Bill Summary for H 410 (2023-2024)

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Summary date: 

Mar 16 2023

Bill Information:

View NCGA Bill Details2023-2024 Session
House Bill 410 (Public) Filed Thursday, March 16, 2023
Intro. by Howard, Bell.

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Bill summary

Amends Article 14B, relating to the supervision and regulation of credit unions, in GS Chapter 54 as follows. Refers to Administrator instead of the Administrator of Credit Unions and to Division instead of to the Credit Union Division throughout. 

Amends GS 54-109.14 allowing the Administrator to charge fees other than those already specified for service and supervision as approved by the Credit Union Commission. Allows the Administrator to waive any fee for any credit union or group of credit unions at the Administrator's discretion. Allows the Administrator to assess a civil penalty not to exceed $500 for violations of sections of Articles 14A (Formation of Credit Union) to 15A (Corporate Credit Union) or any rule the Administrator has adopted. Requires penalty proceeds to be remitted to the Civil Penalty and Forfeiture Fund.

Amends GS 54-109.15 by removing the report of condition requirements and instead requiring credit unions organized under Article 14A to 15A to make a report of condition to the Administrator in a manner and schedule adopted by the Administrator. Also allows the Administrator to require additional reports. Changes the fee for neglecting to make such reports so that it’s no less than $75 and no more than $750 (was, flat fine of $75) for each day the neglect continues. Requires the Administrator to publish the late penalty amount annually by rule. Removes authority to revoke the certificate of incorporation and take possession of the credit union's assets and business for failing to pay the penalty.

Amends GS 54-109.16 as follows. Expands upon the types of credit unions subject to examination to also include those formed under Article 15A. Specifies that the examinations are to be once every 18 months or a shorter period (was, 18 months or whenever deemed necessary) as deemed necessary by the Administrator. Requires the examiners to also be given free access to electronic or digital records in respect to the credit union. Allows an independent audit, the examination of a peer state regulatory agency, or the examination of a deposit insurer, in lieu of an exam by the Division. 

Amends GS 54-109.17 by specifying that the Administrator is to adopt rules (was, prescribe rules) concerning recordkeeping. Removes the provision allowing a photostatic or photographic reproduction of any credit union record to be admissible as evidence of transactions with the credit union. Allows a credit union to cause its records to be recorded, copied, or reproduced by any photographic, reproduction, electronic, or digital process or method, or by any other records retention technology approved by rule or order of the Administrator, in a manner capable of accurately converting the records into tangible form within a reasonable time. Deems each converted tangible form of record as a record. 

Deletes GS 54-109.18 which required the Administrator to establish rules and regulations relating to selection of attorneys-at-law to handle credit union loan closing proceedings.

Enacts new GS 54-109.18A requiring administrative hearings required or permitted to be held by the Administrator to be conducted according to Article 3A (Other administrative hearings) of GS Chapter 150B. Allows for an appeal of the hearing decision to the Credit Union Commission; sets out the procedure and timing for such an appeal. Entitles any party to an appeals proceeding before the Commission to judicial review of the decision or order according to Article 4 (Judicial Review) of GS Chapter 150B. Allows the hearing officer at administrative hearings conducted under this statute to be the Administrator or other suitable person designated by the Administrator to serve as a hearing officer.

Amends GS 54-109.19 by amending the disciplinary actions the Administrator may take to now also include one or both of (1) removing the director, officer, committee member, or employee from office; or (2) prohibit the director, officer, committee member, or employee from participating in the conduct of the affairs of a credit union or credit union service organization (was, may remove individuals from office). Expands upon the reason for taking action to also include being deceitful, convicted of a felony, convicted of a misdemeanor involving fraud or dishonestly, gross negligence, and breaching the member’s trust. Amends what is to be included in a notice of removal and the timeline for the hearing. No longer allows removal pending the hearing. Requires the Commission, upon a request for hearing, or upon scheduling a discretionary hearing on its own initiative, to review the facts of the case and hear from the Administrator and the removed party and determine whether the preponderance of the evidence supports removal. Requires the Commission to issue an order that does one of the following: (1) overturns the removal and reinstates the removed party; (2) upholds the removal in full; or (3) modifies the removal into a suspension of a defined period. Specifies that the order remains effective and enforceable except to the extent that it is stayed, modified, terminated, or set aside by a later action of the Commission or a reviewing court.

Enacts new GS 54-109.20 allowing the Administrator, if there is a natural disaster or other national, regional, State, or local emergency, to temporarily waive or suspend requirements for compliance by one or more credit unions with any provisions of this Chapter or rules if it is in the public interest. Allows the Administrator to issue and serve upon a credit union an order to cease and desist from one or more unsafe or unsound practices or violations if, in the Administrator's opinion, a credit union is engaging or has engaged, is reasonably believed to be about to engage in, an unsafe or unsound practice, or is violating or has violated, or there is reasonable cause to believe is about to violate, this Chapter or any other applicable law, rule, regulation, or order. Sets out what is to be included in the order. Allows the Administrator to investigate, including conducting background checks, any credit union employee, officer, director, or committee member when considering applications for new charters, changes to those positions in credit unions in a troubled condition, a managing agent or manager in a conserved credit union, or when the Administrator has reason to believe the credit union employee, director, or committee member affected or is likely to affect the safety or soundness of the credit union.

Amends Article 14C, relating to the powers of a credit union, in GS Chapter 54 as follows. Refers to Administrator instead of the Administrator of Credit Unions throughout. 

Amends GS 54-109.21, enumerating the general powers of a credit union, as follows:

· Allows a credit union to acquire, lease, hold and dispose of property, either in whole or in part, necessary or incidental to its present and future operations (currently, just specifies operations).

·  Allows the credit union to receive funds from persons (currently, credit union is allowed to receive savings from its members) in the form of shares, deposits or special purpose thrift accounts.

· Expands the scope of whom a credit union may lend its funds to beyond its members, to include credit union service organizations, other credit unions, and any State or tribal government or political subdivision thereof as provided in Articles 14A to 15A (currently, Articles 14A-14L).  

· Expands the type of funds that a credit union may invest pursuant to Articles 14A to 15A (currently, Articles 14A-14L) to any funds (currently, just surplus funds).

· Removes central type credit union organizations from a place where credit unions may legally make deposits and replaces it with corporate credit unions.

· Allows credit unions to also hold membership in any type of credit union organized under GS Chapter 54 (currently, just Articles 14A to 14L) and in organizations or associations fostering the interests of credit unions or providing services to credit unions.

· Changes statutory reference in powers related to declaring dividends, paying interest on deposits and paying interest refunds to borrowers to refer to Articles 14A to 15A (currently, Articles 14A-14L).

· Expands the scope of financial services that a credit union can offer beyond travelers checks and money orders so that a credit union may also offer other negotiable instruments, electronic transfer of funds, safe deposit boxes, custodial services, and correspondent services, and charge a reasonable fee for these services. Also lifts the condition that the travelers checks/money orders sold by the credit union are payable at other institutions than a credit union.

· Changes the statutory scope governing when a credit union performs tasks and missions requested by the federal government or the State to Articles 14A to 15A (currently, Articles 14A-14L).

· Changes the process by which a credit union can expel a member for cause to remove the requirement for notice and a hearing. Now requires that a member be expelled after being informed in writing, and also allows for the member to appeal the determination in writing. Also removes the specified acts (i.e., the member has not carried out the engagement the member made with the corporation, has been convicted of a felony or crime involving moral turpitude, or neglects or refuses to comply with the provisions of GS Chapter 54, Article 14 or of the bylaws) that constitute cause. Removes the standards governing a credit union’s determination to expel a member for cause (currently, expulsion only warranted when the credit union finds either, the member's intemperance disrupts the activities of the credit union or the member's habitual neglect of financial obligations reflects discredit upon the credit union). Also permits a credit union to reduce services to a member for cause.

· Allows credit unions, notwithstanding the provisions of Articles 14C to 14J of this Chapter, upon 45-day written notice to the Administrator and subject to the Administrator's written disapproval during the 45-day period if the Administrator concludes the credit union is not well-capitalized or well-managed as demonstrated by the supervisory rating it received during its most recent safety and soundness examination, engage in any activity or exercise any power in which it could engage or exercise if it were a federally chartered credit union, subject to similar approval provisions, if any, applicable to federally chartered credit unions with respect to the activity or power.  (Currently, only authorizes the Administrator subject to the advise and consent of the Credit Union Commission, to adopt rules authorizing to engage in any activity in which they could engage if they were a federally chartered credit union and only if there is a finding that action is necessary to preserve and protect the welfare of credit unions and to promote the general economy of the State.)

Makes technical and clarifying changes, and terms gender neutral.

Amends Article 14D, relating to the membership in a credit union, in GS Chapter 54 as follows. Refers to Administrator instead of the Administrator of Credit Unions and to Division instead of to the Credit Union Division throughout. 

Amends GS 54-109.26 (definition of credit union membership) to remove the requirement of paying an entrance/membership fee, subscribing for one or more shares, and paying the initial installment. Expands the scope of eligible members by allowing for family members of groups having a common bond, persons who reside within an identifiable neighborhood, community, rural district, employees of a common employer or family members of any member in good standing to join a credit union. 

Amend GS 54-109.27 to allow societies and partnerships composed of or controlled primarily by individuals eligible for membership, corporations owned or controlled primarily by eligible individual, and other business entities owned or controlled primarily by eligible individuals may be admitted to membership in the same manner and under the same conditions as individuals.

Amends GS 54-109.28 (pertaining to other credit unions) by permitting any credit union organized under Articles 14A to 14L of GS Chapter 45 to also permit membership of the following persons located in this State: (1) individuals and families that earn income at or below the federal poverty  threshold; (2) women-owned or minority-owned businesses; and (3) underserved areas, as defined by the Federal Credit Union Act.

Amends GS 54-109.31 (pertaining to meetings of members) to require annual and special meeting to be held at the same time (currently, same time and place) as required in the bylaws and new GS 55A-7-01 (currently, just bylaws). In provision relating to voting at meetings by businesses or other organizational members, removes reference to “society association, copartnership or corporation having membership” and replaces it with “business or other entity having membership” so it is clear that any entity may be a member of a credit union.

Makes clarifying changes to GS 54-109.29 and GS 54-109.30.

Makes technical changes, and terms gender neutral.

Amends Article 14I, relating to investments of a credit union in GS Chapter 54, as follows. Refers to Administrator instead of the Administrator of Credit Unions throughout. 

Amends GS 54-109.82 (pertaining to investments of funds) to change the aggregate amount of funds a credit union may invest from 25% of the allocations to the reserve fund to 12.5% of the credit union’s net worth, in agencies, companies, or associations. Allows a credit union to invest an aggregate amount not to exceed 1% of the credit union's net worth in a small business formed under the laws of the United States, or a state, district, or territory of the United States, that meets the appropriate United States Small Business Administration definition of small business and that is principally engaged in the development or exploitation of inventions, technological improvements, new processes, or other fintech products. Allows a credit union to invest in a common trust or mutual funds whose investment portfolios consist of securities otherwise permitted for credit unions. Allows a credit union to invest in stock, securities, obligations, or other instruments that are approved by the Administrator. Allows a credit union to hold an investment regardless of its change in status or form. Allows for credit unions, subject to the rules of the Administrator, to make an otherwise impermissible investment to fund an employee benefit plan. Specifies that a credit union's investment to fund an employee benefit plan obligation is not subject to the investment limitations of GS 54-109.82 if the investment is directly related to the credit union's obligation under the employee benefit plan and the credit union holds the investment only for so long as it has an actual or potential obligation under the plan.

Makes technical changes.

Amends GS 54-109.92 (pertaining to suspension and conservation of a credit union) to delete hearing process provided for and replace it with reference to new GS 54-109.18A.  

Effective January 1, 2024.