Bill Text: IL HB5342 | 2013-2014 | 98th General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Amends the Illinois Credit Union Act. Defines "charitable donation account" and provides that a credit union may establish one or more charitable donation accounts that must comply with the requirements of the Act. Further provides that the investments and purchases to fund a charitable donation account are not subject to the investment limitations of the Act and that the aggregate book value of the investments in all charitable donation accounts shall not exceed 5% of the credit union's net worth. Adds provisions establishing the procedural requirements of the Department of Financial and Professional Regulation's examination process and prescribes the requirements of the Department's examination reports. Provides that each member of the board of directors of a credit union shall have a working familiarity with basic finance and accounting practices consistent with the size and complexity of the credit union they serve. Further provides that members of the supervisory committee of a credit union shall receive training related to their duties under the Act and establishes the acceptable forms of such training. Provides that, for a renewal, refinancing, or restructuring of an existing loan that is secured by an interest in real estate, a new appraisal of the collateral shall not be required under certain circumstances. Additionally provides that a credit union may act as a representative of and enter into an agreement with other credit unions or organizations for certain purposes. Generally effective immediately, but some provisions take effect on January 1, 2015.

Spectrum: Bipartisan Bill

Status: (Passed) 2014-07-24 - Public Act . . . . . . . . . 98-0784 [HB5342 Detail]

Download: Illinois-2013-HB5342-Introduced.html

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98TH GENERAL ASSEMBLY State of Illinois 2013 and 2014 HB5342 Introduced , by Rep. Lou Lang SYNOPSIS AS INTRODUCED:
205 ILCS 305/1.1 from Ch. 17, par. 4402
205 ILCS 305/9 from Ch. 17, par. 4410
205 ILCS 305/30 from Ch. 17, par. 4431
205 ILCS 305/34 from Ch. 17, par. 4435
205 ILCS 305/39 from Ch. 17, par. 4440
205 ILCS 305/46 from Ch. 17, par. 4447
205 ILCS 305/57.1 new
Amends the Illinois Credit Union Act. Defines "charitable donation account" and provides that a credit union may establish one or more charitable donation accounts that must comply with the requirements of the Act. Further provides that the investments and purchases to fund a charitable donation account are not subject to the investment limitations of the Act and that the aggregate book value of the investments in all charitable donation accounts shall not exceed 5% of the credit union's net worth. Adds provisions establishing the procedural requirements of the Department of Financial and Professional Regulation's examination process and prescribes the requirements of the Department's examination reports. Provides that each member of the board of directors of a credit union shall have a working familiarity with basic finance and accounting practices consistent with the size and complexity of the credit union they serve. Further provides that members of the supervisory committee of a credit union shall receive training related to their duties under the Act and establishes the acceptable forms of such training. Provides that, for a renewal, refinancing, or restructuring of an existing loan that is secured by an interest in real estate, a new appraisal of the collateral shall not be required under certain circumstances. Additionally provides that a credit union may act as a representative of and enter into an agreement with other credit unions or organizations for certain purposes. Generally effective immediately, but some provisions take effect on January 1, 2015.
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A BILL FOR
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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Credit Union Act is amended by
changing Sections 1.1, 9, 30, 34, 39, and 46 and by adding
Section 57.1 as follows:
(205 ILCS 305/1.1) (from Ch. 17, par. 4402)
Sec. 1.1. Definitions.
Credit Union - The term "credit union" means a cooperative,
non-profit association, incorporated under this Act, under the
laws of the United States of America or under the laws of
another state, for the purposes of encouraging thrift among its
members, creating a source of credit at a reasonable rate of
interest, and providing an opportunity for its members to use
and control their own money in order to improve their economic
and social conditions. The membership of a credit union shall
consist of a group or groups each having a common bond as set
forth in this Act.
Common Bond - The term "common bond" refers to groups of
people who meet one of the following qualifications:
(1) Persons belonging to a specific association, group
or organization, such as a church, labor union, club or
society and members of their immediate families which shall

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include any relative by blood or marriage or foster and
adopted children.
(2) Persons who reside in a reasonably compact and well
defined neighborhood or community, and members of their
immediate families which shall include any relative by
blood or marriage or foster and adopted children.
(3) Persons who have a common employer or who are
members of an organized labor union or an organized
occupational or professional group within a defined
geographical area, and members of their immediate families
which shall include any relative by blood or marriage or
foster and adopted children.
Shares - The term "shares" or "share accounts" means any
form of shares issued by a credit union and established by a
member in accordance with standards specified by a credit
union, including but not limited to common shares, share draft
accounts, classes of shares, share certificates, special
purpose share accounts, shares issued in trust, custodial
accounts, and individual retirement accounts or other plans
established pursuant to Section 401(d) or (f) or Section 408(a)
of the Internal Revenue Code, as now or hereafter amended, or
similar provisions of any tax laws of the United States that
may hereafter exist.
Credit Union Organization - The term "credit union
organization" means any organization established to serve the
needs of credit unions, the business of which relates to the

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daily operations of credit unions.
Department - The term "Department" means the Illinois
Department of Financial and Professional Regulation.
Secretary - The term "Secretary" means the Secretary of
Financial and Professional Regulation or a person authorized by
the Secretary or this Act to act in the Secretary's stead.
Division of Financial Institutions - The term "Division of
Financial Institutions" means the Division of Financial
Institutions of the Department of Financial and Professional
Regulation.
Director - The term "Director of Financial Institutions"
means the Director of the Division of Financial Institutions of
the Department of Financial and Professional Regulation.
Office - The term "office" means the Division of Financial
Institutions of the Department of Financial and Professional
Regulation.
NCUA - The term "NCUA" means the National Credit Union
Administration, an agency of the United States Government
charged with the supervision of credit unions chartered under
the laws of the United States of America.
Central Credit Union - The term "central credit union"
means a credit union incorporated primarily to receive shares
from and make loans to credit unions and directors, officers,
committee members and employees of credit unions. A central
credit union may also accept as members persons who were
members of credit unions which were liquidated and persons from

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occupational groups not otherwise served by another credit
union.
Corporate Credit Union - The term "corporate credit union"
means a credit union which is a cooperative, non-profit
association, the membership of which is limited primarily to
other credit unions.
Insolvent - "Insolvent" means the condition that results
when the total of all liabilities and shares exceeds net assets
of the credit union.
Danger of insolvency - For purposes of Section 61, a credit
union is in "danger of insolvency" if its net worth to asset
ratio falls below 2%. In calculating the danger of insolvency
ratio, secondary capital shall be excluded. For purposes of
Section 61, a credit union is also in "danger of insolvency" if
the Department is unable to ascertain, upon examination, the
true financial condition of the credit union.
Net Worth - "Net worth" means the retained earnings balance
of the credit union, as determined under generally accepted
accounting principles, and forms of secondary capital approved
by the Secretary and the Director pursuant to rulemaking.
Charitable Donation Account – The term "charitable
donation account" means an account owned by a credit union that
is held in a segregated custodial account or special purpose
entity and specifically identified as a charitable donation
account whereby, no less frequently than every 5 years and upon
termination of the account, at least 51% of the total return on

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assets in the account is distributed to one or more charitable
organizations or non-profit entities.
(Source: P.A. 97-133, eff. 1-1-12.)
(205 ILCS 305/9) (from Ch. 17, par. 4410)
Sec. 9. Reports and examinations.
(1) Credit unions shall report to the Department on forms
supplied by the Department, in accordance with a schedule
published by the Department. A recapitulation of the annual
reports shall be compiled and published annually by the
Department, for the use of the General Assembly, credit unions,
various educational institutions and other interested parties.
A credit union which fails to file any report when due shall
pay to the Department a late filing fee for each day the report
is overdue as prescribed by rule. The Secretary may extend the
time for filing a report.
(2) The Secretary may require special examinations of and
special financial reports from a credit union or a credit union
organization in which a credit union loans, invests, or
delegates substantially all managerial duties and
responsibilities when he determines that such examinations and
reports are necessary to enable the Department to determine the
safety of a credit union's operation or its solvency. The cost
to the Department of the aforesaid special examinations shall
be borne by the credit union being examined as prescribed by
rule.

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(3) All credit unions incorporated under this Act shall be
examined at least biennially by the Department or, at the
discretion of the Secretary, by a public accountant registered
by the Department of Financial and Professional Regulation. The
costs of an examination shall be paid by the credit union. The
scope of all examinations by a public accountant shall be at
least equal to the examinations made by the Department. The
examiners shall have full access to, and may compel the
production of, all the books, papers, securities and accounts
of any credit union. A special examination shall be made by the
Department or by a public accountant approved by the Department
upon written request of 5 or more members, who guarantee the
expense of the same. Any credit union refusing to submit to an
examination when ordered by the Department shall be reported to
the Attorney General, who shall institute proceedings to have
its charter revoked. If the Secretary determines that the
examination of a credit union is to be conducted by a public
accountant registered by the Department of Financial and
Professional Regulation and the examination is done in
conjunction with the credit union's external independent audit
of financial statements, the requirements of this Section and
subsection (3) of Section 34 shall be deemed met.
(4)(a) In conducting its examinations of credit unions, it
shall be the objective of the Department to work together with
the credit unions to proactively identify problems and
reasonable solutions and the Department shall adhere to the

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following standards of performance:
(i) Credit union management shall be involved in the
development of any corrective action plans.
(ii) As examiners identify concerns, credit union
management should articulate solutions.
(iii) The goal shall be to utilize management's
preferred strategies to address and resolve any issues
identified in the examination, if the preferred strategies
represent a reasonable chance of success.
(iv) Reasonable solutions provided by the credit union
shall become the corrective action plan included in any
document of resolution issued to the credit union.
(b) In preparing its examination report, the Department
shall convey the purpose, scope, identified problems,
corrective actions, and conclusions reached during the
examination process. Examiners shall develop a professional
and concise examination report that communicates all problems
and risks in an understandable format for the credit union. The
examination report shall:
(i) properly identify all material examination
concerns related to the risk areas of credit, interest
rate, liquidity, transaction, compliance, strategic, and
reputation;
(ii) relate the applicable risk areas to the
examination ratings;
(iii) support all conclusions reached regarding

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problems identified;
(iv) outline proper corrective actions to ensure
problems are resolved in a timely manner, drawing upon the
preferred strategies and reasonable solutions provided by
the credit union; and
(v) establish a documented administrative record to
support future administrative action and problem
resolution, if necessary.
(c) Examiners shall set aside time throughout the
examination to discuss in a professional and respectful manner
with management and the board of the credit union any problems
identified during the examination. Examiners shall provide
management and the board of the credit union with a draft copy
of the examination report and any examiner's findings and
document of resolution, with sufficient time to review the
draft report before the joint conference or exit meeting with
the credit union's board of directors. Examiners shall not
present new information to management or the board of directors
at the joint conference, at the exit interview, or in the final
examination report.
(d) The Secretary shall adopt rules to administer and carry
out the standards set forth in this subsection (4), including
rules that: (i) define the scope of the examination process;
(ii) clarify examination items to be resolved; and (iii) ensure
consistency and due process in the examination process. The
Secretary may also establish guidelines to implement the

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standards and objectives set forth in this subsection (4). The
rules, formal guidance, interpretative letters, or opinions
furnished to credit unions by the Secretary may be relied upon
by the credit unions.
(e) Prior to commencement of the examination and during
each stage of the examination, the Department shall make a
reasonable effort to provide prior and reasonable notification
to management and the board of the credit union of the
commencement date, the joint conference and the exit interview,
and the data, information, and documentation deemed necessary
by the Department to conduct the examination. The Department
shall submit its final examination report to the credit union
in a timely manner after the exit meeting. In addition to the
time period referenced in subsection (5) of this Section for
replying to review comment letters, the credit union shall be
afforded a reasonable period in which to implement corrective
action in response to a finding, document of resolution, or
other administrative request.
(5) (4) A copy of the completed report of examination and a
review comment letter, if any, citing exceptions revealed
during the examination, shall be submitted to the credit union
by the Department. A detailed report stating the corrective
actions taken by the board of directors on each exception set
forth in the review comment letter shall be filed with the
Department within 40 days after the date of the review comment
letter, or as otherwise directed by the Department. Any credit

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union through its officers, directors, committee members or
employees, which willfully provides fraudulent or misleading
information regarding the corrective actions taken on
exceptions appearing in a review comment letter may have its
operations restricted to the collection of principal and
interest on loans outstanding and the payment of normal
expenses and salaries until all exceptions are corrected and
accepted by the Department.
(Source: P.A. 97-133, eff. 1-1-12.)
(205 ILCS 305/30) (from Ch. 17, par. 4431)
Sec. 30. Duties of directors.
(a) It shall be the duty of the directors to:
(1) Review actions on applications for membership. A
record of the membership committee's approval or denial of
membership or management's approval or denial of
membership if no membership committee has been appointed
shall be available to the board of directors for
inspection. A person denied membership by the membership
committee or credit union management may appeal the denial
to the board;
(2) Provide adequate fidelity bond coverage for
officers, employees, directors and committee members, and
for losses caused by persons outside of the credit union,
subject to rules and regulations promulgated by the
Secretary;

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(3) Determine from time to time the interest rates, not
in excess of that allowed under this Act, which shall be
charged on loans to members and to authorize interest
refunds, if any, to members from income earned and received
in proportion to the interest paid by them on such classes
of loans and under such conditions as the board prescribes.
The directors may establish different interest rates to be
charged on different classes of loans;
(4) Within any limitations set forth in the credit
union's bylaws, fix the maximum amount which may be loaned
with and without security to a member;
(5) Declare dividends on various classes of shares in
the manner and form as provided in the bylaws;
(6) Limit the number of shares which may be owned by a
member; such limitations to apply alike to all members;
(7) Have charge of the investment of funds, except that
the board of directors may designate an investment
committee or any qualified individual or entity to have
charge of making investments under policies established by
the board of directors;
(8) Authorize the employment of or contracting with
such persons or organizations as may be necessary to carry
on the operations of the credit union, provided that prior
approval is received from the Department before delegating
substantially all managerial duties and responsibilities
to a credit union organization, and fix the compensation,

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if any, of the officers and provide for compensation for
other employees within policies established by the board of
directors;
(9) Authorize the conveyance of property;
(10) Borrow or lend money consistent with the
provisions of this Act;
(11) Designate a depository or depositories for the
funds of the credit union and supervise the investment of
funds;
(12) Suspend or remove, or both, any or all officers or
any or all members of the membership, credit, or other
committees whenever, in the judgment of the board of
directors, the best interests of the credit union will be
served thereby; provided that members of the supervisory
committee may not be suspended or removed except for
failure to perform their duties; and provided that removal
of any officer shall be without prejudice to the contract
rights, if any, of the person so removed;
(13) Appoint any special committees deemed necessary;
and
(14) Perform such other duties as the members may
direct, and perform or authorize any action not
inconsistent with this Act and not specifically reserved by
the bylaws to the members.
(b) The board of directors may delegate to the chief
management official, according to guidelines established by

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the board that may include the authority to further delegate
one or more duties, all of the following duties:
(1) determining the interest rates on loans;
(2) determining the dividend rates on share accounts;
and
(3) hiring employees other than the chief management
official and fixing their compensation.
(c) Each director shall have a working familiarity with
basic finance and accounting practices consistent with the size
and complexity of the credit union operation they serve,
including the ability to read and understand the credit union's
balance sheet and income and expense statements and the ability
to ask, when appropriate, substantive questions of management
and auditors. For the purposes of this subsection (c),
substantive questions include queries concerning financial
services and products offered to the membership; how those
activities generate revenue for the credit union; the credit,
liquidity, interest rate, compliance, strategic, transaction,
and reputation risks associated with those activities; and the
internal control structures maintained by the credit union that
limit and manage those risks.
A director who was elected or appointed on or after January
1, 2015 and who comes to the position without the requisite
financial skills shall have until 6 months after the date of
election or appointment to acquire the enumerated skills.
An incumbent director who was elected or appointed before

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January 1, 2015 and does not possess the requisite financial
skills shall have until July 1, 2015 to acquire the enumerated
skills.
An incumbent director or a director who is elected or
appointed on or after January 1, 2015 who already understands
his or her credit union's financial statements shall not be
required to do anything further to satisfy the financial skills
requirement set forth in subsection (c).
It is the intent of the Department that all credit union
directors possess a basic understanding of their credit union's
financial condition. It is not the intent of the Department to
subject credit union directors to examiner scrutiny of their
financial skills. Rather, the Department shall evaluate
whether the credit union has in place a policy to make
available to their directors appropriate training to enhance
their financial knowledge of the credit union. Directors may
receive the training through internal credit union training,
external training offered by the credit union's retained
auditors, trade associations, vendors, regulatory agencies, or
any other sources or on-the-job experience, or a combination of
those activities. The training may be received through any
medium, including, but not limited to, conferences, workshops,
audit closing meetings, seminars, teleconferences, webinars,
and other internet based delivery channels.
(Source: P.A. 97-133, eff. 1-1-12.)

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(205 ILCS 305/34) (from Ch. 17, par. 4435)
Sec. 34. Duties of supervisory committee.
(1) The supervisory committee shall make or cause to be
made an annual internal audit of the books and affairs of the
credit union to determine that the credit union's accounting
records and reports are prepared promptly and accurately
reflect operations and results, that internal controls are
established and effectively maintained to safeguard the assets
of the credit union, and that the policies, procedures and
practices established by the board of directors and management
of the credit union are being properly administered. The
supervisory committee shall submit a report of that audit to
the board of directors and a summary of that report to the
members at the next annual meeting of the credit union. It
shall make or cause to be made such supplementary audits as it
deems necessary or as are required by the Secretary or by the
board of directors, and submit reports of these supplementary
audits to the Secretary or board of directors as applicable. If
the supervisory committee has not engaged a public accountant
registered by the Department of Financial and Professional
Regulation to make the internal audit, the supervisory
committee or other officials of the credit union shall not
indicate or in any manner imply that such audit has been
performed by a public accountant or that the audit represents
the independent opinion of a public accountant. The supervisory
committee must retain its tapes and working papers of each

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internal audit for inspection by the Department. The report of
this audit must be made on a form approved by the Secretary. A
copy of the report must be promptly mailed to the Secretary.
(2) The supervisory committee shall make or cause to be
made at least once each year a reasonable percentage
verification of members' share and loan accounts, consistent
with rules promulgated by the Secretary.
(3) The supervisory committee of a credit union with assets
of $5,000,000 or more shall engage a public accountant
registered by the Department of Financial and Professional
Regulation to perform an annual external independent audit of
the credit union's financial statements in accordance with
generally accepted auditing standards. The supervisory
committee of a credit union with assets of $3,000,000 or more,
but less than $5,000,000, shall engage a public accountant
registered by the Department of Financial and Professional
Regulation to perform an external independent audit of the
credit union's financial statements in accordance with
generally accepted auditing standards at least once every 3
years. A copy of an external independent audit shall be
completed and mailed to the Secretary no later than 90 days
after December 31 of each year; provided that a credit union or
group of credit unions may obtain an extension of the due date
upon application to and receipt of written approval from the
Secretary. If the annual internal audit of such a credit union
is conducted by a public accountant registered by the

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Department of Financial and Professional Regulation and the
annual internal audit is done in conjunction with the credit
union's annual external audit, the requirements of subsection
(1) of this Section shall be deemed met.
(4) In determining the appropriate balance in the allowance
for loan losses account, a credit union may determine its
historical loss rate using a defined period of time of less
than 5 years, provided that:
(A) the methodology used to determine the defined
period of time is formally documented in the credit union's
policies and procedures and is appropriate to the credit
union's size, business strategy, and loan portfolio
characteristics and the economic environment of the areas
and employers served by the credit union;
(B) supporting documentation is maintained for the
technique used to develop the credit union loss rates,
including the period of time used to accumulate historical
loss data and the factors considered in establishing the
time frames; and
(C) the external auditor conducting the credit union's
financial statement audit has analyzed the methodology
employed by the credit union and concludes that the
financial statements, including the allowance for loan
losses, are fairly stated in all material respects in
accordance with U.S. Generally Accepted Accounting
Principles, as promulgated by the Financial Accounting

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Standards Board.
(5) A majority of the members of the supervisory committee
shall constitute a quorum.
(6) On an annual basis commencing January 1, 2015, the
members of the supervisory committee shall receive training
related to their statutory duties. Supervisory committee
members may receive the training through internal credit union
training, external training offered by the credit union's
retained auditors, trade associations, vendors, regulatory
agencies, or any other sources or on-the-job experience, or a
combination of those activities. The training may be received
through any medium, including, but not limited to, conferences,
workshops, audit closing meetings, seminars, teleconferences,
webinars, and other Internet-based delivery channels.
(Source: P.A. 96-141, eff. 8-7-09; 96-963, eff. 7-2-10; 97-133,
eff. 1-1-12.)
(205 ILCS 305/39) (from Ch. 17, par. 4440)
Sec. 39. Special purpose share accounts; charitable
donation accounts.
(1) If provided for in and consistent with the bylaws,
Christmas clubs, vacation clubs and other special purpose share
accounts may be established and offered under conditions and
restrictions established by the board of directors.
(2) Pursuant to a policy adopted by the board of directors,
which may be amended from time to time, a credit union may

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establish one or more charitable donation accounts. The
investments and purchases to fund a charitable donation account
are not subject to the investment limitations of this Act,
provided the charitable donation account is structured in
accordance with this Act. At their time of purchase, the book
value of the investments in all charitable donation accounts,
in the aggregate, shall not exceed 5% of the credit union's net
worth.
(a) If a credit union chooses to establish a charitable
donation account using a trust vehicle, the trustee must be
an entity regulated by the Office of the Comptroller of the
Currency, the U.S. Securities and Exchange Commission or
another federal regulatory agency. A regulated trustee or
other person who is authorized to make investment decisions
for a charitable donation account, other than the credit
union itself, shall be registered with the U.S. Securities
and Exchange Commission as an investment advisor.
(b) If the credit union utilizes a third party to
establish or administer a charitable donation account, the
parties, typically the charitable donation account trustee
or other manager, shall document the terms and conditions
controlling the account in a written operating agreement,
trust agreement, or similar instrument. The terms of the
agreement shall be consistent with the requirements and
conditions set forth in this Section. The agreement, if
applicable, and policies must document the investment

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strategies of the charitable donation account trustee or
other manager in administering the charitable donation
account and provide for the accounting of all aspects of
the account, including its distributions and liquidation,
in accordance with generally accepted accounting
principles.
(c) A credit union's charitable donation account
agreement, if applicable, and policies shall provide that
the charitable organization or non-profit entity
recipients of any charitable donation account funds must be
identified in the policy and be exempt from taxation under
Section 501(c)(3) of the Internal Revenue Code.
(d) Upon termination of a charitable donation account,
the credit union may receive a distribution of the
remaining assets in cash, or a distribution in kind of the
remaining assets, but only if those assets are permissible
investments for credit unions pursuant to this Act.
(Source: P.A. 97-133, eff. 1-1-12.)
(205 ILCS 305/46) (from Ch. 17, par. 4447)
Sec. 46. Loans and interest rate.
(1) A credit union may make loans to its members for such
purpose and upon such security and terms, including rates of
interest, as the credit committee, credit manager, or loan
officer approves. Notwithstanding the provisions of any other
law in connection with extensions of credit, a credit union may

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elect to contract for and receive interest and fees and other
charges for extensions of credit subject only to the provisions
of this Act and rules promulgated under this Act, except that
extensions of credit secured by residential real estate shall
be subject to the laws applicable thereto. The rates of
interest to be charged on loans to members shall be set by the
board of directors of each individual credit union in
accordance with Section 30 of this Act and such rates may be
less than, but may not exceed, the maximum rate set forth in
this Section. A borrower may repay his loan prior to maturity,
in whole or in part, without penalty. The credit contract may
provide for the payment by the member and receipt by the credit
union of all costs and disbursements, including reasonable
attorney's fees and collection agency charges, incurred by the
credit union to collect or enforce the debt in the event of a
delinquency by the member, or in the event of a breach of any
obligation of the member under the credit contract. A
contingency or hourly arrangement established under an
agreement entered into by a credit union with an attorney or
collection agency to collect a loan of a member in default
shall be presumed prima facie reasonable.
(2) Credit unions may make loans based upon the security of
any interest or equity in real estate, subject to rules and
regulations promulgated by the Secretary. In any contract or
loan which is secured by a mortgage, deed of trust, or
conveyance in the nature of a mortgage, on residential real

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estate, the interest which is computed, calculated, charged, or
collected pursuant to such contract or loan, or pursuant to any
regulation or rule promulgated pursuant to this Act, may not be
computed, calculated, charged or collected for any period of
time occurring after the date on which the total indebtedness,
with the exception of late payment penalties, is paid in full.
For purposes of this subsection (2) of this Section 46, a
prepayment shall mean the payment of the total indebtedness,
with the exception of late payment penalties if incurred or
charged, on any date before the date specified in the contract
or loan agreement on which the total indebtedness shall be paid
in full, or before the date on which all payments, if timely
made, shall have been made. In the event of a prepayment of the
indebtedness which is made on a date after the date on which
interest on the indebtedness was last computed, calculated,
charged, or collected but before the next date on which
interest on the indebtedness was to be calculated, computed,
charged, or collected, the lender may calculate, charge and
collect interest on the indebtedness for the period which
elapsed between the date on which the prepayment is made and
the date on which interest on the indebtedness was last
computed, calculated, charged or collected at a rate equal to
1/360 of the annual rate for each day which so elapsed, which
rate shall be applied to the indebtedness outstanding as of the
date of prepayment. The lender shall refund to the borrower any
interest charged or collected which exceeds that which the

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lender may charge or collect pursuant to the preceding
sentence. The provisions of this amendatory Act of 1985 shall
apply only to contracts or loans entered into on or after the
effective date of this amendatory Act.
(3) Notwithstanding any other provision of this Act, a
credit union authorized under this Act to make loans secured by
an interest or equity in real estate may engage in making
"reverse mortgage" loans to persons for the purpose of making
home improvements or repairs, paying insurance premiums or
paying real estate taxes on the homestead properties of such
persons. If made, such loans shall be made on such terms and
conditions as the credit union shall determine and as shall be
consistent with the provisions of this Section and such rules
and regulations as the Secretary shall promulgate hereunder.
For purposes of this Section, a "reverse mortgage" loan shall
be a loan extended on the basis of existing equity in homestead
property and secured by a mortgage on such property. Such loans
shall be repaid upon the sale of the property or upon the death
of the owner or, if the property is in joint tenancy, upon the
death of the last surviving joint tenant who had such an
interest in the property at the time the loan was initiated,
provided, however, that the credit union and its member may by
mutual agreement, establish other repayment terms. A credit
union, in making a "reverse mortgage" loan, may add deferred
interest to principal or otherwise provide for the charging of
interest or premiums on such deferred interest. "Homestead"

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property, for purposes of this Section, means the domicile and
contiguous real estate owned and occupied by the mortgagor.
(4) Notwithstanding any other provisions of this Act, a
credit union authorized under this Act to make loans secured by
an interest or equity in real property may engage in making
revolving credit loans secured by mortgages or deeds of trust
on such real property or by security assignments of beneficial
interests in land trusts.
For purposes of this Section, "revolving credit" has the
meaning defined in Section 4.1 of the Interest Act.
Any mortgage or deed of trust given to secure a revolving
credit loan may, and when so expressed therein shall, secure
not only the existing indebtedness but also such future
advances, whether such advances are obligatory or to be made at
the option of the lender, or otherwise, as are made within
twenty years from the date thereof, to the same extent as if
such future advances were made on the date of the execution of
such mortgage or deed of trust, although there may be no
advance made at the time of execution of such mortgage or other
instrument, and although there may be no indebtedness
outstanding at the time any advance is made. The lien of such
mortgage or deed of trust, as to third persons without actual
notice thereof, shall be valid as to all such indebtedness and
future advances form the time said mortgage or deed of trust is
filed for record in the office of the recorder of deeds or the
registrar of titles of the county where the real property

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described therein is located. The total amount of indebtedness
that may be so secured may increase or decrease from time to
time, but the total unpaid balance so secured at any one time
shall not exceed a maximum principal amount which must be
specified in such mortgage or deed of trust, plus interest
thereon, and any disbursements made for the payment of taxes,
special assessments, or insurance on said real property, with
interest on such disbursements.
Any such mortgage or deed of trust shall be valid and have
priority over all subsequent liens and encumbrances, including
statutory liens, except taxes and assessments levied on said
real property.
(5) Compliance with federal or Illinois preemptive laws or
regulations governing loans made by a credit union chartered
under this Act shall constitute compliance with this Act.
(6) Credit unions may make residential real estate mortgage
loans on terms and conditions established by the United States
Department of Agriculture through its Rural Development
Housing and Community Facilities Program. The portion of any
loan in excess of the appraised value of the real estate shall
be allocable only to the guarantee fee required under the
program.
(7) For a renewal, refinancing, or restructuring of an
existing loan that is secured by an interest or equity in real
estate, a new appraisal of the collateral shall not be required
when the transaction involves an existing extension of credit

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at the credit union, no new moneys are advanced other than
funds necessary to cover reasonable closing costs, and there
has been no obvious or material change in market conditions or
physical aspects of the real estate that threatens the adequacy
of the credit union's real estate collateral protection after
the transaction.
(Source: P.A. 96-141, eff. 8-7-09; 97-133, eff. 1-1-12.)
(205 ILCS 305/57.1 new)
Sec. 57.1. Services to other credit unions.
(a) A credit union may act as a representative of and enter
into an agreement with credit unions or other organizations for
the purpose of:
(1) sharing, utilizing, renting, leasing, purchasing,
selling, and joint ownership of fixed assets or engaging in
activities and services that relate to the daily operations
of credit unions; and
(2) providing correspondent services to other credit
unions that the service provider credit union is authorized
to perform for its own members or as part of its
operations, including, but not limited to, loan
processing, loan servicing, member check cashing services,
disbursing share withdrawals and loan proceeds, cashing
and selling money orders, ACH and wire transfer services,
coin and currency services, performing internal audits,
and automated teller machine deposit services.

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Section 99. Effective date. This Act takes effect upon
becoming law, except that the changes to Section 9 and
subsection (6) of Section 34 of the Illinois Credit Union Act
take effect January 1, 2015.