Actions

Votes

Memo

BILL NUMBER:S4567

TITLE OF BILL: An act to amend the banking law, in relation to credit union memberships and general powers

PURPOSE: This bill would expand the qualifications for membership into credit unions and to create parity with federal credit unions in the areas of investments, taxation and branching.

SUMMARY OF PROVISIONS: Section 1. Expands the definition of a low income credit union and grants low income credit unions the same tax treatment as branches of banks in banking development districts.

Section 2. Amends subdivision 2 of section 451 to provide that the qualifications for memberships shall be determined by a new section 451-a and shall not apply to a corporate credit union.

Section 3. Adds a new section 451-a to the banking law to provide that the qualifications for memberships shall be determined by the board of directors of the credit union.

Section 4. Amends subparagraph (i) of paragraph (c) of subdivision 6 of section 454 of the banking law to place limitations on business loans made to its members.

Sections 5 and 6. Amends subparagraph (i) of paragraph (a) of subdivision 18 of section 454 of the banking law and adds a new paragraph (d) to authorize credit unions to invest in projects of State corporations that work with housing projects, slum clearance corporations, small business investment corporations and urban development corporations.

Section 7. Amends subdivision 21 of section 454 to create parity with savings banks as it relates to owning real property and improvements thereon for the purpose of conducting business.

Section 8. Amends subdivision 2 of section 461 of the banking law to create parity with federal credit unions by authorizing credit unions to operate in any locality where its actual potential membership attends school. Eliminates requirement for a credit union to submit an application to the superintendent of banks in order to open a place of business.

Section 9. Amends subdivision one of section 454 of the banking law to authorize the use of credit unions by nonmembers and governmental units.

Section 10. Amends section 454 by adding two new subparagraphs to create parity with federal credit unions as it relates to exercising incidental powers and adding a new subparagraph granting state chartered credit unions the authority to accept supplemental capital.

 Section 11. Amends section 479 of the banking law to ensure parity between state and federal credit unions as it relates to unrelated business income tax.

Section 12. Provides that this act shall take effect immediately.

JUSTIFICATION: State chartered credit unions remain an important component of the financial services industry. A healthy dual chartering system and the ability for credit unions to reach as many New Yorkers in need of their products and services are essential elements toward their continued success. These revisions to the state credit union act ensure credit unions are able to meet the financial services needs of low and working class New Yorkers by enabling them to reach into these communities and offer them membership and services through a viable business model. The revisions also ensure state chartered credit unions remain a viable alternative to federal credit unions fostering a healthy dual chartering system by maintaining parity with federal law and regulation.

LEGISLATIVE HISTORY: New.

FISCAL IMPLICATIONS: To be determined.

EFFECTIVE DATE: Immediate.

Text

STATE OF NEW YORK
________________________________________________________________________

4567

2011-2012 Regular Sessions

IN SENATE

April 12, 2011
___________

Introduced  by  Sen.  GRIFFO -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT to amend the banking law, in relation to credit union memberships
  and general powers

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Subdivisions 3 and 5 of section 450-a of the banking law,
as added by chapter 214 of the laws of 1999,  are  amended  to  read  as
follows:
  3.  Notwithstanding  any other provision of this article, a low income
credit union may issue shares, share drafts and  share  certificates  to
nonmembers  who  or which may be natural persons, corporations, partner-
ships or other legal entities. A BRANCH OF A  LOW  INCOME  CREDIT  UNION
LOCATED IN A LOW INCOME AREA SHALL BE EXEMPT FROM TAXATION UNDER SECTION
FOUR HUNDRED EIGHTY-FIVE-F OF THE REAL PROPERTY TAX LAW.
  5.  As  used in this section, the term "low income credit union" shall
mean a credit union in which a majority of [the members] A  WELL-DEFINED
SEGMENT  OF  MEMBERS TO BE SERVED:  (a) make less than eighty percent of
the average for all wage earners as established by the bureau  of  labor
statistics  of  the  United  States  department  of labor or have annual
household incomes that fall at or below eighty  percent  of  the  median
household  income  for  the  nation  as established by the United States
census bureau; or (b) are residents of  a  public  housing  project  who
qualify  for  such  residency  because  of low income; or (c) qualify to
receive benefits from any program designed to  assist  the  economically
disadvantaged.  The banking board may promulgate regulations appropriate
to the formation and operation of low income credit unions.
  S 2. Subdivision 2 of section 451 of the banking law,  as  amended  by
chapter 660 of the laws of 2004, is amended to read as follows:
  2. The qualifications for membership.
  [(a) Membership shall be limited to:

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10800-01-1
S. 4567                             2

  (1) persons having a common employer;
  (2)  persons  and  organizations  who  are  members of the same trade,
industry, profession, club, union, society or other association;
  (3) in the case of a credit union incorporated under this  chapter  as
of  the effective date of this subdivision, and with the approval of the
superintendent, which approval  shall  not  be  given  if  it  would  be
destructive  of  competition within a municipality, more than one common
employer; provided, however, that an employer  group  with  under  three
thousand  employees may be added upon receipt of a notice as provided in
subdivision two of section four hundred seventy-eight of this article;
  (4) with the approval  of  the  superintendent,  and  subject  to  the
provisions  of  paragraph  (b)  of this subdivision, more than one group
each of which has, within  the  group,  a  common  bond  of  occupation,
including  a  common employer, or association; provided, however, that a
group of less than three thousand members, which  is  within  reasonable
proximity to the credit union's service area or areas, may be added upon
receipt  of  a  notice  as  provided  in subdivision two of section four
hundred seventy-eight of this article; or
  (5) persons and organizations within a well-defined  local  community,
neighborhood  or  rural  district  and who in the judgment of the super-
intendent have such a community of interest as will insure proper admin-
istration.
  (b) In considering an application to add a group  to  a  credit  union
authorized under subparagraph four of paragraph (a) of this subdivision,
the  superintendent  shall  not approve the addition unless the group is
within reasonable proximity to the credit union's service area or areas.
If the group has more than three thousand  members,  the  superintendent
shall  not  approve  such  addition unless he or she determines that the
group could not feasibly or reasonably establish  a  new  single  common
bond credit union because:
  (1)  the  group  lacks  sufficient  volunteer  and  other resources to
support the efficient and effective operation of a credit union;
  (2) the group does not meet the criteria which the superintendent  has
determined to be important for the likelihood of success in establishing
and  managing  a new credit union, including demographic characteristics
such as geographical location of members, diversity of ages  and  income
levels,  and  other  factors that may affect the financial viability and
stability of a credit union;
  (3) the group would be unlikely to operate a  safe  and  sound  credit
union; or
  (4)  the  group  has  been  transferred  from  another credit union in
connection with a merger or consolidation  recommended  by  a  state  or
federal regulator based on safety and soundness concerns or by the board
of the National Credit Union Administration in its capacity as conserva-
tor or liquidating agent.
  (c) With the approval of the superintendent, a credit union may extend
membership to persons and organizations in an underserved local communi-
ty, neighborhood or rural district, where such area is determined by the
superintendent  to  be  an  "investment  area" as defined in the federal
Community Development Banking and Financial Institutions Act of 1994 (12
U.S.C. 4703(16)) and any other requirements imposed by  the  superinten-
dent,  including a requirement that the credit union establish and main-
tain an office or facility in such area.
  (d) To the extent not expressly prohibited by the bylaws of the credit
union:
S. 4567                             3

  (1) in each instance where a person is a member or is directly  eligi-
ble  for membership, members of his or her immediate family or household
shall be eligible for membership. For the purposes of this subparagraph,
"immediate family" means a person's spouse, and their  lineal  ancestors
and  descendants,  including  persons  so related by adoption, siblings,
stepparents,  stepchildren,  and  stepsiblings;  and  "household"  means
persons  living  in the same residence and maintaining a single economic
unit;
  (2) any employee of the credit union shall be eligible to  membership;
and
  (3)  any  member  who  leaves  the field of membership and who has not
withdrawn or been expelled may retain membership.
  (e) To the extent not expressly prohibited by the bylaws of the credit
union, any incorporated or unincorporated organization composed  princi-
pally  of  persons  eligible  to  membership in the credit union and the
organization's employees shall be eligible to membership in  the  credit
union.
  (f)  Any  person  who is eligible for membership by reason of the fact
that he or she is an employee either of a common employer or of a credit
union shall not become ineligible, after the termination of such employ-
ment, as long as he or she receives a pension or annuity from, or under,
a plan or other arrangement established by such common employer or cred-
it union.
  (g) The provisions of this subdivision shall not apply to a  corporate
credit  union.]  QUALIFICATIONS  FOR  MEMBERSHIP  SHALL  BE  PURSUANT TO
SECTION FOUR HUNDRED FIFTY-ONE-A OF THIS ARTICLE AND SHALL NOT APPLY  TO
A CORPORATE CREDIT UNION.
  S  3. The banking law is amended by adding a new section 451-a to read
as follows:
  S 451-A. QUALIFICATIONS FOR MEMBERSHIP. 1. THE MEMBERSHIP OF A  CREDIT
UNION SHALL BE DETERMINED BY THE BOARD OF DIRECTORS OF SUCH CREDIT UNION
AND  SHALL CONSIST OF PERSONS WITHIN THE CREDIT UNION'S FIELD OF MEMBER-
SHIP WHO HAVE BEEN DULY ADMITTED MEMBERS.
  2. A CREDIT UNION'S FIELD OF MEMBERSHIP MAY INCLUDE:
  (A) PERSONS WITHIN ONE OR MORE GROUPS OF THE FOLLOWING, OR A  COMBINA-
TION OF SUCH GROUPS:
  (1) OCCUPATION, OR
  (2) ASSOCIATION OR INTEREST, OR
  (3)  PERSONS  WHO  RESIDE,  WORK,  WORSHIP  OR  ATTEND SCHOOL WITHIN A
GEOGRAPHIC AREA, IDENTIFIABLE NEIGHBORHOOD, COMMUNITY OR RURAL DISTRICT;
AND
  (B)  BUSINESSES,  ASSOCIATIONS  OR  ORGANIZATIONS  LOCATED  WITHIN   A
GEOGRAPHIC AREA; AND
  (C)  FAMILY MEMBERS OF SUCH PERSONS DESCRIBED IN PARAGRAPH (A) OF THIS
SUBDIVISION. FOR THE PURPOSES OF THIS PARAGRAPH, "FAMILY MEMBER" MEANS A
PERSON RELATED BY BLOOD, MARRIAGE OR LIVING IN THE SAME HOUSEHOLD WITH A
PERSON WITHIN THE FIELD OF MEMBERSHIP AND  THEIR  LINEAL  ANCESTORS  AND
DESCENDANTS INCLUDING PERSONS SO RELATED BY ADOPTION, SIBLINGS, STEPPAR-
ENTS,  STEPCHILDREN  AND  STEPSIBLINGS;  AND  "HOUSEHOLD"  MEANS PERSONS
LIVING IN THE SAME RESIDENCE AND MAINTAINING A SINGLE ECONOMIC UNIT; AND
  (D) ANY EMPLOYEE OF THE CREDIT UNION; AND
  (E) ANY MEMBER WHO LEAVES THE FIELD OF  MEMBERSHIP  AND  WHO  HAS  NOT
WITHDRAWN OR BEEN EXPELLED MAY RETAIN MEMBERSHIP; AND
  (F)  ANY  INCORPORATED OR UNINCORPORATED ORGANIZATION COMPOSED PRINCI-
PALLY OF PERSONS ELIGIBLE TO MEMBERSHIP IN THE  CREDIT  UNION  AND  THAT
ORGANIZATION'S EMPLOYEES.
S. 4567                             4

  3.  ANY  PERSON  WHO  IS ELIGIBLE FOR MEMBERSHIP BY REASON OF THE FACT
THAT HE OR SHE IS AN EMPLOYEE OF A COMMON EMPLOYER OR OF A CREDIT  UNION
SHALL  NOT  BECOME INELIGIBLE, AFTER THE TERMINATION OF SUCH EMPLOYMENT,
AS LONG AS HE OR SHE RECEIVES A PENSION OR ANNUITY  FROM,  OR  UNDER,  A
PLAN  OR OTHER ARRANGEMENT ESTABLISHED BY SUCH COMMON EMPLOYER OR CREDIT
UNION.
  4. A CREDIT UNION MAY EXTEND MEMBERSHIP TO PERSONS  AND  ORGANIZATIONS
IN  AN UNDERSERVED LOCAL COMMUNITY, NEIGHBORHOOD OR RURAL DISTRICT WHERE
SUCH AREA IS CONSIDERED AN "INVESTMENT AREA" AS DEFINED IN  THE  FEDERAL
COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS ACT OF 1994 (12
U.S.C. 4703(16)).
  S 4. Subparagraph (i) of paragraph (c) of subdivision 6 of section 454
of  the  banking  law,  as  added by chapter 660 of the laws of 2004, is
amended to read as follows:
  (i) [No credit union may make any  member  business  loan  that  would
result  in a total amount of such loans outstanding at that credit union
at any one time equal to more than the lesser of 1.75 times  the  actual
net  worth  of  the  credit  union,  or 1.75 times the minimum net worth
required under 12 U.S.C. 1790d(c)(1)(A) for a credit union  to  be  well
capitalized.]  NO  CREDIT UNION SHALL MAKE ANY MEMBER BUSINESS LOAN THAT
WOULD RESULT IN A TOTAL AMOUNT OF SUCH LOANS OUTSTANDING AT  THE  CREDIT
UNION  AT  ANY  ONE  TIME  EQUAL TO MORE THAN THE GREATER OF TWENTY-FIVE
PERCENT OF THE TOTAL ASSETS OF THE CREDIT UNION,  OR  THE  LIMIT  ESTAB-
LISHED FOR FEDERAL CREDIT UNIONS.
  S  5.  Subparagraph  (i) of paragraph (a) of subdivision 18 of section
454 of the banking law, as amended by chapter 679 of the laws  of  2003,
is amended to read as follows:
  (i) Those securities authorized as permissible investments for savings
banks  by  subdivisions one, two, three, four, SIX, SUBPARAGRAPH FIVE OF
PARAGRAPH (A) OF SUBDIVISION NINE, twelve,  [paragraph]  PARAGRAPHS  (a)
AND  (B) of subdivision twelve-a, [and] subdivisions fifteen, seventeen,
PARAGRAPH (A) OF SUBDIVISION TWENTY,  SUBPARAGRAPHS  ONE  AND  ONE-A  OF
PARAGRAPH (A) OF SUBDIVISION TWENTY-ONE, AND SUBDIVISIONS TWENTY-FOUR-D,
twenty-seven [and], TWENTY-EIGHT, twenty-eight-a, TWENTY-NINE AND THIRTY
of section two hundred thirty-five of this chapter.
  S  6.  Subdivision 18 of section 454 of the banking law, as amended by
chapter 679 of the laws of 2003, is amended by adding  a  new  paragraph
(d) to read as follows:
  (D)  ALL  INVESTMENT ACTIVITIES AND INVESTMENTS AUTHORIZED FOR FEDERAL
CREDIT UNIONS UNDER 12 CFR PART 703.13 AND 703.14.
  S 7. Subdivision 21 of section 454 of the banking law, as  amended  by
chapter 679 of the laws of 2003, is amended to read as follows:
  21. To purchase, hold, lease and convey a plot whereon there is or may
be erected a building suitable for the transaction of its business, from
portions of which not required for its own use a revenue may be derived,
and  a  plot  whereon  parking accommodations are or are to be provided,
with or without charge, primarily for its members or employees or  both;
provided  that  the net aggregate of all investments of any credit union
in such plots and building shall be limited to [six] FORTY per centum of
the capital and retained earnings of such credit union, except with  the
approval of the superintendent.
  S  8.  Subdivision  2  of  section 461 of the banking law, as added by
chapter 608 of the laws of 1996, is amended to read as follows:
  2. Subject to such regulations as the superintendent  may  adopt,  any
credit  union, may open and maintain within or without the state, in any
locality in which  [a  substantial  portion  of]  its  actual  potential
S. 4567                             5

membership  is  employed,  ATTENDING  SCHOOL  or  residing,  one or more
stations for the conduct of its business [provided that before any  such
station  or  stations  shall be opened or maintained or removed to a new
location:
  (a)  Its board of directors shall submit to the superintendent a writ-
ten application setting forth the  reasons  therefor  and  the  proposed
location of such station or stations.
  (b) The superintendent shall have given his written approval thereto].
  S  9.  Subdivision  1 of section 454 of the banking law, as amended by
chapter 679 of the laws of 2003, is amended to read as follows:
  1. To issue and receive payments on, shares, share drafts,  and  share
certificates, subject to such terms, rates, and conditions as are estab-
lished by its board of directors, from:
  (A) its members;
  (B)  AN  OFFICER,  EMPLOYEE  OR  AGENT OF THOSE NONMEMBER UNITS OF THE
FEDERAL, STATE, INDIAN TRIBAL OR LOCAL GOVERNMENTS AND POLITICAL  SUBDI-
VISIONS; and
  (C) from other credit unions, both state and federally chartered.
  A  member  may  designate any person or persons to own shares or share
certificates with him or her in joint tenancy with the right  of  survi-
vorship,  but  no joint tenant shall be permitted to vote, obtain loans,
or hold office, unless he or she is within the field of  membership  and
is a qualified member.
  S  10.  Section  454  of  the banking law is amended by adding two new
subdivisions 37 and 38 to read as follows:
  37. TO EXERCISE INCIDENTAL POWERS  APPROVED  BY  THE  NATIONAL  CREDIT
UNION ADMINISTRATION AS SET FORTH IN 12 C.F.R. 721.
  38.  TO RECEIVE SUPPLEMENTAL CAPITAL FROM BOTH NATURAL AND NON-NATURAL
PERSON NON-MEMBERS. THE OFFER AND SALE OF SUPPLEMENTAL CAPITAL SHALL  BE
SUBJECT  TO  REGULATIONS  PROMULGATED  BY  THE SUPERINTENDENT THAT SHALL
ADDRESS THE SAFETY AND SOUNDNESS OF THE OFFER OR SALE  OF  SUCH  SUPPLE-
MENTAL  CAPITAL,  INCLUDING THE SUPPLEMENTAL CAPITAL'S MATURITY, TERM OF
SALE, TERMS OF CAPITAL, TOTAL AMOUNT OF SUPPLEMENTAL CAPITAL THAT MAY BE
OUTSTANDING AT ONE TIME, REDEMPTION, ELIGIBILITY OF  THE  INVESTORS.  IN
ADDITION, SUPPLEMENTAL CAPITAL SHALL BE SUBJECT TO ALL OF THE FOLLOWING:
  (I)  THE  SUPPLEMENTAL  CAPITAL  SHALL  BE ESTABLISHED AS AN UNINSURED
SUPPLEMENTAL CAPITAL OR OTHER FORM OF NON-SHARE ACCOUNT.
  (II) THE SUPPLEMENTAL CAPITAL MAY NOT BE INSURED BY THE NATIONAL CRED-
IT UNION SHARE INSURANCE FUND (NCUSIF)  OR  ANY  OTHER  GOVERNMENTAL  OR
PRIVATE ENTITY.
  (III) THE SUPPLEMENTAL CAPITAL HOLDER'S CLAIM AGAINST THE CREDIT UNION
SHALL  BE  SUBORDINATE TO ALL OTHER CLAIMS INCLUDING THOSE OF SHAREHOLD-
ER'S CREDITORS, AND THE NCUSIF, OR AN APPROVED INSURER.
  (IV) THE SUPPLEMENTAL CAPITAL MAY NOT BE PLEDGED OR  PROVIDED  BY  THE
ACCOUNT  HOLDER  AS  A  SECURITY  ON A LOAN OR OTHER OBLIGATION WITH THE
CREDIT UNION OR ANY OTHER PARTY.
  FOR PURPOSES OF THIS SECTION, SUPPLEMENTAL CAPITAL SHALL MEAN FORMS OF
CAPITAL THAT ARE SUBORDINATE TO  SHARES,  OTHER  LIABILITIES  AND  SHARE
INSURANCE.
  S  11.  Section 479 of the banking law, as added by chapter 608 of the
laws of 1996, is amended to read as follows:
  S 479. Credit union not liable for taxation.  Any credit union subject
to the provisions of this article shall be  deemed  an  institution  for
savings  within  the  meaning of the law which exempts such institutions
from taxation. No law which taxes  corporations  in  any  form,  or  the
shares  thereof  or  the accumulations therein, OR THEIR PROPERTY, THEIR
S. 4567                             6

FRANCHISES, CAPITAL, RESERVES, SURPLUSES,  AND  OTHER  FUNDS,  OR  THEIR
INCOME,  shall  apply  to corporations doing business in accordance with
the provisions of this article, unless  such  corporations  are  specif-
ically  named  in  said  law, EXCEPT THAT ANY REAL AND TANGIBLE PERSONAL
PROPERTY OF SUCH CORPORATION SHALL BE SUBJECT TO TAXATION  TO  THE  SAME
EXTENT AS OTHER SIMILAR PROPERTY IS TAXED.
  S 12. This act shall take effect immediately.