Public Act 096-0141
 		





HB0348 Enrolled
LRB096 04653 MJR 14712 b






    AN ACT concerning financial regulation.

 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:


 
    Section 5. The Illinois Credit Union Act is amended  by 
changing Sections 34 and 46 and  by adding Section 42.5 as 
follows:
 



    (205 ILCS 305/34)  (from Ch. 17, par. 4435)



    Sec. 34. Duties of Supervisory Committee. 
    (1) The Supervisory Committee
shall make or cause to be 
made an annual internal audit of the books and
affairs of the 
credit union to determine that the credit union's accounting

records and reports are prepared promptly and accurately 
reflect operations
and results, that internal controls are 
established and effectively
maintained to safeguard the assets 
of the credit union, and that the
policies, procedures and 
practices established by the Board of Directors
and management 
of the credit union are being properly administered.  The

Supervisory Committee shall submit a report of that audit to 
the Board
of Directors and a summary of that report to the 
members at the next annual
meeting of the credit union.  It 
shall make or cause to be made such
supplementary audits as it 
deems necessary or as are required by the
Director or by the 
Board of Directors, and submit reports of these
supplementary 
audits to the Director or Board of Directors as applicable.
If 
the Supervisory Committee has not engaged a public accountant 
registered
by the Department of Professional Regulation to make 
the internal audit,
the Supervisory Committee or other 
officials of the credit union shall not
indicate or in any 
manner imply that such audit has been performed by a
public 
accountant or that the audit represents the independent opinion 
of a
public accountant.  The Committee must retain its tapes and 
working papers
of each internal audit for inspection by the 
Department. The report of this
audit must be made on a form 
approved by the Director. A copy of the report
must be promptly 
mailed to the Director.

    (2) The Supervisory Committee shall make or cause to be 
made at least
once each year a reasonable percentage 
verification of members' share and
loan accounts, consistent 
with rules promulgated by the Director.

    (3) The Supervisory Committee of a credit union with assets 
of
$5,000,000 or more shall engage a public accountant 
registered by the
Department of Professional Regulation to 
perform an annual external
independent audit of the credit 
union's financial statements in accordance
with generally 
accepted auditing standards.  The Supervisory Committee of a

credit union with assets of $3,000,000 or more, but less than 
$5,000,000,
shall engage a public accountant registered by the 
Department of
Professional Regulation to perform an external 
independent audit of the
credit union's financial statements in 
accordance with generally accepted
auditing standards at least 
once every 3 years.  A copy of an external
independent audit 
shall be mailed to the Director upon completion. If the
annual 
internal audit of such a credit union is conducted by a public

accountant registered by the Department of Professional 
Regulation and the
annual internal audit is done in conjunction 
with the credit union's annual
external audit, the requirements 
of subsection (1) of this Section shall
be deemed met.

    (4) In determining the appropriate balance in the allowance 
for loan losses account, a credit union may determine its 
historical loss rate using a defined period of time of less 
than 5 years, provided that:
        (A) the methodology used to determine the defined 
    period of time is formally documented in the credit union's 
    policies and procedures and is appropriate to the credit 
    union's size, business strategy, and loan portfolio 
    characteristics and the economic environment of the areas 
    and employers served by the credit union;
        (B) supporting documentation is maintained for the 
    technique used to develop the credit union loss rates, 
    including the period of time used to accumulate historical 
    loss data and the factors considered in establishing the 
    time frames; and
        (C) the external auditor conducting the credit union's 
    financial statement audit has analyzed the methodology 
    employed by the credit union and concludes that the 
    financial statements, including the allowance for loan 
    losses, are fairly stated in all material respects in 
    accordance with U.S. Generally Accepted Accounting 
    Principles, as promulgated by the Financial Accounting 
    Standards Board.
    (5) A majority of the members of the Supervisory Committee

shall constitute a quorum.

(Source: P.A. 86-238.)

 
    (205 ILCS 305/42.5  new)
    Sec. 42.5. Marketing of services.  For purposes of 
promoting its services to persons eligible for membership, a 
credit union may sell to persons within its field of membership 
negotiable checks, including travelers checks, money orders, 
and similar money transfer instruments (including 
international and domestic electronic fund transfers) and may 
cash checks and money orders, and may receive international and 
domestic electronic fund transfers for such persons for a fee.
 
    (205 ILCS 305/46)  (from Ch. 17, par. 4447)

    Sec. 46. Loans and interest rate.


    (1) A credit union may make loans
to its members for such 
purpose and upon such security and terms, including
rates of 
interest, as the Credit Committee, credit manager, or loan 
officer
approves.
Notwithstanding the provisions of any other 
law in connection with extensions
of credit, a credit union may 
elect to
contract for and receive interest and fees and other 
charges for extensions of
credit subject only to the provisions 
of this Act and rules promulgated under
this Act, except that 
extensions of credit secured by residential real estate
shall 
be subject to the laws applicable thereto.
The rates of 
interest to be charged on loans to members shall be
set by the 
Board of Directors of each individual credit union in 
accordance with Section 30 of this Act and such
rates may be 
less than, but may not exceed, the maximum rate set forth in

this Section.  A borrower may repay his loan prior to maturity, 
in whole or
in part, without penalty. The credit contract may 
provide for the payment
by the member and receipt by the credit 
union of all costs and
disbursements, including reasonable 
attorney's fees and collection agency
charges, incurred by the 
credit union to collect or enforce the debt in the
event of a 
delinquency by the member, or in the event of a breach of any

obligation of the member under the credit contract.  A 
contingency or
hourly arrangement established under an 
agreement entered into by a credit
union with an attorney or 
collection agency to collect a loan of a member
in default 
shall be presumed prima facie reasonable.


    (2) Credit unions may make loans based upon the security of 
any
interest or equity in real estate, subject to rules and 
regulations
promulgated by the Director. In any contract or 
loan which
is secured by a mortgage, deed of
trust, or 
conveyance in the nature of a mortgage, on residential real

estate, the interest which is computed, calculated, charged, or 
collected
pursuant to such contract or loan, or pursuant to any 
regulation or rule
promulgated pursuant to this Act, may not be 
computed, calculated, charged
or collected for any period of 
time occurring after the date on which the
total indebtedness, 
with the exception of late payment penalties, is paid
in full.


    For purposes of this subsection (2) of this Section 46, a 
prepayment
shall mean the payment of the total indebtedness, 
with the exception of
late payment penalties if incurred or 
charged, on any date before the date
specified in the contract 
or loan agreement on which the total indebtedness
shall be paid 
in full, or before the date on which all payments, if timely

made, shall have been made.  In the event of a prepayment of the

indebtedness which is made on a date
after the date on which 
interest on the indebtedness was last computed,
calculated, 
charged, or collected but before the next date on which 
interest
on the indebtedness was to be calculated, computed, 
charged, or collected,
the lender may calculate, charge and 
collect interest on the indebtedness
for the period which 
elapsed between the date on which the prepayment is
made and 
the date on which interest on the indebtedness was last 
computed,
calculated, charged or collected at a rate equal to 
1/360 of the annual
rate for each day which so elapsed, which 
rate shall be applied to the
indebtedness outstanding as of the 
date of prepayment.  The lender shall
refund to the borrower any 
interest charged or collected which exceeds that
which the 
lender may charge or collect pursuant to the preceding 
sentence.
The provisions of this amendatory Act of 1985 shall 
apply only to contracts
or loans entered into on or after the 
effective date of this amendatory
Act.


    (3) Notwithstanding any other provision of this Act, a 
credit union
authorized under this Act to make loans secured by 
an interest or equity in
real estate may engage in making 
"reverse mortgage" loans to persons for
the purpose of making 
home improvements or repairs, paying insurance
premiums or 
paying real estate taxes on the homestead properties
of such 
persons.  If made, such loans shall be made on such terms and

conditions as the credit union shall determine and as shall be 
consistent
with the provisions of this Section and such rules 
and regulations as the
Director shall promulgate hereunder.  For 
purposes of this Section, a
"reverse mortgage" loan shall be a 
loan extended on the basis of existing
equity in homestead 
property and secured by a mortgage on such property.
Such loans 
shall be repaid upon the sale of the property or upon the death

of the owner or, if the property is in joint tenancy, upon the 
death of the
last surviving joint tenant who had such an 
interest in the property at the
time the loan was initiated, 
provided, however, that the credit union and
its member may by 
mutual agreement, establish other repayment terms.  A
credit 
union, in making a "reverse mortgage" loan, may add deferred

interest to principal or otherwise provide for the charging of 
interest or
premiums on such deferred interest. "Homestead" 
property, for purposes of
this Section, means the domicile and 
contiguous real estate owned and
occupied by the mortgagor.  The 
Director shall promulgate rules and
regulations under this 
Section; provided that such rules and regulations
need not be 
promulgated jointly with any other administrative agency of 
this State.


    (4) Notwithstanding any other provisions of this Act, a 
credit union
authorized under this Act to make loans secured by 
an interest or equity
in real property may engage in making 
revolving credit loans secured by
mortgages or deeds of trust 
on such real property or by security
assignments of  beneficial 
interests in land trusts.


    For purposes of this Section, "revolving credit" has the 
meaning defined
in Section 4.1 of the Interest Act.


    Any mortgage or deed of trust given to secure a revolving 
credit loan may,
and when so expressed therein shall, secure 
not only the existing indebtedness
but also such future 
advances, whether such advances are obligatory or to
be made at 
the option of the lender, or otherwise, as are made within 
twenty
years from the date thereof, to the same extent as if 
such future advances
were made on the date of the execution of 
such mortgage or deed of trust,
although there may be no 
advance made at the time of execution of such mortgage
or other 
instrument, and although there may be no indebtedness 
outstanding
at the time any advance is made.  The lien of such 
mortgage or deed of trust,
as to third persons
without actual 
notice thereof, shall be valid as to all such indebtedness
and 
future advances form the time said mortgage or deed of trust is 
filed
for record in the office of the Recorder of Deeds or the 
Registrar of Titles
of the county where the real property 
described therein is located.  The
total amount of indebtedness 
that may be so secured may increase or decrease
from time to 
time, but the total unpaid balance so secured at any one time

shall not exceed a maximum principal amount which must be 
specified in such
mortgage or deed of trust, plus interest 
thereon, and any disbursements
made for the payment of taxes, 
special assessments, or insurance on said
real property, with 
interest on such disbursements.


    Any such mortgage or deed of trust shall be valid and have 
priority over
all subsequent liens and encumbrances, including 
statutory liens, except
taxes and assessments levied on said 
real property.


    (5) Compliance with federal or Illinois preemptive laws or 
regulations
governing loans made by a credit union chartered 
under this Act shall
constitute compliance with this Act.


    (6) Credit unions may make residential real estate mortgage 
loans on terms and conditions established by the United States 
Department of Agriculture through its Rural Development 
Housing and Community Facilities Program. The portion of any 
loan in excess of the appraised value of the real estate shall 
be allocable only to the guarantee fee required under the 
program. 
(Source: P.A. 95-98, eff. 8-13-07.)

 

    Section 99. Effective date. This Act takes effect upon 
becoming law.