AB807: Bill Text

LRB-4506/1

ARG:cjs&kjf

2015 - 2016 LEGISLATURE

2015 Assembly BILL 807

January 25, 2016 - Introduced by Representatives Craig, Kuglitsch, Brandtjen, E. Brooks, Brostoff, Czaja, Hintz, Jacque, Kremer, Krug, Loudenbeck, Murphy, Nygren, Petryk, Riemer, Ripp, Rohrkaste, Sargent, Sinicki, Skowronski, Tauchen, Zepnick and Danou, cosponsored by Senators Stroebel, Gudex, Bewley, Carpenter and Vinehout. Referred to Committee on Financial Institutions.

AB807,1,6 An Act to repeal 186.11 (2) (b) and 186.22; to renumber and amend 186.11 (2) (a), 186.235 (16) and 186.70; to amend 186.071 (1) (e), 186.113 (8), 186.12 (3), 186.13, 186.235 (7m) and 186.70 (title); to repeal and recreate 186.17; and to create 186.01 (4), 186.07 (8), 186.235 (7) (b) 3., 186.235 (16) (b) and 186.70 (2) of the statutes; relating to: credit union operations and modifying rules promulgated by the Department of Financial Institutions.

Analysis by the Legislative Reference Bureau

This bill makes various statutory and administrative rule changes related to the operations of credit unions. Among the statutory changes, the bill does all of the following:

1. Specifies that a credit union must maintain sufficient reserves to meet anticipated withdrawals, commitments, and loan demand and must maintain at least the level of reserves required by the National Credit Union Administration (NCUA).

2. Creates an exception to the requirement that the Office of Credit Unions in the Department of Financial Institutions conduct an examination of the records and accounts of each credit union at least once every 18 months, allowing, in lieu of this examination, the OCU to accept an examination conducted by the NCUA.

3. Removes a limit under current law on the amount that a credit union may make in donations and grants approved by the credit union's board of directors.

4. Creates provisions relating to director conflict of interest transactions, defined as a transaction with the credit union in which a director of the credit union has a direct or indirect interest. The bill specifies that a conflict of interest transaction is not voidable by the credit union solely because of the director's interest in the transaction if the transaction was fair to the credit union or if the material facts were disclosed or known and the transaction was authorized, approved, or ratified in the manner specified in the bill.

5. Provides a procedure under which a group of credit union members have a right to inspect and copy nonconfidential portions of the credit union's accounting books and records and the minutes of credit union proceedings.

6. Authorizes credit unions and the OCU to provide confidential examination reports to the credit union's attorneys, independent certified public accountants, or other consultants or advisers who have agreed in writing to maintain the confidentiality of the report.

7. Revises the contents of the oath of office that credit union directors, officers, committee members, and employees must take with respect to personal pecuniary interests and conflicts of interest.

8. Provides that a member expelled from a credit union may petition the board of directors in writing for reconsideration of the member's expulsion, but no longer has a right to a hearing.

9. Repeals a statutory provision authorizing ten or more credit unions, with the OCU's approval, to form the Credit Union Finance Corporation.

10. Repeals a statutory provision imposing a limit on the value of a building used for credit union operations.

The bill also makes the following changes to DFI's administrative rules:

1. The bill allows a credit union to provide written notice, instead of obtaining express or implied prior approval, before placing and operating an automated teller machine at a location away from a credit union office.

2. The bill removes loan officers from the prohibition against preferential treatment for loan transactions involving directors, executive officers, and credit committee members.

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

AB807,1 Section 1. 186.01 (4) of the statutes is created to read:

AB807,2,4 186.01 (4) "Net worth" means the aggregate of retained earnings of a credit union, as determined according to generally accepted accounting principles, and other forms of capital approved by the director of the office of credit unions.

AB807,2 Section 2. 186.07 (8) of the statutes is created to read:

AB807,3,3 186.07 (8) Director conflict of interest. (a) In this subsection, "conflict of interest transaction" means a transaction with the credit union in which a director of the credit union has a direct or indirect interest.

AB807,3,5 (b) A conflict of interest transaction is not voidable by the credit union solely because of the director's interest in the transaction if any of the following is true:

AB807,3,9 1. The material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or specifically ratified the transaction under par. (d).

AB807,3,10 2. The transaction was fair to the credit union.

AB807,3,13 (c) For purposes of this subsection, the circumstances in which a director of the credit union has an indirect interest in a transaction include a transaction under any of the following circumstances:

AB807,3,15 1. Another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction.

AB807,3,18 2. Another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is or, because of its significance to the credit union, should be considered by the board of directors of the credit union.

AB807,4,3 (d) For purposes of par. (b) 1., a conflict of interest transaction is authorized, approved, or specifically ratified if it receives the affirmative vote of a majority of the directors on the board of directors or on the committee acting on the transaction who have no direct or indirect interest in the transaction. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this subsection. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under par. (b) 1. if the transaction is otherwise authorized, approved, or ratified as provided in this subsection.

AB807,3 Section 3. 186.071 (1) (e) of the statutes is amended to read:

AB807,4,6 186.071 (1) (e) Avoid initiating or participating in any action that may be in that person's present to that person a personal pecuniary conflict of interest.

AB807,4 Section 4. 186.11 (2) (a) of the statutes is renumbered 186.11 (2) and amended to read:

AB807,4,11 186.11 (2) Credit union property. Subject to par. (b), a A credit union may purchase, hold, and dispose of property as necessary for or incidental to its operations.

AB807,5 Section 5. 186.11 (2) (b) of the statutes is repealed.

AB807,6 Section 6. 186.113 (8) of the statutes is amended to read:

AB807,4,18 186.113 (8) Donations. Make donations and grants, the total of which may not exceed 1.0 percent of regular reserves within a given year, if the board of directors approves any such donation or grant and the approval is based on a determination that the donation or grant is in the best interest of the credit union and is reasonable given the size and financial condition of the credit union.

AB807,7 Section 7. 186.12 (3) of the statutes is amended to read:

AB807,4,24 186.12 (3) Expenditures. The To the extent permitted by a credit union's bylaws, the officers elected by the board of directors, and the members of the credit committee and loan officers may receive such compensation as the board authorizes, but the expenditures of the credit union for all purposes shall be paid from its earnings.

AB807,8 Section 8. 186.13 of the statutes is amended to read:

AB807,5,10 186.13 Expulsion. If the board of directors adopts a written policy, a credit union may expel a member if the member neglects or refuses to comply with this chapter or the credit union bylaws or if the board has other just cause. The credit union shall provide notice to the member in writing of the reason for expulsion. The notice shall include a description of the member's right to a hearing petition the board for reconsideration of the member's expulsion and the time period for the member to request a hearing petition. If a member requests a hearing petitions the board in writing within 45 days of receipt of the expulsion notice, the board shall give the member an opportunity to be heard on reconsider the expulsion within 90 days after the date of the expulsion notice.

AB807,9 Section 9. 186.17 of the statutes is repealed and recreated to read:

AB807,5,17 186.17 Reserves. A credit union shall maintain sufficient reserves to meet anticipated withdrawals, commitments, and loan demand. A credit union shall maintain at least the level of reserves required for it by the national credit union administration. The office of credit unions may prescribe additional reserve requirements for an individual credit union based on examination findings or other reports available to the office.

AB807,10 Section 10. 186.22 of the statutes is repealed.

AB807,11 Section 11. 186.235 (7) (b) 3. of the statutes is created to read:

AB807,5,22 186.235 (7) (b) 3. Provide examination reports to a credit union's attorneys, independent certified public accountants, or other consultants or advisers who have agreed in writing to maintain the confidentiality of the reports.