Clearinghouse Rule _________
PROPOSED ORDER OF THE
DEPARTMENT OF FINANCIAL INSTITUTIONS,
OFFICE OF CREDIT UNIONS
AMENDING AND CREATING RULES
The Wisconsin Department of Financial Institutions, Office of Credit Unions proposes an order to repeal DFI-CU 59 of the Wisconsin Administrative Code; to renumber and amend DFI-CU 54.05 (intro.) and (1) to (7), 62.01 (1) (c), and 71.03 (1) (a) and (b) and (2); to amend DFI-CU 51.01, 54.02 (5) (intro.) and (a) to (d), 54.03 (1) (intro.) and (a) to (c) and (3) (a) to (d), 56.01, 56.06, 56.07, 56.09, 56.10, 62.01 (intro.), (a), and (b), 62.01 (2), 63.02 (4), 63.04 (2) (intro.) and (a), 63.06 (intro.), (2) (intro.), (a), and (b) and (3) (intro.) and (a), 68.06 (2) 69.03, 71.02 (1) (intro.), (a) and (b) and (2) (a) to (d), 71.03 (intro.), 71.04 (intro.) and (1), 74.04 (1) to (3), and 74.09; and to repeal and recreate DFI-CU 72.02 of the Wisconsin Administrative Code, relating to correcting out-of-date cross-references, repealing obsolete provisions, modifying the structure of existing rules to conform to current drafting practices, and revising the definition of “member business loan” to conform to federal law.
The scope statement for this rule was approved by the Governor on October 5, 2023, published in Administrative Register No. 814B on October 30, 2023, approved by the Director of the Office of Credit Unions on December 19, 2023, and approved by the Credit Union Review Board on December 13, 2023. ______________________________________________________________________________
ANALYSIS
1. Statutes interpreted:
Chapters 186 and 227 of the Wisconsin Statutes. 2. Statutory authority:
Section 186.235 (8) of the Wisconsin Statutes provides the Office of Credit Unions general rulemaking authority concerning the business of credit unions, while section 186.098 (10) provides specific authority to make rules regarding loans secured by mortgages on real estate. Sections 227.14 (1) and 227.29 impose requirements on agencies to draft proposed administrative rules in accordance with current Legislative Reference Bureau and the Legislative Council staff form and style guidelines, and to address obsolete, unnecessary, unauthorized, inconsistent, or duplicative rules. 3. Explanation of agency authority:
Section 186.235 (8), Stats., provides: “The office of credit unions shall, with the approval of the credit union review board, promulgate rules relating to the business of credit unions.” Section 186.098 (10), Stats., provides: “Loans to members secured by mortgages on real estate may be made subject to the rules prescribed by the office of credit unions.” In addition, the changes seek to ensure that rules the Division administers are compliant with Wis. Stat., s. 227.14 (1), which requires that in drafting administrative rules “an agency shall adhere substantially to the form and style used by the legislative reference bureau in the preparation of bill drafts and the form and style specified in the manual prepared by the legislative council staff and the legislative reference bureau under s. 227.15 (7),” and with Wis. Stat., s. 227.29 (1), which directs agencies to address rules that are “unauthorized,” “obsolete or that have been rendered unnecessary,” or “duplicative of, superseded by, or in conflict with another rule, a state statute, a federal statute or regulation, or a ruling of a court of competent jurisdiction.” 4. Related statutes or rules:
Section 186.098, Stats., authorizes a credit union to make loans to members. Under Wisconsin law, state-chartered credit unions must be federally insured by the National Credit Union Administration (NCUA). Wis. Stat. s. 185.34. Title 12, section 1757a of the United States Code establishes limits on the amount of “member business loans” that federally insured credit unions may have outstanding at any one time. In 2018, as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act, Congress modified the definition of “member business loan” to exclude loans secured by liens on 1- to 4-family dwellings. (Previously, that exclusion only applied if the dwellings were owner-occupied.) 5. Plain language analysis:
The proposed revisions seek to modify certain rules administered by the Department of Financial Institutions’ Office of Credit Unions, in four respects.
First, the proposed revisions will correct several cross-references that have become outdated. For example, section DFI-CU 56.10 of the Wisconsin Administrative Code expressly adopted the pleading standard formerly contained in s. 263.28 of the 1973 version of the Wisconsin Statutes. Section 263.28 no longer exists, however. Following revisions to the Wisconsin Statutes, the substance of former section 263.28 now appears in modified form at section 802.09 (2). The proposed revisions would update this and other cross-references in DFI-CU that have become outdated. Second, the proposed revisions will repeal certain rules that have become obsolete or unnecessary. Chapter DFI-CU 59, for example, is a 1972 rule authorizing credit unions to invest in “securities issued by hospitals, churches, sanatoria, seminaries, dioceses, and similar type institutions,” subject to certain regulatory restrictions. But such investments are uncommon for state credit unions today, and the rule is unnecessary in any event because there is already a statutory option for credit unions to seek regulatory approval for investments in specific instruments pursuant to Wis. Stat. s. 186.11 (1) (e). Third, the proposed revisions modify the structure of existing rules to conform to current Wisconsin drafting practices. While none of these changes have any substantive effect, they will provide greater clarity and consistency with the drafting style of other statutes and rules administered by the agency.
Fourth, the proposed revisions would update s. DFI-CU 72.02 to reflect changes to the definition of “member business loan” set forth in the federal Economic Growth, Regulatory Relief, and Consumer Protection Act, which Congress enacted in 2018, and accompanying rules governing credit unions. DFI-CU 72.02’s definition of “member business loan” tracked the federal definition prior to those 2018 changes, and this amendment will ensure that the rule language continues to conform to federal law. The Office of Credit Unions previously promulgated a rule making those updates to DFI-CU 72.02, which were approved in early 2020 as provided under chapter 227 of the Wisconsin Statutes (see Clearinghouse Rule 17-063), but the rule was not timely published due to delays by the National Credit Union Administration (NCUA) in approving the final language of the updated definition. The Office has now obtained the NCUA’s final approval, but due to the passage of time, s. 227.14 (6) (d) of the Wisconsin Statutes requires the Office to promulgate the rule again. 6. Summary of, and comparison with, existing or proposed federal regulation:
Title 12, section 1757a (c) of the United States Code and accompanying rules (12 C.F.R. part 723) define the term “member business loan” in a manner that is inconsistent with Wis. Admin. Code s. 77.02. In particular, in 2018 Congress amended 12 U.S.C. s. 1757a to exclude loans secured by 1- to 4- family dwellings from the definition of “member business loan.” (Previously, the law only excluded such loans if the dwellings were owner-occupied). Wis. Admin. Code s. 77.02 has not yet been revised to reflect those recent federal changes. 7. Summary of comments received during preliminary comment period and at public hearing on the statement of scope.
At the preliminary public hearing held on November 16, 2023, the Department received three written comments regarding the scope statement. The Wisconsin Credit Union League and Capital Credit Union each submitted comments in support of the proposed rule, particularly the proposal to revise the definition of “member business loan” to mirror federal law. The Wisconsin Bankers Association submitted a comment opposing the scope statement as too narrow, contending that other provisions of DFI-CU 72 should also be revised to maintain consistency with federal law.
