Chapter 234 Oregon Laws 2009

AN ACT

SB 438

Relating to regulation of credit unions; creating new provisions; amending ORS 723.032, 723.122, 723.172, 723.186, 723.252, 723.276, 723.292, 723.532 and 723.631; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 723.032 is amended to read:

723.032. (1) A credit union may establish a place of business or change the credit union’s place of business within this state upon written notice to the Director of the Department of Consumer and Business Services.

(2) A credit union may establish additional places of business upon written application to the director. The application [shall] must be accompanied by a fee in an amount that the director sets by rule. The fee [shall] must be paid only with applications for the establishment of new places of business. Except as provided in subsection (3) of this section, mobile facilities described in subsection (3) of this section are [considered] new places of business. The fee is not required to be paid with applications relating to the acquisition or relocation of existing places of business. The director may approve or disapprove the application. If the director does not disapprove an application within 30 days after receiving a completed application, [is received,] the application [shall be considered] is approved.

(3) A credit union may establish one or more mobile facilities to engage in credit union operations. Mobile facilities of a credit union [having] that have the membership described in ORS 723.172 [(2)(a)] (3)(a) may operate in this state or in other states. Mobile facilities of a credit union [having] that have the membership described in ORS 723.172 [(2)(b)] (3)(b) may operate only within the well-defined local community, neighborhood or rural district served by the credit union. An application and fee are not required under this section for mobile facilities that exercise permissible credit union powers or engage in permissible credit union activities but that do not accept deposits.

(4) The director may limit or restrict [the ability of] a credit [union] union’s ability to establish additional places of business upon written notice to the credit union if the director determines that the [safety and soundness of the] credit [union] union’s safety and soundness would be adversely affected by [any] an addition.

(5) A credit union may share office space with one or more credit unions and contract with [any] a person or corporation to provide facilities or personnel.

SECTION 2. ORS 723.122 is amended to read:

723.122. (1) [Each] A credit union shall obtain and maintain a fidelity bond or irrevocable letter of credit issued by an insured institution, as defined in ORS 706.008, [which] that includes coverage in accordance with [any] rules of the Director of the Department of Consumer and Business Services, to protect the credit union against losses caused by occurrences [covered therein] such as fraud, dishonesty, forgery, embezzlement, misappropriation, misapplication of duty and all acts of [its] agents, directors, officers, committee members, employees or attorneys of the credit union. The minimum amount of the bond or letter of credit [shall be determined] is based on the amount of the credit union’s total assets in accordance with the following table:

[____________________________________________________________________________]

Assets Minimum Amount

of Bond

or Letter of Credit

$0 to $10,000 Coverage equal to

the credit union’s

assets.

$10,001 to $1,000,000 $10,000 for each

$100,000 or

fraction thereof.

$1,000,001 to $50,000,000 $100,000 plus

$50,000 for each $1

million or fraction

thereof over $1

million.

$50,000,001 to $295,000,000 $2.55 million plus

$10,000 for each $1

million or fraction

thereof over $50

million.

More than $295,000,000 $5 million.

[____________________________________________________________________________]

____________________________________________________________________________

Assets Minimum Amount

of Bond

or Letter of Credit

$0 to $4,000,000 $250,000 or

coverage equal

to the credit

union’s assets,

whichever is less.

$4,000,001 to $50,000,000 $100,000 plus

$50,000 for each

$1,000,000 or

fraction thereof.

$50,000,001 to $500,000,000 $2,550,000 plus

$10,000 for each

$1,000,000 or

fraction thereof

over $1,000,000,

with a maximum of

$5,000,000.

More than $500,000,000 1% of the credit

union’s assets

rounded to the

nearest $1,000,000,

with a maximum

of $9,000,000.

____________________________________________________________________________

(2) [Each] A fidelity bond or letter of credit [shall] must include a faithful performance clause to cover the chief financial officer. [Each] The director must approve the fidelity bond or letter of credit [shall be approved by the director who] and may require such additional amounts as the director considers necessary.

(3) [All bond claims or] Claims upon a fidelity bond or letter of credit that exceed one percent of the credit union’s reserves and undivided earnings or that are related to the errors or omissions of an officer, director or committee member [shall] must be reported to the director.

SECTION 3. ORS 723.172 is amended to read:

723.172. (1) As used in this section:

(a) “Organization” means a corporation, limited liability company, partnership or association, trust, estate or other entity and a director, officer, employee, member, partner, personal representative, trustee or volunteer of the corporation, limited liability company, partnership or association, trust, estate or other entity.

(b) “Well-defined local community, neighborhood or rural district” means one or more adjacent precincts, districts, cities, counties or other boundaries defined by the state or a unit of local government or by a state or local government agency.

[(1)] (2) The membership of a credit union [shall be] is limited to and [consist] consists of the incorporators to the articles of incorporation and [such] other persons within the common bond set forth in the bylaws [as] that have been duly admitted as members, have paid the required entrance fee or membership fee, or both, have subscribed for one or more shares and have paid the initial installment [thereon] on the shares, and have complied with such other requirements as the articles of incorporation or bylaws specify.

[(2)] (3) Credit union membership may include:

(a) One or more groups, each having a common bond of occupation or association; or

(b) Persons who live or work in, or organizations located within, a well-defined local community, neighborhood or rural district.

[(3)] (4) Credit union membership may also include any of the immediate family of a person who is eligible for membership in the credit union under subsection [(2)] (3) of this section.

[(4) For purposes of this section, a “well-defined local community, neighborhood or rural district” shall consist of one or more adjacent precincts, districts, cities, counties or other boundaries defined by the state or a unit of local government or by any state or local government agency.]

(5) In determining whether adjacent precincts, districts, cities, counties or other boundaries defined by the state or a unit of local government or by any state or local government agency form a well-defined local community, neighborhood or rural district, the Director of the Department of Consumer and Business Services shall consider:

(a) [Any interaction] Interactions or shared interests that tie the precincts, districts, cities, counties or other boundaries together;

(b) The size of the population of the proposed well-defined local community, neighborhood or rural district;

(d) [Any] Other criteria that the director considers relevant in accordance with the purposes of this chapter.

(6)(a) A credit union may not add a group with a separate bond of occupation or association to [its] the credit union’s membership unless, at the time the group is added to the [membership of the credit union] credit union’s membership, the group does not contain more than 3,000 members.

(b) The limitation in paragraph (a) of this subsection does not apply to:

(A) [Any] A group the director determines could not feasibly or reasonably establish a new credit union [due to a lack of] because the group lacks volunteer resources, financial resources or other factors the director considers important to the likelihood of the successful formation of a new credit union; or

(B) [Any] A group transferred to the credit union in connection with a merger, consolidation or transfer approved by the director, or in connection with the liquidation of another credit union.

(7) Notwithstanding subsection [(2)] (3) of this section, a credit union, [whose] the membership of which includes one or more groups[, each having] that have a common bond of occupation or association, may add to [its] the credit union’s membership persons who live or work in, or organizations located within, a well-defined local community, neighborhood or rural district if:

(a) The director determines that the well-defined local community, neighborhood or rural district is underserved by other depository institutions, as defined in section 19(b)(1)(A) of the Federal Reserve Act, [(] 12 U.S.C. 461(b)(1)(A)[)], based on data of the National Credit Union Administration and the federal banking agencies, as defined in section 3 of the Federal Deposit Insurance Act, [(] 12 U.S.C. 1813[)]; and

(b) The credit union establishes and maintains an office or facility in the well-defined local community, neighborhood or rural district at which credit union services are available.

(8) In reviewing a proposed amendment to a credit union’s bylaws that would include an additional group within the credit union’s membership, the director shall consider:

(a) Whether, within the preceding year, the credit union has engaged in any unsafe or unsound practice that is material;

(b) Whether the credit union has the capitalization, administrative capability and financial resources to serve the additional group; and

SECTION 4. ORS 723.186 is amended to read:

723.186. [Members who leave the field of membership may be permitted to retain their membership in the credit union as a matter of general policy of the board of directors.] A member who leaves the credit union’s field of membership may be permitted to retain the member’s membership in the credit union.

SECTION 5. ORS 723.252 is amended to read:

723.252. (1) [The] A credit union [shall] must be directed by a board [consisting] that consists of an odd number of directors, at least five in number, [to be] who are elected by and from the credit union’s members in the manner provided in the credit union’s bylaws. [All] Members of the board [shall] hold office for such terms as the bylaws provide.

(2) The board of directors shall appoint a supervisory committee of not less than three members at the organizational meeting and within [30] 60 days following each annual meeting of the members for such terms as the bylaws provide.

(3) The board of directors shall appoint a credit committee [consisting] that consists of an odd number[,] not less than three [in number,] for such terms as the bylaws provide[, or]. The members of the credit union may instead elect the members of the credit committee from among the membership of the credit union at the annual members’ meeting. In lieu of the credit committee, the board of directors may appoint a credit manager. [said credit committee may be elected at the annual members’ meeting by and from the members, or in lieu of a credit committee, a credit manager may be appointed.]

(4) The board of directors may appoint [alternate] temporary or successor directors[,] or temporary or successor credit committee or supervisory committee members to serve in place of absent [officials] directors or committee members.

SECTION 6. ORS 723.276 is amended to read:

723.276. (1) At [their] the organizational meeting of the board of directors and within [30] 60 days following each annual meeting of the members, the directors shall elect an executive officer, who may be designated as chairperson of the board or president; a vice chairperson of the board or one or more vice presidents; a treasurer; and a secretary. The treasurer and the secretary may be the same individual. The persons [so] elected [shall be] by the board of directors are the executive officers of the corporation.

(2) The terms of the officers [shall be] are one year, or until [their] the successors of the officers are chosen and have duly qualified.

(3) The duties of the officers [shall] must be prescribed in the bylaws.

(4) The board of directors may employ an officer in charge of operations whose title [shall be] is president, general manager, or [such other] another title [as may be] that is designated in the bylaws of the credit union[; or, in lieu thereof,]. The board of directors may instead designate the treasurer or an assistant treasurer to be in active charge of the affairs of the credit union.

(5) The board of directors may appoint a security officer.

SECTION 7. ORS 723.292 is amended to read:

723.292. The board of directors shall meet at least monthly. If a quorum of directors is present at the annual meeting of the credit union’s membership, the board of directors need not hold a board meeting for the month in which the annual meeting occurs.

SECTION 8. ORS 723.532 is amended to read:

723.532. (1) For the purposes of this section, “management team” means [any] an individual who holds a position in a credit union of vice president or higher or who has policymaking authority.

(2) A credit union may make loans to [its] individual directors, members of [its] the credit union’s management team, credit managers and members of [its] the credit union’s supervisory and credit committees, provided that:

(a) The loan complies with all lawful requirements under this chapter with respect to loans to other borrowers and is not on terms more favorable than [those] terms extended to other borrowers;

(b) The credit union’s board of directors has approved the combined aggregate amount of loans to [any one such] an individual described in this subsection that exceeds five percent of the credit union’s equity or [$25,000] $100,000, whichever is less[, has been approved by the credit union’s board of directors]; and

(c) The combined aggregate amount of [such] loans to [all such individuals] all individuals described in this subsection may not exceed 10 percent of the credit union’s assets.

(3) Except as provided in this subsection or when approved by the board of directors of the credit union, [no] a director, officer or committee member [shall be permitted to] may not become a surety or guarantor for [any] a loan or advance made by the credit union. [except] A director, officer or committee member may without the approval of the board of directors become a surety or guarantor for the spouse or children of the director, officer or committee member.

(4) The Director of the Department of Consumer and Business Services may waive the requirements of this section by rule or order [upon request of] at a credit [union] union’s request. The Director of the Department of Consumer and Business Services may establish by rule a higher amount than the amount set in subsection (2)(b) of this section and may specify by rule the type of loans to directors, officers or committee members that [must be approved by] the board of directors of the credit union must approve.

SECTION 9. ORS 723.631 is amended to read:

723.631. (1) A credit union shall establish and maintain a regular reserve for contingencies. The Director of the Department of Consumer and Business Services may adopt rules prescribing:

(a) Minimum net worth requirements for credit unions; and

(b) Actions [to be taken by] a credit union must take when the net worth of the credit union falls below the applicable minimum net worth requirement.

(2) In addition to the regular reserve required in subsection (1) of this section, a credit union shall establish a reserve for loan losses in accordance with generally accepted accounting principles issued by the Financial Accounting Standards Board or a successor organization. [The credit union shall allocate sufficient funds each month to the reserve for loan losses to maintain the reserve for loan losses in an amount at least equal to the credit union’s best estimate of the losses the credit union expects to sustain in the liquidation of currently outstanding loans.]

SECTION 10. (1) The amendments to ORS 723.032, 723.122, 723.172, 723.186, 723.252, 723.276, 723.292, 723.532 and 723.631 by sections 1 to 9 of this 2009 Act become operative 90 days after the effective date of this 2009 Act.

(2) The Director of the Department of Consumer and Business Services may take any action before the operative date of this 2009 Act that is necessary to enable the director to exercise, on and after the operative date of this 2009 Act, all the duties, functions and powers conferred on the director by the amendments to ORS 723.122, 723.172, 723.532 and 723.631 by sections 2, 3, 8 and 9 of this 2009 Act.

SECTION 11. This 2009 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2009 Act takes effect on its passage.

Approved by the Governor June 4, 2009

Filed in the office of Secretary of State June 4, 2009

Effective date June 4, 2009

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