AB2: Bill Text

Under current law, credit unions are subject to the provisions of chs. 93 to 100 (agriculture, trade, and consumer protection statutes) that apply to businesses generally. Banks, savings banks, and savings and loan associations are specifically exempted from the definition of "business" that applies in the agriculture, trade, and consumer protection statutes. This bill specifically exempts credit unions from this definition.

Universal banks

Generally

Under current law, the Division of Savings Institutions regulates state savings banks and state savings and loan associations, and the Division of Banking regulates state banks. This bill allows a state savings bank, state savings and loan association, or state bank (financial institution) to apply to the Division of Banking to become certified as a universal bank. If certified as a universal bank, a financial institution may exercise certain powers, in addition to those that are granted under the statutes under which the financial institution is organized. A universal bank retains its status as a savings and loan association, savings bank, or state bank and remains subject to existing regulatory and supervisory requirements, except to the extent that these requirements are inconsistent with the requirements applicable to universal banks. Universal banks are subject to the following provisions:

Certification of universal banks

A financial institution may apply to become certified as a universal bank by filing a written application with the Division of Banking. In order to be certified as a universal bank, the financial institution must meet all of the following requirements: 1) the financial institution must have been in existence and continuous operation for at least three years; 2) the financial institution must be "well-capitalized," as defined in federal law; 3) the financial institution must not exhibit moderately severe or unsatisfactory financial, managerial, operational, and compliance weaknesses; 4) the financial institution must not have been the subject of any enforcement action within the 12 months preceding the application; 5) the most recent evaluation of the financial institution under the federal Community Reinvestment Act must rate the financial institution as "outstanding" or "satisfactory" at helping to meet the credit needs of its entire community; and 6) the most recent report received by the financial institution evaluating the financial institution's compliance with certain federal laws relating to customer privacy must indicate that the financial institution is in substantial compliance with these federal laws. If these requirements are met, the Division of Banking must certify the financial institution as a universal bank. If a universal bank fails to maintain compliance with these requirements, the Division of Banking must limit the universal bank's exercise of universal banking powers. In addition, a universal bank may be decertified if it fails to maintain compliance with these requirements. With the approval of the Division of Banking, a universal bank may also elect to terminate its certification. As a precondition to elective decertification, the universal bank must terminate the exercise of all universal banking powers.

Organization and regulation of universal banks

A financial institution that is certified as a universal bank remains subject to all of the requirements and duties, and remains able to exercise all of the powers, that applied to the financial institution prior to its certification as a universal bank, except to the extent that such requirements, duties, and powers are inconsistent with the requirements, powers, and duties of universal banks. After a financial institution becomes certified as a universal bank, the Division of Banking is responsible for establishing the capital requirements applicable to the universal bank.

A universal bank continues to operate under the articles of incorporation and bylaws that were in effect prior to its certification as a universal bank, and these articles and bylaws may be amended in accordance with the law governing savings banks, savings and loan associations, or state banks, whichever is applicable to the financial institution. Current law generally prohibits a savings bank or a savings and loan association from using the term "bank" in its corporate name without also using the term "savings." Notwithstanding these provisions, the bill allows any financial institution that becomes certified as a universal bank to use the term "bank" in its corporate name without using the word "savings," subject to certain limitations relating to the distinguishability of the name.

Under current law, the Division of Banking regulates mergers and acquisitions of state banks, and the Division of Savings Institutions regulates mergers and acquisitions of savings banks and savings and loan associations. Under the bill, the Division of Banking assumes responsibility for reviewing and approving the mergers and acquisitions of all financial institutions that have been certified as universal banks, including savings banks and savings and loan associations. The standards to be used by the Division of Banking in reviewing a merger or acquisition of a universal bank generally track the standards currently applicable to the various financial institutions that may become certified as universal banks, except that universal banks may generally acquire or merge with any type of financial institution.

Powers of universal banks

The bill expands the powers of a financial institution that becomes certified as a universal bank. Currently, savings banks, savings and loan associations, and banks have differing powers under both state and federal law. Under the bill, a universal bank is authorized to engage in any activity authorized for any savings bank, savings and loan association, or state bank beginning on the first day of the third month beginning after the bill's publication. In addition, the bill specifically permits a universal bank to exercise all of the following powers:

1) Federal powers: Under the bill, a universal bank may exercise all powers that may be exercised directly by a national bank, a federally chartered savings and loan association, or a federally chartered savings bank. In addition, a universal bank may exercise through a subsidiary all powers that a subsidiary of these federal financial institutions may exercise. The Division of Banking must approve the initial exercise of a federal power by a universal bank under these provisions, but thereafter any universal bank generally may exercise that power. The Division of Banking may, however, require a universal bank to exercise a federal power through a subsidiary of the universal bank to limit the risk exposure of the universal bank.

2) Lending powers: Under current law, the lending powers of a financial institution depend on whether the financial institution is organized as a savings bank, savings and loan association, or state bank. The lending powers granted to universal banks under the bill are most similar to the lending powers granted to state banks under current law. Current law imposes some restrictions on the types and purposes of loans that savings banks and savings and loan associations may make. Under the bill, a universal bank may make, sell, purchase, arrange, participate in, invest in, or otherwise deal in loans or extensions of credit for any purpose. Like state banks, the limitations imposed on a universal bank's lending generally focus on the total amount of liabilities of any one lender at any one time. Although the limit varies depending on the lender and on the type of security pledged for the loan, the general rule is that the total liabilities of any one person to a universal bank may not exceed 20% of the universal bank's capital.

The lending limits for universal banks are generally the same as for state banks, except that universal banks are granted additional authority to lend, through the universal bank or its subsidiaries, an aggregate amount to all borrowers from the universal bank and all of its subsidiaries not to exceed 20% of the universal bank's capital. Generally, however, the loans to any one borrower made under any lending authority of the universal bank may not exceed 20% of the universal bank's capital. Loans made under this additional authority are not subject to rules regarding bad debts or classification of losses for a period of two years from the date of the loan. This additional authority may be suspended by the Division of Banking. Among the factors that may be considered by the Division of Banking in suspending this authority are a universal bank's capital adequacy, management, earnings, liquidity, and sensitivity to market risk. The bill prohibits a universal bank, in determining whether to make a loan or extension of credit, from considering any health information obtained from the records of an affiliate of the universal bank that is engaged in the business of insurance, unless the person to whom the health information relates consents.

3) Investment powers: A universal bank may purchase, sell, underwrite, and hold investment securities, consistent with safe and sound banking practices, in an amount up to 100% of the universal bank's capital. Investment securities include commercial paper; banker's acceptances; marketable securities in the form of bonds, notes, and debentures; and similar instruments. A universal bank may not invest greater than 20% of its capital in any one obligor or issuer. A universal bank may purchase, sell, underwrite, and hold equity securities, consistent with safe and sound banking practices, in an amount up to 20% of the universal bank's capital, unless the Division of Banking approves a greater percentage. A universal bank may also invest in certain housing properties and projects, except that the total investment in any one project may not exceed 15% of the universal bank's capital and except that the total amount invested in housing properties and projects may not exceed 50% of the universal bank's capital. A universal bank may take equity positions in profit-participation projects, including projects funded through loans from the universal bank, in an aggregate amount not to exceed 20% of the universal bank's capital. The Division of Banking may suspend a universal bank's authority to invest in profit-participation projects.

The bill permits a universal bank to invest without limitation in certain types of securities, including: 1) obligations of certain federal agencies or federally chartered corporations and associations; 2) deposit accounts or insured obligations of insured financial institutions; 3) securities of certain business development corporations and urban renewal investment corporations; 4) certain securities of bank insurance companies; 5) securities of certain corporations operating automated teller machines; 6) securities of service corporation subsidiaries of the universal bank; 7) advances of federal funds; 8) risk management instruments, including financial futures transactions, financial operations transactions, and forward commitments, but solely for the purpose of reducing, hedging, or otherwise managing its interest rate risk exposure; 9) securities of subsidiaries exercising certain fiduciary powers; and 10) securities of certain agricultural credit corporations. A universal bank may invest in other financial institutions. The investment powers of a universal bank may be exercised directly or indirectly through a subsidiary, unless the Division of Banking requires the investment to be made through a subsidiary to limit the risk exposure of the universal bank. The bill contains specific provisions governing the purchase by a universal bank of its own stock and of stock in banks and bank holding companies.

4) Deposit and trust powers: The bill permits a universal bank to establish the types and terms of deposits that the universal bank will solicit and accept. A universal bank may pledge its assets as security for deposits. With the approval of the Division of Banking, a universal bank may securitize its assets for sale to the public, subject to any procedures established by the Division of Banking. A universal bank may exercise safe deposit powers and have a lien for its safekeeping charges on the contents of property accepted for safekeeping. If these charges remain unpaid for two years or if property accepted for safekeeping is not called for within two years, a universal bank may sell the property at public auction. The bill authorizes a universal bank to exercise the same trust powers that trust company banks are permitted to exercise under current law.

5) Incidental and related powers: Under the bill, a universal bank may exercise all powers necessary or convenient to effect the purposes for which the universal bank is organized or to further the businesses in which the universal bank is lawfully engaged. Current law does not have a similar provision.

In addition to these necessary or convenient powers, the bill allows a universal bank to engage in activities that are reasonably related or incident to the purposes of the universal bank. With certain exceptions, a universal bank may engage in these activities either directly or indirectly through a subsidiary. Under the bill, any activity permitted under the federal Bank Holding Act satisfies the reasonably related or incidental criterion. The bill also contains a list of specific activities that meet the reasonably related or incidental criterion. The listed activities include: 1) business and professional services; 2) data processing; 3) courier and messenger services; 4) credit-related activities; 5) consumer services; 6) real estate-related services; 7) insurance services, other than insurance underwriting; 8) securities brokerage; 9) investment advice; 10) securities and bond underwriting; 11) mutual fund activities; 12) financial consulting; 13) tax planning and preparation; 14) community development and charitable activities; and 15) debt cancellation contracts.

A universal bank may also engage in activities that the Division of Banking determines are reasonably related or incidental to these listed activities. In addition, the Division of Banking may determine that other activities are reasonably related or incidental activities.

A universal bank must give 60 days' prior written notice to the Division of Banking of the universal bank's intention to exercise a necessary or convenient power or to engage in a reasonably related or incidental activity. The Division of Banking may deny a universal bank the authority to exercise a necessary or convenient power or to engage in a reasonably related or incidental activity, other than an activity that is contained in the specific list of reasonably related or incidental activities, if the Division of Banking determines that the activity is not a reasonably related or incidental activity, that the financial institution is not well-capitalized, that the financial institution is the subject of an enforcement action, or that the financial institution does not have sufficient management expertise for the activity. The Division of Banking may also require a universal bank to engage in certain of these activities through a subsidiary, with appropriate safeguards to limit the risk exposure of the universal bank. Amounts invested in a single subsidiary that engages in these activities may not exceed 20% of the universal bank's capital, unless a higher percentage is approved by the Division of Banking.

Uniform commercial code

Currently, under this state's version of the Uniform Commercial Code, when collateral is disposed of by a secured party following a default by the debtor, all subordinate security interests and liens are discharged by the disposition of the collateral, except liens held by this state or a local governmental unit. One result of this exception is essentially to give priority to subordinate liens held by this state or a local governmental unit. These liens include, for example, tax liens, liens related to environmental clean-up payments, public assistance payments, wage claims, unemployment and worker's compensation payments, and liens on aircraft for nonpayment of certain fees. This bill deletes this exception and, in effect, grants these liens the priority otherwise applicable to them under the law.

Because this bill creates a new crime or revises a penalty for an existing crime, the Joint Review Committee on Criminal Penalties may be requested to prepare a report concerning the proposed penalty and the costs or savings that are likely to result if the bill is enacted.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB2, s. 1 Section 1. 93.01 (1m) of the statutes is amended to read:

AB2,11,10 93.01 (1m) "Business" includes any business, except that of banks, savings banks, credit unions, savings and loan associations , and insurance companies. "Business" includes public utilities and telecommunications carriers to the extent that their activities, beyond registration, notice, and reporting activities, are not regulated by the public service commission and includes public utility and telecommunications carrier methods of competition or trade and advertising practices that are exempt from regulation by the public service commission under s. 196.195, 196.196, 196.202, 196.203, 196.219, or 196.499 or by other action of the commission.

AB2, s. 2 Section 2. 186.01 (2) of the statutes is amended to read:

AB2,12,2 186.01 (2) "Credit union" means, except as specifically provided under ss. 186.41 (1) and 186.45 (1), a cooperative, nonprofit corporation, incorporated under this chapter to encourage thrift among its members, create a source of credit at a fair and reasonable cost, and provide an opportunity for its members to improve their economic and social conditions.

AB2, s. 3 Section 3. 186.02 (2) (a) 1. of the statutes is amended to read:

AB2,12,5 186.02 (2) (a) 1. The conditions of residence or occupation which qualify persons that determine eligibility for membership.

AB2, s. 4 Section 4. 186.02 (2) (b) 2. of the statutes is amended to read:

AB2,12,14 186.02 (2) (b) 2. Residents Except as otherwise provided in this subdivision, individuals who reside or are employed within a well-defined neighborhood, community or rural district and contiguous neighborhoods and communities. If the office of credit unions, subsequent to a credit union merger, determines that it would be inappropriate under the circumstances to require members of the credit union that results from the merger to reside or be employed in contiguous neighborhoods and communities, the requirement that these neighborhoods and communities be contiguous does not apply.

AB2, s. 5 Section 5. 186.02 (2) (b) 2m. of the statutes is created to read:

AB2,12,17 186.02 (2) (b) 2m. Individuals who reside or are employed within well-defined and contiguous rural districts or multicounty regions.

AB2, s. 6 Section 6. 186.02 (2) (c) of the statutes is amended to read:

AB2,12,23 186.02 (2) (c) Members of the immediate family of all qualified persons are eligible for membership. In this paragraph, "members of the immediate family" include the wife, husband, parents, stepchildren and children of a member whether living together in the same household or not and any other relatives of the member or spouse of a member living together in the same household as the member.

AB2, s. 7 Section 7. 186.02 (2) (d) of the statutes is renumbered 186.02 (2) (d) 1. and amended to read:

AB2,13,4 186.02 (2) (d) 1. Organizations and associations An organization or association of individuals, the majority of whom the directors, owners, or members of which are eligible for membership, may be admitted to membership in the same manner and under the same conditions as individuals.

AB2, s. 8 Section 8. 186.02 (2) (d) 2. of the statutes is created to read:

AB2,13,8 186.02 (2) (d) 2. An organization or association that has a business location within any geographic limits of the credit union's field of membership may be admitted to membership.

AB2, s. 9 Section 9. 186.06 (4) of the statutes is amended to read:

AB2,13,12 186.06 (4) Fiscal year. The fiscal year of every credit union shall end at the close of business on December 31 and the credit union shall, at least semiannually, transfer funds as provided in s. 186.17.

AB2, s. 10 Section 10. 186.07 (3m) of the statutes is created to read:

AB2,13,21 186.07 (3m) Written consent in lieu of meeting. (a) Unless the articles of incorporation or bylaws provide otherwise, any action required or permitted by this chapter to be authorized at a board of directors' meeting may be authorized without a meeting if that action is authorized by all directors and is evidenced by one or more written statements, signed by each director, describing and consenting to the action. Such an action has the same effect as an action authorized by unanimous vote at a meeting at which all directors are present and may be described as such in any document.

AB2,13,24 (b) Any action authorized under par. (a) is effective when the last director signs the statement evidencing his or her consent, unless the statement specifies a different effective date.

AB2,14,2 (c) A credit union shall retain all statements signed by its directors under par. (a).

AB2, s. 11 Section 11. 186.11 (4) (title) of the statutes is amended to read:

AB2,14,5 186.11 (4) (title) Investment in credit union service corporations organizations.

AB2, s. 12 Section 12. 186.11 (4) (a) of the statutes is renumbered 186.11 (4) (a) (intro.) and amended to read:

AB2,14,12 186.11 (4) (a) (intro.) A Unless the office of credit unions approves a higher percentage, a credit union may invest not more than 1.5% of its total assets in the capital shares or obligations of a credit union service corporation organizations that, in the opinion of the office of credit unions, are sufficiently bonded and insured and that satisfy all of the following:

AB2,14,14 2. Are organized primarily to provide goods and services to credit unions, credit union organizations and credit union members.

AB2, s. 13 Section 13. 186.11 (4) (a) 1. of the statutes is created to read:

AB2,14,18 186.11 (4) (a) 1. Are corporations, limited partnerships, limited liability companies, or other entities that are permitted under the laws of this state and that are approved by the office of credit unions.

AB2, s. 14 Section 14. 186.11 (4) (b) of the statutes is repealed and recreated to read:

AB2,14,21 186.11 (4) (b) A credit union service organization under par. (a) may provide any of the following services related to the routine daily operations of credit unions:

AB2,14,24 1. Checking and currency services, check cashing services, money order services, savings bond services, traveler's check services, and services regarding the purchase and sale of U.S. mint commemorative coins.

AB2,15,4 2. Clerical, professional, and management services, including, but not limited to, accounting, courier, credit analysis, facsimile transmission and copying, internal credit union audit, locator, management and personnel training and support, marketing, research, and supervisory committee audit services.

AB2,15,5 3. Consumer mortgage loan origination services.

AB2,15,9 4. Electronic transaction services, including, but not limited to, remote terminal, credit and debit card, data processing, electronic fund transfer, electronic income tax filing, payment item processing, wire transfer, and Internet financial services.

AB2,15,13 5. Tax preparation services, services regarding the development and administration of individual retirement accounts, Keogh plans, deferred compensation plans, and other personnel benefit plans, and financial counseling services, including, but not limited to, estate planning.

AB2,15,16 6. Fixed asset services, including, but not limited to, the management, development, sale, or lease of fixed assets and the sale, lease, or servicing of computer hardware or software.

AB2,15,19 7. Insurance brokerage or agency services, including, but not limited to, providing vehicle warranty programs, providing group insurance purchasing programs, and acting as an agent for the sale of insurance.

AB2,15,21 8. Services with regard to the leasing of real property owned by the credit union service organization or personal property.

AB2,15,24 9. Loan support services, including, but not limited to, debt collection and loan processing, servicing, and sales services and services regarding the sale of repossessed collateral.

AB2,16,3 10. Record retention, security, and disaster recovery services, including, but not limited to, alarm monitoring, data storage and retrieval, and record storage services and providing forms and supplies.

AB2,16,4 11. Securities brokerage services.

AB2,16,5 12. Shared credit union branch operations.

AB2,16,6 13. Student loan origination services.

AB2,16,7 14. Travel agency services.

AB2,16,10 15. Trust and other fiduciary services, including, but not limited to, acting as an administrator for prepaid legal services plans or acting as a trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity.

AB2,16,11 16. Real estate brokerage services.

AB2, s. 15 Section 15. 186.11 (4) (bd) and (bh) of the statutes are created to read:

AB2,16,21 186.11 (4) (bd) The office of credit unions may expand the list of services under par. (b) that are related to the routine daily operations of credit unions. Any service approved under this paragraph shall be authorized for all credit union service organizations under par. (a). A credit union may file a written request with the office of credit unions to exercise its authority under this paragraph and may include, along with the request, a description of any proposed service and an explanation of how that service is related to the routine daily operations of credit unions. Within 60 days after receiving a request under this paragraph, the office of credit unions shall approve or disapprove the request.

AB2,17,3 (bh) A credit union service organization under par. (a) may provide any service described under par. (b) or approved under par. (bd) through an investment by the credit union service organization in a third-party service provider. The amount that a credit union service organization may invest in a third-party service provider under this paragraph may not exceed the amount necessary to obtain the applicable services, or a greater amount if necessary for the credit union service organization to obtain the services at a reduced cost.

AB2, s. 16 Section 16. 186.11 (4) (c) of the statutes is amended to read:

AB2,17,6 186.11 (4) (c) A credit union service corporation organization may be subject to audit by the office of credit unions.

AB2, s. 17 Section 17. 186.113 (1) of the statutes is amended to read:

AB2,17,13 186.113 (1) Branch offices. If the need and necessity exist and with With the approval of the office of credit unions, establish branch offices inside this state or no more than 25 miles or outside of this state. Permanent records may be maintained at branch offices established under this subsection. In this subsection, the term "branch office" does not include a remote terminal, a limited services office, or a service center.

AB2, s. 18 Section 18. 186.113 (1m) (a) (intro.) of the statutes is amended to read:

AB2,17,17 186.113 (1m) (a) (intro.) Establish Before the effective date of this paragraph .... [revisor inserts date], establish limited services offices outside this state to serve any member of the credit union if all of the following requirements are met:

AB2, s. 19 Section 19. 186.113 (6) (b) and (c) of the statutes are amended to read:

AB2,17,21 186.113 (6) (b) Act as trustees or custodians of member tax deferred retirement funds, individual retirement accounts, medical savings accounts, or other employee benefit accounts or funds permitted by federal law to be deposited in a credit union.

AB2,17,23 (c) Act as a depository for member-deferred member qualified and nonqualified deferred compensation funds as permitted by federal law.

AB2, s. 20 Section 20. 186.113 (11) of the statutes is renumbered 186.113 (11) (a) and amended to read:

AB2,18,1 186.113 (11) (a) Have Offer deposit accounts to members.