Relates to credit union memberships and membership powers; sets forth the qualifications for membership in a credit union; and amends the powers of credit unions in relation to business loans, investment activities and other powers.
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.
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: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.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.]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 potentialS. 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, THEIRS. 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.