AB573: Bill Text

LRB-3577/2

RJM:wlj:kjf

1999 - 2000 LEGISLATURE

1999 Assembly BILL 573

November 3, 1999 - Introduced by Representatives F. Lasee, J. Lehman, Sykora, Musser, Balow, Kreibich, Hebl, Hasenohrl, Goetsch, Ainsworth, Staskunas, Owens, Waukau, Travis, Pettis, Townsend, Young, Carpenter, Ryba, Colon, Huber, Pocan, Boyle, Plale, Reynolds, Sinicki, Black, Gronemus, Plouff, Meyerhofer, Ziegelbauer, Albers and Schneider, cosponsored by Senators Erpenbach, A. Lasee, Risser, Zien, Moen, Grobschmidt, Plache, Baumgart, George, Decker and Robson. Referred to Committee on Financial Institutions.

AB573,2,2 An Act to repeal 186.01 (8), 186.02 (2) (a) 3. and 4., 186.235 (16) (b), 186.41 (1) (d), 186.41 (6) (b) and 186.41 (8); to renumber 186.11 (4) (b) 6. and 7., 186.235 (16) (a) and 186.41 (6) (a); to renumber and amend 186.02 (2) (d), 186.41 (1) (a) and 186.41 (1) (c); to amend 93.01 (1m), 186.01 (2), 186.02 (2) (a) 1., 186.02 (2) (b) 2., 186.02 (2) (b) 3., 186.02 (2) (c), 186.11 (4) (title) and (a), 186.11 (4) (b) (intro.) and 1., 186.11 (4) (c), 186.113 (1), 186.113 (1m) (a) (intro.), 186.113 (6) (b) and (c), 186.113 (7), 186.235 (7) (a) (intro.), 186.36, 186.41 (title), 186.41 (2) and (3), 186.41 (4) (intro.), (a) to (d) and (f) and 186.41 (5) (a), (b), (c) and (cr); and to create 186.02 (2) (d) 2., 186.08 (1m) (h), 186.11 (4) (b) 6m., 7m. and 8., 186.113 (24), 186.113 (25), 186.235 (7) (c), 186.235 (7m), 186.45 and 186.80 of the statutes; relating to: credit union membership, powers and operation; the application of agriculture, trade and consumer protection statutes to credit unions and providing a penalty.

Analysis by the Legislative Reference Bureau

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

Credit union membership

Under current law, credit union membership is open to groups having a common bond of occupation or association; residents within a well-defined neighborhood, community or rural district; employes of related industries or industries that operate within a well-defined neighborhood, community or rural district; members of certain fraternal, labor, educational or other similar organizations and credit union employes. Furthermore, credit union membership is open to the immediate family of all individuals who are qualified for membership. Current law defines "members of the immediate family" as any relative of a member or of a member's spouse who is living with the member and as the member's spouse, parents, stepchildren and children. In addition, current law permits a credit union to accept an organization or association as a member, if a majority of the members of the organization or association are eligible for membership.

This bill expands the pool of individuals, organizations and associations that are eligible for membership in a credit union. Under this bill, credit union membership is open to individuals who reside or are employed in neighborhoods, communities, rural districts or multicounty regions, unless the office of credit unions determines that it is impractical for the particular credit union to serve the area in which the individuals reside or are employed. Furthermore, membership is open to employes of industries that operate at least one facility within a neighborhood or within an urban, suburban or rural community, the limits of which are not determined by any arbitrary physical standard. This bill repeals the definition of "members of the immediate family" and requires the board of directors of each credit union to establish a policy for determining which individuals qualify as members of the immediate family for the purposes of determining membership eligibility. In addition, this bill opens credit union membership to any organization or association that has a business location within any geographic limits of the credit union's field of membership, as well as any organization or association that, in the ordinary course of business, provides goods and services to credit unions, credit union organizations or persons who are eligible for membership in the credit union. This bill also permits a credit union to accept any organization or association as a member, if a majority of the directors, owners or members of the organization or association are eligible for membership.

Credit union investments

Under current law, a credit union may invest up to 1.5% of its total assets in an organization that is organized primarily to provide goods and services to credit unions, credit union organizations and credit union members (credit union service organization). Under current law, a credit union may invest in a credit union service organization that is a corporation. Current law also specifies the types of goods and services that a credit union service organization may provide. These goods and services include, among other things, credit card services, automated teller services, financial planning and insurance sales. However, current law is ambiguous as to whether the percentage limitation on a credit union's investment in credit union service organizations applies to the aggregate total of all credit union investments in credit union service organizations or to a credit union's investment in each particular credit union service organization.

This bill expands the types of organizations in which a credit union may invest. Under this bill, a credit union service organization is any organization that is organized to provide goods and services, in the ordinary course of business, to credit unions, credit union organizations and credit union members. In addition, under this bill, a credit union may invest in a credit union service organization that is a corporation, limited partnership, limited liability company or any other entity that is permitted under state law and that is approved by the office of credit unions.

This bill also provides that the office of credit unions may permit a credit union to invest greater than 1.5% of credit union assets in a credit union service organization. In addition, this bill clarifies that the limitation on a credit union's investment in credit union service organizations applies to the aggregate total of all credit union investments in credit union service organizations.

This bill also expands the types of goods and services that a credit union service organization may provide. Under this bill, the goods and services provided by a credit union service organization may include electronic transaction services; the management, development, sale or lease of fixed assets; the sale, lease or servicing of computer hardware or software; securities brokerage services and travel agency services.

Credit union powers

Currently, to the extent permitted by federal law, a credit union may act as trustee of member tax deferred funds and as a depository for member-deferred compensation funds. This bill expands this authority, allowing a credit union, to the extent permitted by federal law, to act as a trustee or custodian of member tax deferred retirement funds, individual retirement accounts, medical savings accounts and other employe benefit accounts or funds. In addition, this bill allows a credit union, to the extent permitted by federal law, to act as a depository for member qualified and nonqualified deferred compensation funds.

Under current law, funds held in trust under a burial agreement (commonly known as a funeral trust) must be deposited in a bank, savings bank, savings and loan association or credit union. This bill clarifies that a credit union may accept these deposits if the deposits are made by a credit union member.

Currently, with certain exceptions, a credit union may purchase, hold and dispose of property as necessary for or incidental to credit union operations. However, although current law does permit a credit union to make investments, with certain exceptions, current law does not specifically permit a credit union to purchase the financial assets of another lender or seller. This bill specifies that a credit union, with the approval of the office of credit unions, generally may purchase the following financial assets of another lender or seller: loans, lines of credit, liens, security interests, leases, conditional sales contracts and certain investments that a credit union is permitted to make under current law.

Branch offices of Wisconsin credit unions

Under current law, if the need and necessity exist, a credit union may establish branch offices within this state or no more than 25 miles outside of this state. In addition, if certain conditions are met, a credit union may establish a limited service office outside of this state to serve members of the credit union. A credit union seeking to establish a branch office or limited service office must first obtain the approval of the office of credit unions.

This bill expands the authority of a credit union to establish branch offices. Under this bill, with the permission of the office of credit unions, a credit union may establish branch offices anywhere inside or outside of this state. This bill repeals the authority for a credit union to establish a limited service office, although a credit union may continue to operate a limited service office that is in existence on the effective date of this bill.

Branch offices of non-Wisconsin credit unions

Current law does not specifically permit a credit union organized under the laws of another state (non-Wisconsin credit union) to establish a branch office in this state. This bill specifies that a non-Wisconsin credit union may establish a branch office in this state if the office of credit unions finds that certain conditions apply to the non-Wisconsin credit union. For example, the non-Wisconsin credit union must be organized under laws similar to ch. 186, must be financially solvent and must have federal insurance for member deposits. In addition, the office of credit unions must find that credit unions organized under the laws of this state are allowed to do business under similar conditions in the home state of the non-Wisconsin credit union.

Interstate mergers and acquisitions of credit unions

Under current law regarding interstate mergers and acquisitions of credit unions, a credit union organized in this state may only merge with, acquire or be acquired by a state or federal credit union that has its principal office in Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri or Ohio. This bill repeals this geographic limitation on mergers and acquisitions of credit unions and, thus, expands the number of credit unions that are eligible to merge with, acquire or be acquired by a credit union organized in this state.

Credit union reports

Current law contains several credit union reporting requirements and, with certain exceptions, requires the office of credit unions to annually examine the records and accounts of each credit union. The employes of the office of credit unions and members of the credit union review board must keep information obtained in the course of examinations confidential, with limited exceptions. A violation of this confidentiality requirement is subject to a forfeiture of up to $200.

This bill expands the confidentiality requirement to also include information contained in certain reports that a credit union provides to the office of credit unions. In addition, this bill specifies that, with certain exceptions, any employe of the office of credit unions or member of the credit union review board who discloses any information about the private account or transactions of a credit union or who discloses any information obtained in the course of an examination is subject to a fine of not less than $100 nor more than $1,000, imprisonment for not less than six months nor more than three years or both and may be required to forfeit his or her office or position.

Definition of "credit union"

This bill deletes the statement, currently contained in the definition of "credit union", that a credit union be incorporated to encourage thrift, create a source of credit at a fair and reasonable cost and provide an opportunity for credit union members to improve their economic and social conditions. Under this bill, "credit union" means a cooperative, nonprofit corporation, incorporated under ch. 186.

Credit union bylaws

This bill reduces the information that a credit union must include in its bylaws. Under this bill, a credit union is no longer required to include a provision describing the credit union's method for receipting money paid on accounts or a provision describing the conditions on which accounts may be paid in, transferred and withdrawn. Thus, this bill allows a credit union to alter its method of operation with regard to these subjects without amending the credit union bylaws.

Other changes

Current law specifically requires any officer or employe of a credit union who sells credit life insurance or credit accident or sickness insurance on behalf of the credit union to pay to the credit union all commissions received from the sale. This bill clarifies that an officer or employe of a credit union must pay to the credit union all commissions received from the sale of any authorized insurance product sold on behalf of the credit union.

In addition, currently it is a Class A misdemeanor if a person, with intent to defame, communicates a defamatory matter to a third person without the consent of the person defamed. This bill creates a similar crime specific to credit unions. Under this bill, any person who knowingly publishes false reports or makes false statements about a credit union may be fined not less than $1,000 nor more than $5,000, imprisoned for not less than one year nor more than 15 years, or both.

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, as well.

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:

AB573, s. 1 Section 1. 93.01 (1m) of the statutes is amended to read:

AB573,6,10 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.

AB573, s. 2 Section 2. 186.01 (2) of the statutes is amended to read:

AB573,6,16 186.01 (2) "Credit union" means 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, except as specifically provided under ss. 186.41 (1) and 186.45 (1).

AB573, s. 3 Section 3. 186.01 (8) of the statutes is repealed.

AB573, s. 4 Section 4. 186.02 (2) (a) 1. of the statutes is amended to read:

AB573,6,20 186.02 (2) (a) 1. The conditions of residence or occupation which qualify persons determine eligibility for membership.

AB573, s. 5 Section 5. 186.02 (2) (a) 3. and 4. of the statutes are repealed.

AB573, s. 6 Section 6. 186.02 (2) (b) 2. of the statutes is amended to read: