)(d) may:
             688          (i) operate an office or branch that is operated by the credit union on May 3, 1999, but that
             689      is not located in a county that is in the credit union's grandfathered limited field of membership;
             690      and
             691          (ii) serve a member who is not in a credit union's grandfathered limited field of
             692      membership, if the member is a member of the credit union as of May 3, 1999.
             693          (b) Subsection (5)(a) does not authorize a credit union to:
             694          (i) establish a branch in a county that is not in the credit union's grandfathered limited field
             695      of membership unless the branch meets the requirements of Subsection (3)(c); or
             696          (ii) include in its limited field of membership an association that:
             697          (A) as of January 1, 1999, is not included in the credit union's limited field of membership;
             698      and
             699          (B) does not reside within the credit union's domicile-county.
             700          (6) A credit union shall amend its bylaws in accordance with Section 7-9-11 by no later
             701      than August 3, 1999, to comply with this section.
             702          (7) This section does not exempt a credit union from complying with any other
             703      requirement under this title for the establishment, relocation, or change in the physical location of
             704      a main office or branch of a credit union.
             705          Section 16. Section 7-9-54 is enacted to read:
             706          7-9-54. Electing to terminate grandfathering.
             707          (1) (a) In accordance with this section, a credit union that has a grandfathered limited field
             708      of membership under Section 7-9-53 may terminate the grandfathering of the credit union's
             709      grandfathered limited field of membership if, by no later than May 3, 2000, the credit union has


             710      received approval from the commissioner in accordance with Section 7-9-11 of an amendment to
             711      the bylaws of the credit union that establishes a limited field of membership in compliance with
             712      Section 7-9-51 .
             713          (b) Notwithstanding Subsection (1)(b), a credit union seeking to terminate its
             714      grandfathered limited field of membership may not amend its bylaws to include in the limited field
             715      of membership of the credit union after termination of the grandfathering a county other than the
             716      domicile-county of the credit union.
             717          (2) On receipt of a request under Subsection (1) to approve an amendment to the bylaws
             718      of a credit union, the commissioner shall give notice of the request in the manner and to the extent
             719      the commissioner considers appropriate to institutions subject to the jurisdiction of the department
             720      that:
             721          (a) are located in a county within the credit union's grandfathered limited field of
             722      membership; or
             723          (b) may be affected by the termination of the grandfathering.
             724          (3) The commissioner may approve the amendment to the bylaws described in Subsection
             725      (1) if the commissioner:
             726          (a) has given the notice required by Subsection (2); and
             727          (b) finds that any harm the termination of the grandfathering may have on other institutions
             728      subject to the jurisdiction of the commissioner does not clearly outweigh the probable beneficial
             729      effect of the termination.
             730          (4) In accordance with Section 7-1-309 , the commissioner may hold a hearing on the
             731      termination of the grandfathering of a credit union.
             732          (5) Beginning on the date the commissioner approves the amendments to the bylaws of
             733      a credit union under Subsection (3), the credit union:
             734          (a) may not admit as a member a resident of the county for which grandfathering is
             735      terminated;
             736          (b) may admit as a member a person belonging to an association regardless of whether the
             737      association resides in the domicile-county within the limited field of membership of the credit
             738      union;
             739          (c) may serve a member of the credit union who is not in the credit union's grandfathered
             740      limited field of membership, if the member is a member of the credit union on the day that the


             741      grandfathering terminates;
             742          (d) may operate a main office or branch that is located outside the limited field of
             743      membership of a credit union after grandfathering terminates but is operated by the credit union
             744      on the day that the grandfathering terminates;
             745          (e) may establish, relocate, or otherwise change the physical facilities of the credit union's
             746      main office or of a branch in the domicile-county of the credit union if that county is included in
             747      the limited field of membership of the credit union after termination of the grandfathering; and
             748          (f) may establish, relocate, or otherwise change the physical location of a main office or
             749      branch in a county that is not in the limited field of membership of the credit union after the
             750      grandfathering is terminated, if the commissioner finds that the main office or branch is to be
             751      established, relocated, or otherwise changed solely for the purpose of serving members of the
             752      credit union that belong to an association that is in the credit union's limited field of membership.
             753          Section 17. Repealer.
             754          This act repeals:
             755          Section 7-9-41, Publication of applications -- Hearing and notice on application to
             756      form community or regional credit union.




Legislative Review Note
    as of 2-15-99 9:13 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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