Second Substitute S.B. 237

Representative Kevin S. Garn proposes to substitute the following bill:

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; MAKING TECHNICAL
13 CHANGES; AND PROVIDING AN EFFECTIVE DATE.
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) has a similar:
41 (i) interest;
42 (ii) profession;
43 (iii) occupation; or
44 (iv) formal association with an identifiable purpose; or
45 (b) is 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) formation of the credit union would not result in a substantial adverse financial impact
206 on an existing credit 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 a credit union at the time the member is
263 admitted as a member but who is no longer in the limited field of membership of the 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); and
306 (ii) except that the board of directors may:
307 (A) set a lower limit than the limit in Subsection (7)(b)(i) or (7)(b)(ii)(B); or
308 (B) require that a 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 March 24, 1999, a credit union may not extend a member-business loan to
323 a 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) if the person is an individual, unless the individual is a member of the credit union for
328 at least six 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 March 24, 1999, a credit union may not extend a member-business loan
335 if as a result of that member-business loan the credit union's aggregate member-business loan

336 amount 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)(ii)(B)
354 only if:
355 (A) that portion that is in excess of the limits described in Subsection (7)(b)(ii)(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)(ii)(B) is insured or guaranteed by, or there is an advance commitment to purchase that
359 excess 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 exceeds $1,000,000.
365 (f) For a member-business loan that is extended through a loan participation arrangement
366 in accordance with Subsection 7-9-5 (12):

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

398 Section 9. Section 7-9-39 is amended to read:
399 7-9-39. Voluntary merger.
400 (1) Any credit union may merge with another credit union under the existing charter of the
401 other credit union when all of the following have occurred:
402 (a) the majority of the directors of each merging credit union votes in favor of the merger
403 plan;
404 (b) the commissioner approves the merger plan;
405 (c) the majority of the members of each merging credit union present at a meeting called
406 for the purpose of considering the merger plan votes to approve [it] the merger plan, but a vote of
407 the membership of the surviving credit union is not required if its board of directors determines
408 that the merger will not have any significant effect on the organization, membership, or financial
409 condition of the credit union; and
410 (d) (i) the National Credit Union Administration or its successor federal deposit insurance
411 agency approves the merger plan and commits to insure deposits of the [serving] surviving credit
412 union[.]; or
413 (ii) the commissioner approves the surviving credit union to operate without federal
414 deposit insurance in accordance with Section 7-9-45 .
415 (2) Upon merger, the chair of the board and secretary of each credit union shall execute,
416 and file with the department, a certificate of merger setting forth:
417 (a) the time and place of the meeting of the board of directors at which the plan was
418 approved;
419 (b) the vote by which the directors approved the plan;
420 (c) a copy of the resolution or other action by which the plan was approved;
421 (d) the time and place of the meeting of the members at which the plan was approved;
422 (e) the vote by which the members approved the plan; and
423 (f) the effective date of the merger, which shall be:
424 (i) the date on which the last approval or vote required under Subsection (1) was
425 obtained[,]; or
426 (ii) a later date specified in the merger plan.
427 (3) On the effective date of any merger[,]:
428 (a) all property, property rights, and interests of the merged credit union shall vest in the

429 surviving credit union without deed, endorsement, or other instrument of transfer[,]; and
430 (b) all debts, obligations, and liabilities of the merged credit union are considered to have
431 been assumed by the surviving credit union.
432 (4) Except as provided in Subsection (5)(b), if the surviving credit union is chartered under
433 this chapter, the residents of a county in the limited field of membership of the merging credit
434 union may not be added to the limited field of membership of the surviving credit union, except
435 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 the residents of a county in the limited field of membership of the merging credit
446 union to the limited field of membership of the surviving credit union if the commissioner finds
447 that:
448 (i) the expansion of the limited field of membership of the surviving credit union is
449 necessary for that credit union's safety and soundness; and
450 (ii) the expanded limited field of membership of the surviving credit union meets the
451 criteria stated in Subsection 7-9-52 (3)(c).
452 (6) If the commissioner approves a merger plan under Subsection (5)(b) under which the
453 surviving credit union's limited filed of membership after the merger will include residents of more
454 than one county, Subsections (6)(a) through (e) apply to the surviving credit union.
455 (a) The domicile-county of the surviving credit union is:
456 (i) if the credit union does not have a limited field of membership under Subsection
457 7-9-53 (2)(c) or (2)(d), the county in which the credit union has located the greatest number of
458 branches as of the date the merger is effective; or
459 (ii) if the credit union has a limited field of membership under Subsection 7-9-53 (2)(c) or

460 (2)(d), the county that is the domicile-county of the surviving credit union under Section 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 within a three-mile radius of the original location of the main office or branch.
474 (d) After the merger, the surviving credit union may admit as a member:
475 (i) a person in the surviving credit union's limited field of membership after the date that
476 the merger is effective; or
477 (ii) a person belonging to an association that:
478 (A) is added to the limited field of membership of the credit union; and
479 (B) resides in the domicile-county of the surviving credit union, as defined in Section
480 7-9-53 .
481 (e) In addition to any requirement under this Subsection (6), a surviving credit union shall
482 comply with any requirement under this title for the establishment, relocation, or change in the
483 physical location of a main office or branch of a credit union.
484 Section 10. Section 7-9-39.5 is enacted to read:
485 7-9-39.5. Supervisory merger.
486 If a credit union is merged with another credit union as a result of a supervisory action
487 under Chapter 2 or 19, the commissioner may permit the surviving credit union to have a limited
488 field of membership that is larger than a limited field of membership permitted under Section
489 7-9-51 .
490 Section 11. Section 7-9-45 is amended to read:

491 7-9-45. Insurance of shares and deposits -- Security shares and deposits.
492 (1) [Each] Except as provided in Subsection (2), a credit union [or branch] subject to the
493 jurisdiction of the department shall obtain and maintain insurance on shares and deposits from the
494 National Credit Union Administration or successor federal deposit insurance agency.
495 (2) Notwithstanding Subsection 7-1-704 (7)(a)(v) and Subsection (1), a credit union may
496 not be required to obtain federal insurance on shares and deposits if:
497 (a) the commissioner approves the credit union's election not to obtain federal insurance
498 on shares and deposits;
499 (b) as security for the shares and deposits, the credit union maintains securities:
500 (i) that are issued by or directly and unconditionally guaranteed by:
501 (A) the United States; or
502 (B) an agency of the United States;
503 (ii) that are held in an account with a primary reporting dealer that is:
504 (A) recognized by the Federal Reserve Bank of New York; and
505 (B) independent of the credit union;
506 (iii) that are held in accordance with Title 70A, Chapter 8, Uniform Commercial Code -
507 Investment Securities; and
508 (iv) in which the department has an express and exclusive security interest; and
509 (c) the aggregate value of the securities described in Subsection (2)(b) is at all times equal
510 to or greater than 1.15 times the aggregate amount of the shares and deposits of the credit union.
511 [(2)] (3) The commissioner may appoint the administrator of the National Credit Union
512 Administration as liquidating agent of an insured credit union.
513 [(3)] (4) Failure to [maintain share and deposit insurance] comply with this section
514 constitutes grounds for supervisory action under Chapter 2 or 19.
515 Section 12. Section 7-9-48 is amended to read:
516 7-9-48. Disclosure of share and deposit insurance -- Disclosure if secured through
517 securities.
518 [Credit unions] (1) A credit union shall comply with all share and deposit insurance
519 disclosure requirements of the National Credit Union Administration or its successor agency.
520 (2) In addition to the disclosure requirements described in Subsection (1), a credit union
521 that in accordance with Subsection 7-9-45 (2) is not insured by the National Credit Union

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

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

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

615 (C) residents of the one county in which the credit union has its main office or branches
616 as of January 1, 1999, and
617 (D) any association that as of January 1, 1999, is in the limited field of membership of the
618 credit union;
619 (c) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
620 in Subsection (2)(c)(ii) if:
621 (A) the limited field of membership of a credit union stated in the bylaws of the credit
622 union as of January 1, 1999, includes residents of more than one county;
623 (B) as of January 1, 1999, the credit union has a main office or branch in more than one
624 county; and
625 (C) as a result of a merger pursuant to a supervisory action under Chapter 2 or 19 that is
626 effective on or after January 1, 1983, but before January 1, 1994, the credit union acquired a branch
627 in a county in the limited field of membership of the credit union and the credit union did not have
628 a branch in the county before the merger;
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) except that the credit union:
632 (A) is not subject to Subsection (3); and
633 (B) is subject to Subsection (4)(b); and
634 (d) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
635 in Subsection (2)(d)(ii) if:
636 (A) the limited field of membership stated in the bylaws of the credit union as of January
637 1, 1999, includes the residents of more than one county; and
638 (B) as of January 1, 1999, the credit union has a main office or branch in more than one
639 county;
640 (ii) as of May 3, 1999, the limited field of membership of a credit union described in
641 Subsection (2)(d)(i) is:
642 (A) the immediate family of a member of the credit union;
643 (B) the employees of the credit union;
644 (C) residents of the credit union's domicile-county;
645 (D) the residents of any county other than the domicile-county:

646 (I) if, as of January 1, 1999, the county is in the limited field of membership of the credit
647 union; and
648 (II) in which, as of January 1, 1994, the credit union had located its main office or a
649 branch; and
650 (E) any association that as of January 1, 1999, is in the limited field of membership of the
651 credit union.
652 (3) If a credit union's limited field of membership is as described in Subsection (2)(d),
653 beginning May 3, 1999, the credit union:
654 (a) within the credit union's domicile-county, may establish, relocate, or otherwise change
655 the physical location of the credit union's:
656 (i) main office; or
657 (ii) branch;
658 (b) within a county other than a domicile-county that is in the credit union's grandfathered
659 limited field of membership, may not:
660 (i) establish a main office or branch that:
661 (A) was not located in the county as of January 1, 1999; or
662 (B) for which the credit union has not received by January 1, 1999, approval or conditional
663 approval of a site plan for the main office or branch from the planning commission of the
664 municipality where the main office or branch will be located;
665 (ii) participate in a service center in which it does not participate as of January 1, 1999;
666 or
667 (iii) relocate the credit union's main office or a branch located in the county as of January
668 1, 1999, unless the commissioner finds that the main office or branch is relocated within a
669 three-mile radius of where it was originally located; and
670 (c) may only admit as a member:
671 (i) a person in the credit union's grandfathered limited field of membership; or
672 (ii) a person belonging to an association that:
673 (A) is added to the limited field of membership of the credit union; and
674 (B) resides in the domicile-county of the credit union.
675 (4) (a) If a credit union's limited field of membership is as described in Subsection (2)(b),
676 as of May 3, 1999, the credit union may operate as a credit union having a limited field of

677 membership under Section 7-9-51 .
678 (b) If a credit union's limited field of membership is as described in Subsection (2)(c), as
679 of May 3, 1999, the credit union:
680 (i) within the credit union's domicile-county, may establish, relocate, or otherwise change
681 the physical location of the credit union's:
682 (A) main office; or
683 (B) branch;
684 (ii) within a county other than its domicile-county that is in the credit union's limited field
685 of membership under Subsection (2)(c), may not:
686 (A) establish a main office or branch that was not located in the county as of January 1,
687 1999;
688 (B) participate in a service center in which it does not participate as of January 1, 1999;
689 or
690 (C) relocate the credit union's main office or a branch located in the county as of January
691 1, 1999, unless the commissioner finds that the main office or branch is relocated within a
692 three-mile radius of where it was originally located; and
693 (iii) may only admit as a member:
694 (A) a person in the credit union's limited field of membership under Subsection (2)(c); or
695 (B) a person belonging to an association that is added to the limited field of membership
696 of the credit union, regardless of whether the association resides in the domicile-county of the
697 credit union.
698 (5) (a) Notwithstanding Subsections (1) through (4), after May 3, 1999, a credit union
699 described in Subsection (2)(c) or (2)(d) may:
700 (i) operate an office or branch that is operated by the credit union on May 3, 1999, but that
701 is not located in a county that is in the credit union's limited field of membership as of May 3,
702 1999; and
703 (ii) serve a member who is not in a credit union's limited field of membership as of May
704 3, 1999, if the member is a member of the credit union as of March 15, 1999.
705 (b) Subsection (5)(a) does not authorize a credit union to:
706 (i) establish a branch in a county that is not in the credit union's limited field of
707 membership as of May 3, 1999, unless the branch meets the requirements of Subsection (3)(c); or

708 (ii) for a credit union described in Subsection (2)(d), include in its limited field of
709 membership an association that:
710 (A) as of January 1, 1999, is not included in the credit union's limited field of membership;
711 and
712 (B) does not reside within the credit union's domicile-county.
713 (6) A credit union shall amend its bylaws in accordance with Section 7-9-11 by no later
714 than August 3, 1999, to comply with this section.
715 (7) In addition to any requirement under this section, a credit union shall comply with any
716 requirement under this title for the establishment, relocation, or change in the physical location of
717 a main office or branch of a credit union.
718 Section 16. Section 7-9-54 is enacted to read:
719 7-9-54. Electing to terminate grandfathering.
720 (1) (a) In accordance with this section, a credit union that has a grandfathered limited field
721 of membership under Section 7-9-53 may terminate the grandfathering of the credit union's
722 grandfathered limited field of membership if, by no later than August 3, 1999, the credit union has
723 received approval from the commissioner in accordance with Section 7-9-11 of an amendment to
724 the bylaws of the credit union that establishes a limited field of membership in compliance with
725 Section 7-9-51 .
726 (b) Notwithstanding Subsection (1)(a), a credit union seeking to terminate its
727 grandfathered limited field of membership may not amend its bylaws to include in the limited field
728 of membership of the credit union after termination of the grandfathering a county other than the
729 domicile-county of the credit union.
730 (2) On receipt of a request under Subsection (1) to approve an amendment to the bylaws
731 of a credit union, the commissioner shall give notice of the request in the manner and to the extent
732 the commissioner considers appropriate to institutions subject to the jurisdiction of the department
733 that:
734 (a) are located in a county within the credit union's grandfathered limited field of
735 membership; or
736 (b) may be affected by the termination of the grandfathering.
737 (3) The commissioner may approve the amendment to the bylaws described in Subsection
738 (1) if the commissioner:

739 (a) has given the notice required by Subsection (2); and
740 (b) finds that any harm the termination of the grandfathering may have on other institutions
741 subject to the jurisdiction of the commissioner does not clearly outweigh the probable beneficial
742 effect of the termination.
743 (4) In accordance with Section 7-1-309 , the commissioner may hold a hearing on the
744 termination of the grandfathering of a credit union.
745 (5) Beginning on the date the commissioner approves the amendments to the bylaws of
746 a credit union under Subsection (3), the credit union:
747 (a) may not admit as a member a resident of a county for which grandfathering is
748 terminated;
749 (b) may admit as a member a person belonging to an association regardless of whether the
750 association resides in the domicile-county within the limited field of membership of the credit
751 union;
752 (c) may serve a member of the credit union who is not in the credit union's grandfathered
753 limited field of membership, if the member is a member of the credit union on the day that the
754 grandfathering terminates;
755 (d) may operate a main office or branch that is located outside the limited field of
756 membership of a credit union after grandfathering terminates but is operated by the credit union
757 on the day that the grandfathering terminates; and
758 (e) may establish, relocate, or otherwise change the physical facilities of the credit union's
759 main office or of a branch in the domicile-county of the credit union if that county is included in
760 the limited field of membership of the credit union after termination of the grandfathering.
761 (6) In addition to any requirement under this section, a credit union shall comply with any
762 requirement under this title for the establishment, relocation, or change in the physical location of
763 a main office or branch of a credit union.
764 Section 17. Repealer.
765 This act repeals:
766 Section 7-9-41, Publication of applications -- Hearing and notice on application to
767 form community or regional credit union.
768 Section 18. Effective date.
769 (1) If approved by two-thirds of all the members elected to each house, the amendments

770 in this act to Subsection 7-9-20 (7) take effect March 24, 1999.
771 (2) The remaining provisions of this act take effect on May 3, 1999.