AB569: Bill Text

LRB-4393/1

KSH&JJL:kg:ks

1995 - 1996 LEGISLATURE

1995 Assembly BILL 569

September 25, 1995 - Introduced by Representatives Ourada, Grobschmidt, Ainsworth, Baldus, Baldwin, Baumgart, Bell, Bock, Boyle, Carpenter, Goetsch, Gronemus, Hanson, Hasenohrl, Huber, Johnsrud, Kreibich, Kreuser, La Fave, Lehman, Musser, Notestein, Otte, Plombon, Ryba, Springer, Vander Loop, Wilder, Wirch, Wood and Ziegelbauer, cosponsored by Senators Zien, C. Potter, Andrea, Burke, Chvala, Clausing, Cowles, George, Jauch, Moen, Risser, Rosenzweig, Rude and Drzewiecki. Referred to Committee on Financial Institutions.

AB569,4,2 An Act to repeal 186.01 (4), 186.01 (7), 186.01 (8), 186.012 (3), 186.015 (3) (e), 186.02 (2) (a) 3. and 4., 186.02 (2) (a) 10., 186.08 (1) (e), 186.08 (2), 186.098 (6) (a) 1. to 6., 186.098 (9), 186.113 (1m), 186.113 (6) (intro.), 186.119, 186.17 (3), 186.235 (1m), 186.24, 186.26 (title), 186.26 (2), 186.29 (1) (d) and (f), 186.29 (1p) (a) (title), 186.29 (1p) (b) (title), 186.30, 186.34 (2) and (3), 186.35 (11), 186.38 and 186.41 (1) (b); to renumber 186.012 (4), 186.27 (title), 186.29 (title), 186.29 (1p) (title) and 186.29 (9); to renumber and amend 186.012 (title), 186.012 (1), 186.012 (2), 186.015 (2), 186.015 (3) (a), 186.015 (3) (b), 186.015 (3) (c), 186.015 (3) (d), 186.015 (3) (f), 186.04, 186.08 (1) (intro.), 186.08 (1) (a) to (d), 186.08 (1) (f), 186.098 (6) (a) (intro.), 186.11 (1), 186.113 (14), 186.23, 186.25, 186.26 (1), 186.27 (intro.), (1) and (2), 186.27 (3), 186.28, 186.29 (1) (intro.), (a) to (c), (e) and (g) to (k), 186.29 (1m), 186.29 (1p) (a), 186.29 (1p) (b), 186.29 (2) (intro.) and (a), 186.29 (2) (b), 186.29 (2) (c), 186.29 (2) (d), 186.29 (3), 186.29 (4), 186.29 (5), 186.29 (6), 186.29 (7), 186.29 (8), 186.29 (10), 186.29 (11) (intro.) and (a) to (d), 186.29 (12), 186.29 (13), 186.33 and 186.37; to amend 186.01 (2), 186.01 (3), 186.01 (3m), 186.01 (5), 186.015 (1), 186.015 (2) (a) and (b), 186.015 (2) (c), 186.015 (3), 186.015 (4) (b), 186.015 (5), 186.02 (1), 186.02 (2) (a) 1., 186.02 (2) (a) 2., 186.02 (2) (a) 7., 186.02 (2) (a) 8., 186.02 (2) (a) 9., 186.02 (2) (b) 2., 186.02 (2) (b) 3., 186.02 (2) (c), 186.02 (2) (d), 186.02 (2) (em), 186.02 (2) (f), 186.02 (3) (a), 186.02 (3) (b), 186.02 (4) (a), 186.02 (4) (b), 186.03 (3), 186.06 (4), 186.08 (3), 186.095 (1), 186.096 (2) (a), 186.098 (1), 186.098 (2), 186.098 (3), 186.098 (4), 186.098 (5), 186.098 (8) (b), 186.098 (9m), 186.098 (10), 186.10 (2), 186.11 (2) (b), 186.11 (4) (a), 186.11 (4) (b) (intro.), 1., 3. and 4., 186.112, 186.113 (title), 186.113 (1), 186.113 (1s), 186.113 (5), 186.113 (6) (a) and (b), 186.113 (8), 186.113 (9), 186.113 (11), 186.113 (12), 186.113 (13), 186.113 (17), 186.113 (18), 186.113 (19), 186.113 (20), 186.113 (21), 186.113 (22), 186.115 (2), 186.117 (1), 186.13, 186.14, 186.15 (2) and (3), 186.16 (2), 186.17 (2), 186.18, 186.21 (1), 186.21 (2), 186.21 (3), 186.21 (4), 186.22 (11), 186.235 (1), 186.235 (3), 186.235 (3m), 186.235 (4), 186.235 (5), 186.235 (7) (a) (intro.), 186.235 (7) (b), 186.235 (9), 186.235 (10) (a) (intro.), 186.235 (10) (a) 2., 186.235 (10) (b), 186.235 (10) (c), 186.235 (10) (d), 186.235 (12), 186.235 (13), 186.235 (14) (a), (b) and (e), 186.235 (15) (a), 186.235 (16), 186.235 (17), 186.235 (18), 186.235 (19), 186.235 (20), 186.31, 186.31 (2m), 186.314, 186.315, 186.32, 186.34 (1), 186.34 (4), 186.35 (8), 186.35 (10) (c), 186.35 (12) (a), 186.35 (12m) (intro.), 186.35 (14), 186.36, 186.41 (5m), 186.42 (1) (intro.) and (3), 186.60, 217.04 (2) and 227.24 (1) (b) and (d); to repeal and recreate 186.01 (6), 186.015 (1), 186.02 (1), 186.02 (3) (a), 186.02 (3) (b), 186.02 (4) (a), 186.02 (4) (b), 186.03, 186.06 (title), (1) and (2), 186.06 (3), 186.07 (title), (1) and (2), 186.098 (6) (b), 186.098 (7), 186.098 (8) (b), 186.098 (10), 186.11 (1) (e), 186.11 (2) (b), 186.112, 186.113 (1), 186.113 (2), 186.113 (2), 186.113 (16), 186.115 (2), 186.15, 186.16 (2), 186.17 (1), 186.17 (2), 186.18, 186.19, 186.21 (1), 186.21 (2), 186.21 (3), 186.21 (4), 186.22 (11), 186.235 (title), 186.235 (2), 186.235 (8), 186.235 (11), 186.31 (1), 186.31 (2), 186.314 (2), (3) and (4), 186.315, 186.34 (4) and 186.35 (8); to create 186.01 (3c), 186.01 (3g), 186.01 (4m), 186.01 (7m), 186.015 (2) (c), 186.015 (3g), 186.015 (3r), 186.015 (6) (title), 186.02 (2) (title), 186.02 (2) (a) 5d., 186.02 (2) (a) 5h., 186.02 (2) (a) 5k., 186.02 (2) (a) 5p., 186.02 (2) (a) 5t., 186.02 (2) (a) 11m., 186.02 (3) (title), 186.02 (4) (title), 186.02 (4) (c), 186.06 (1m), 186.06 (2m), 186.07 (1m), 186.07 (3) (title), 186.07 (4) to (7), 186.071, 186.08 (1m) (f), 186.08 (1m) (g), 186.083 (1) (title), (2) (title), (3) (title) and (4) (title), 186.086 (1) (title), 186.086 (2) (title), 186.087 (1) (title), (2) (title) and (3) (title), 186.088 (1) (title) and (2) (title), 186.096 (1) (title), 186.096 (2) (title), 186.096 (3) (title), 186.098 (6) (c), 186.098 (8) (title), 186.098 (9m), 186.098 (11) (title), 186.098 (12) (title), 186.098 (13), 186.10 (1) (title), 186.11 (4) (c), 186.113 (1e), 186.113 (1s), 186.113 (3) (title), 186.113 (4) (title), 186.113 (6) (title), 186.113 (6) (c), 186.113 (7) (title), 186.113 (10) (title), 186.113 (14) (title), 186.113 (14) (b), 186.113 (14m), 186.113 (15) (title), 186.113 (23), 186.115 (1) (title), 186.115 (3) (title), 186.117 (2) (title), 186.118 (1) (title), (2) (title), (3) (title) and (4) (title), 186.12 (1) (title), (2) (title) and (3) (title), 186.16 (1) (title), 186.235 (1), 186.235 (3), 186.235 (3m), 186.235 (4), 186.235 (9), 186.235 (10), 186.235 (11) (m) 3., 186.235 (12), 186.235 (13), 186.235 (15), 186.235 (17), 186.235 (20), 186.235 (21) (title), 186.31 (2m), 186.325, 186.34 (5) (title), 186.35 (14), 186.41 (2) (a) 3., 186.42 and 186.60 of the statutes; and to affect 1995 Wisconsin Act 27, section 4878, 1995 Wisconsin Act 27, sections 4881 to 4884, 1995 Wisconsin Act 27, sections 4890 to 4894, 1995 Wisconsin Act 27, section 4898, 1995 Wisconsin Act 27, sections 4902 and 4903, 1995 Wisconsin Act 27, sections 4915 to 4920, 1995 Wisconsin Act 27, sections 4937 to 4988, 1995 Wisconsin Act 27, sections 4995 to 4998, 1995 Wisconsin Act 27, sections 5009 to 5017 and 1995 Wisconsin Act 27, section 9459 (7); relating to: credit union operation and authority, reorganizing the credit union chapter, granting rule-making authority and providing a penalty.

Analysis by the Legislative Reference Bureau

This bill makes numerous changes that revise and reorganize the chapter that governs the formation, operation and regulation of credit unions in this state. These changes include the following:

Definitions

The bill revises the definition of "credit union" to specify that a credit union provides other financial services in addition to credit.

Definitions of the terms "federal share insurance", "national board" and "risk assets" are created or revised to be consistent with current federal law.

The bill revises the definition of "deposit account" and creates a definition of "share deposit".

Office of the commissioner of credit unions

The bill consolidates the major responsibilities of the office of the commissioner of credit unions (office) into one statutory section and explicitly states that credit unions are under the supervision of the commissioner of credit unions (commissioner). Under 1995 Wisconsin Act 27, the office of the commissioner is made an attached division of a newly created division of financial institutions, effective July 1, 1996. Consistent with that act, all references created in the bill to the commissioner or to the office of the commissioner are changed, effective July 1, 1996, to the office of credit unions.

Current law directs the commissioner to "promote the extension of credit at the lowest possible rate". The bill deletes that promotional directive.

The bill specifies that the commissioner and deputy commissioner are to devote full time to their duties. After July 1, 1996, this provision is amended to refer to the administrator of the office of credit unions; references to the deputy commissioner are repealed. The bill also requires all employes of the office to be bonded. It also revises the authority of the commissioner to remove an officer or employe of a credit union from his or her position, explicitly gives the commissioner subpoena power to take testimony of witnesses and requires the commissioner to generally act on applications made to the office within 90 days.

Credit unions are required, under the bill, to pay for examinations conducted by the office on the day on which the examination is completed. Current law requires payment within 30 days after the credit union is billed for the examination.

Language that requires the office to conduct annual examinations is revised. The bill deletes a provision that allows 5 or more members of a credit union to ask the office to conduct a special examination and adds language permitting the office to substitute an examination conducted for the federal share (deposit) insurance fund for the office's own examination.

Credit union review board

The bill expands the authority of the credit union review board (review board) to conduct hearings, revises the procedures to be used for hearings and expands the time a party may appeal a decision of the commissioner to the review board from 30 days to 60 days. The bill specifies that the review board will uphold the decision of the commissioner if the decision is not arbitrary and capricious and is supported by the evidence. The bill requires the review board to dispose of review applications within 60 days of receipt.

The bill eliminates the authority of the review board to promulgate rules affecting credit union depositors or shareholders, leaving that authority to the commissioner, but permits the review board to promulgate rules concerning its procedure.

Credit union organization

The bill expands the information required to be included in the bylaws. Under the bill, a credit union's bylaws must include terms that describe the responsibilities and qualifications of directors, director nomination and election procedures, bond requirements for directors, meeting notice requirements and director removal procedures.

The bill permits a credit union to move its principal office within a 20-mile radius of its present location without obtaining the approval of its membership.

Under current law, upon the unanimous recommendation of the board of directors, the members may vote to dissolve the credit union. Under the bill, only the recommendation of two-thirds of the directors is required. Under current law, a credit union may vote to dissolve itself if the total number of members voting on the issue exceeds 50% of the total number of members eligible to vote and other conditions are satisfied. The bill reduces the total number of members needed for a valid dissolution vote to 25%.

Credit union membership

The bill modifies the requirements for eligibility for membership in a credit union. In addition to groups having a common bond of occupation or association, current law permits residents of well-defined neighborhoods, communities or rural districts, or employes of vicinal industries, to be eligible to join a credit union. Under the bill, individuals residing or employed in neighborhoods, communities, rural districts or multicounty regions, or employes of related industries, are eligible to join a credit union, in addition to groups having a common bond.

The bill permits a credit union to determine under its bylaws who is eligible for membership as a family member of a member. The bill also permits a credit union to expand its field of membership to states that border this state.

Under the bill, if a credit union expels a member for cause, a member has 90 days in which to appeal the expulsion. Current law does not specify a time for appeals.

Provisions regarding annual and special membership meetings are revised under the bill. The bill deletes certain specific provisions relating to the manner of calling meetings and permits a credit union to hold such meetings in any manner provided in the bylaws. Additionally, the types of issues that members may decide at a meeting are narrowed under the bill.

Board of directors and officers

The bill specifically gives the board of directors the general oversight responsibility and final decision-making authority for a credit union.

The bill directs the board to appoint a president of the credit union and any necessary committee. Currently, the board is directed to appoint credit committees, loan officers and other officers. Under the bill, most appointment authority is given to the president of the credit union.

Eligibility for, and election to, a board of directors of a credit union is to be determined under the bylaws in the bill. The bill creates specific criteria for removing a director from the board and creates an appeal mechanism for a director removed for cause from a board.

Under the bill, directors, officers and employes are required to take an oath of office. By taking an oath, credit union personnel agree to keep member information confidential and to avoid acting in matters in which they may have a pecuniary interest.

Current provisions relating to the bonding of credit union officers are eliminated under the bill and replaced with a requirement that a credit union maintain bonds for officers that satisfy standards set by the national board that administers the federal share (deposit) insurance fund for credit unions.

Loans to members and borrowing by credit unions

Current law specifies the value of collateral that may be used to secure a loan. The bill eliminates this restriction on collateral levels and authorizes the board of directors to set policies regarding acceptable collateral.

The bill expands the appeal rights of a person who has had a loan application turned down and requires a loan appeal to be in writing. The appeal may be made to the credit union's president and the president's decision may be appealed to the board of directors.

Under the bill, a credit union may engage in open-end, or credit card type, lending without the approval of the commissioner as is presently required. Credit unions may also participate in loans with other lenders if the loan is of the type that a credit union could make individually, subject to rules promulgated by the commissioner.

The bill permits a credit union to have a lien against the deposit accounts of a member and the right of setoff against those accounts to secure payment of loans made to the member.

Current law permits a credit union to borrow money if the amount borrowed does not exceed 50% of the credit union's total deposits and reserves and if the loan is for less than 12 months. The bill revises this provision by reducing the borrowing limit to 30% of total deposits and reserves and by eliminating the 12-month term requirement. The new 30% limit may be exceeded with commissioner approval.

Credit union powers

The bill specifies that a credit union may, with the commissioner's approval, establish branch offices inside or outside of this state. Currently, only in-state branch offices are referred to in the branch authorization provision. The bill also permits a credit union to establish service centers (offices at which some member services may be obtained but at which permanent records are not kept) upon notice to the commissioner.

The bill expands the authority of a credit union to offer safe deposit boxes, to provide debit cards, to make government-guaranteed loans and to make donations. The bill also expands a credit union's authority to sell and purchase assets and to dispose of dormant accounts.

Under present law, a credit union may offer products or services that other financial institutions offer if the commissioner finds the product or service to be financially related. The bill retains this authority but eliminates redundant provisions on this subject.

Reserve requirements and financial information

The present formula for establishing adequate reserve levels is eliminated in the bill and replaced by a requirement that a credit union set aside reserves at a level set by the national board that administers the federal share (deposit) insurance fund for credit unions.

The bill expands current provisions relating to annual audits of a credit union. The bill permits a board of directors to appoint an audit committee and permits the commissioner to order an independent audit of a credit union if the commissioner finds an annual audit to be unsatisfactory. In addition, the bill updates the provisions that require a credit union to file financial information annually with the commissioner.

Mergers