49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–58 

CAPITAL ACCESS FOR SMALL COMMUNITY FINANCIAL 

INSTITUTIONS ACT OF 2015 

APRIL 13, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 299] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 299) to amend the Federal Home Loan Bank Act to authorize privately insured credit unions to become members of a 

Federal home loan bank, and for other purposes, having considered 

the same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

H.R. 299, the Capital Access for Small Community Financial Institutions Act of 2015, would amend Section 4(a) of the Federal 

Home Loan Bank Act (12 U.S.C. 1424(a)) to treat certain privately 

insured credit unions as insured depository institutions for purposes of determining eligibility for membership in a Federal Home 

Loan Bank (FHLB). In order to be eligible for membership, a privately insured credit union would need to receive a certification 

from its state supervisor stating that it is eligible to apply for federal deposit insurance. Additionally, the private insurer of the credit union would be required to provide a copy of the credit union’s 

annual audit report to the National Credit Union Administration 

(NCUA) and the Federal Housing Finance Agency (FHFA). Moreover, within 18 months of the bill’s enactment, the Comptroller 

General of the United States is required to report to Congress on 

the adequacy of insurance reserves held by a private deposit insurer and provide information on the level of compliance with fedVerDate Sep 11 2014 00:24 Apr 16, 2015 Jkt 049006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR058.XXX HR058

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1http://www.fhlbanks.com/fhlbanks-mission.html. 2http://www.fhlbanks.com/fhlbanks-mission.html. 3http://www.fhlbanks.com/funding-and-liquidity-for-members.html. 4http://www.fhfa.gov/DataTools/Downloads/Pages/Federal-Home-Loan-Bank-MemberData.aspx. In 1989 the FHLB System was opened up to commercial banks and credit unions. 

However, the authorizing legislation only applied to an ‘‘insured credit union’’ as defined by 12 

U.S.C. 1752 of the Federal Credit Union Act. Privately insured credit unions were not originally 

included in this definition. 5http://www.fhfa.gov/DataTools/Downloads/Pages/Federal-Home-Loan-Bank-MemberData.aspx. 6 CUNA-provided data. 

7 12 U.S.C. 4703. 

eral regulations relating to the disclosure of a lack of federal deposit insurance. 

BACKGROUND AND NEED FOR LEGISLATION

The FHLB System was created in 1932 to improve the availability of funds to support homeownership. Its broader mission now 

is ‘‘to provide financial products and services to [FHLB System] 

members and eligible non-members, including but not limited to 

advances, that assist and enhance their financing of: (1) housing, 

including single-family and multifamily housing serving consumers 

at all income levels; and (2) community lending.’’ 1 According to the 

FHLB System, its banks provide ‘‘liquidity to members through secured loans (advances), thereby increasing the availability of credit 

for residential mortgages, community investments, and other services for housing and community development.’’ 2 Some of the 

FHLBs also help to enhance liquidity by purchasing mortgage 

loans from, and funding mortgage loans through, participating 

member institutions and housing associates.3

The FHLB System currently limits its membership to building 

and loan associations, savings and loan associations, cooperative 

banks, homestead associations, savings banks, insurance companies, community development financial institutions, federally insured banks and savings associations, and federally insured credit 

unions.4 As of year-end 2014, 7,361 lenders were members of the 

FHLB System, which consisted of 4,850 commercial banks, 1,269 

credit unions, 906 thrifts, 303 insurance companies and 29 community development financial institutions.5

Currently, there are 128 privately insured credit unions that operate in nine states: Alabama, California, Idaho, Illinois, Indiana, 

Maryland, Nevada, Ohio, and Texas.6 Permitting these credit 

unions to apply for membership to the FHLB System would help 

them serve the financial needs of their members, and it would not 

expose the FHLB System to any appreciable additional risk. All advances made by the FHLB System must be fully collateralized and 

subject to strong underwriting standards. While privately insured 

credit unions are not currently eligible for membership, other nonfederally insured entities are permitted to join the FHLB System, 

and under current law, state-chartered, privately insured credit 

unions which also have obtained Community Development Financial Institution status are eligible.7

As part of written testimony before the House Committee on Financial Services at a March 18, 2015 hearing entitled ‘‘Preserving 

Consumer Choice and Financial Independence,’’ Patrick Miller, 

President and CEO of CBC Federal Credit Union, said: 


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8 Combined Financial Report of the Federal Home Loan Bank System for the Quarter ending 

on September 30, 2013. 

We also support H.R. 299, the ‘‘Capital Access for Small 

Community Financial Institutions Act of 2015’’, legislation 

introduced by Representatives Steve Stivers and Joyce 

Beatty which corrects a drafting oversight in the Federal 

Home Loan Bank Act that has resulted in a small number 

of privately insured credit unions being ineligible to join a 

FHLB. In 1989, in the wake of the savings and loan crisis, 

the FHLB System was opened up for the first time to commercial banks and credit unions. Unfortunately, the bill 

was drafted in such a way to apply only to an ‘‘insured 

credit union’’ as defined under the Federal Credit Union 

Act. If the legislation had used a broader term in the 12 

USC 1752 of the Federal Credit Union Act—such as ‘‘state 

credit union’’ or ‘‘state-chartered credit union’’, terms that 

are clearly defined, then privately insured credit unions 

would have the same opportunity for membership as other 

financial institutions. This is why, for many years, we 

have suggested that this was likely an oversight in drafting. Unfortunately, it has meant for over two decades, a 

small group of credit unions have been denied the right to 

even apply for membership in the FHLB System. The 

House of Representatives has continuously recognized this 

as a problem. In 2004, 2006 and 2014, the full House 

passed corrective legislation. In 2008, as part of the Housing and Economic Recovery Act of 2008, Congress made a 

small change to permit privately-insured, state-chartered 

credit unions designated as a Community Development Financial Institution (CDFI) to apply for membership to the 

FHLBs; however, of the 127 privately insured credit 

unions, only two are CDFI certified. We understand some 

policymakers have concerns regarding the existence of the 

private insurance option; however, this legislation would 

not expand that option for credit unions nor would it 

present an increased risk to the FHLB System, since this 

legislation only allows privately insured credit unions the 

option to apply for membership. If enacted, privately insured credit unions would not be the only non-Federally 

insured institutions eligible for membership in the FHLB 

System. Currently, insurance companies, which are not 

federally insured, are members of the System. In fact, in 

terms of current outstanding advancements, 119 insurance 

companies are borrowing almost twice as much as 427 federally insured credit unions.8 It has never seemed reasonable to our small institutions that some of the largest 

banks in the world, insurance companies (which are not 

Federally insured) or a foreign bank’s U.S. subsidiary can 

borrow billions of dollars from the FHLB System, but credit unions serving teachers in Ohio and Texas, firefighters 

in California, postal and county workers in Illinois and 

farmers in Indiana cannot. 

Credit union representatives from several of the nine states 

where privately insured credit unions operate submitted letters 


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supporting H.R. 299. In a joint letter of support dated March 23, 

2015, the California Credit Union League and the Nevada Credit 

Union League stated: 

On behalf of the 10.5 million credit union members in 

California and Nevada, I am writing in support of H.R. 

299, which allows privately insured credit unions access to 

the Federal Home Loan Banks. As you know, currently 

credit unions that chose private insurance are limited in 

their options for liquidity sources. In our two states 19 

credit unions are privately insured. We supported this legislation in the 113th session, where this bill passed the 

House by a vote of 395–0. Credit unions, as not-for-profit 

cooperatives exist to serve the needs of our members. In 

order for credit unions to continue to meet the demands of 

the communities we serve, credit unions require new and 

reliable sources of liquidity that can meet our growing necessities. H.R. 299 enables us to do just that. In California, 

the two largest privately insured credit unions primarily 

serve firefighters and first responders. Your legislation will 

create new lending opportunities for the memberships 

served by these credit unions. In Nevada, 7 of the states’ 

18 credit unions are privately insured, which is why your 

legislation is crucial to the state’s success. After the financial crisis of the last few years, credit unions have worked 

tirelessly to provide new and innovative ways to serve our 

members. H.R. 299 is another tool in credit union belt. 

The Ohio Credit Union League also expressed its support for the 

legislation in a letter dated March 23, 2015, stating: 

On behalf of the Ohio Credit Union League and Ohio’s 

57 privately-insured credit unions, I am writing to offer 

full support for the markup of H.R. 299, the Capital Access 

for Small Community Financial Institutions Act. Ohio’s 

privately-insured credit unions serve more than 333,000 

members, many of which rely on their credit union for access to home mortgage products. The unintentional barring 

of financially-strong, well-regulated credit unions from a 

government-sponsored entity designed to facilitate credit 

for home buyers should be corrected. The Federal Home 

Loan Bank (FHLB) Act was amended in 1989 to allow 

commercial banks and credit unions the right to seek 

membership in the system. However, the definition of a 

credit union was worded incorrectly, mistakenly omitting 

privately-insured credit unions from applying for membership to the FHLB. We support upcoming efforts by the 

U.S. House Financial Services Committee to correct this 

language and grant privately-insured credit unions the option to apply. Credit unions play an important part in consumer lending and home ownership. In a very tangible 

way, providing privately-insured credit unions with access 

to the FHLB system will increase credit union lending and 

strengthen Ohio’s economy. It also increases competition, 

generating more affordable housing options for qualified 

buyers. The Ohio Credit Union League, the trade association representing Ohio’s 330 state- and federally-chartered 


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credit unions, strongly supports a credit union’s ability to 

choose optimum business strategies, including its charter 

(federal or state) and deposit insurer (federal or private/ 

American Share Insurance). This essence of choice enhances a healthy competitive environment that spurs innovation and improved service among regulators, insurers, 

and credit unions. 

The Indiana Credit Union League sent a letter of support dated 

March 23, 2015, stating: 

On behalf of Indiana’s credit unions, we are writing to 

support H.R. 299, the Capital Access for Small Community 

Financial Institutions Act of 2015, which you and Indiana 

Representative Andre Carson introduced again this year 

that would allow privately-insured credit unions to become 

members of the Federal Home Loan Bank (FHLB). We understand that H.R. 299 will be marked up in the Financial 

Services Committee this week. We strongly support the 

legislation and urge the Committee to pass this important 

bill. Under current law, privately-insured credit unions are 

not permitted to become members of a FHLB. This legislation would allow these credit unions to join a FHLB, providing a new source of mortgage funding for these financial institutions and their members. Passage of this legislation would advance home ownership options for members 

of privately-insured credit unions. In Indiana, 17 statechartered credit unions with more than 140,000 members 

and more than $2 billion in assets are privately-insured. 

HEARINGS

The Committee on Financial Services held no hearings on H.R. 

299 in the 114th Congress. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 25, 2015 and March 26, 2015, and ordered H.R. 299 to be 

reported favorably to the House without amendment by a recorded 

vote of 56 yeas to 1 nays (Record vote no. FC–13), a quorum being 

present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole vote in committee was a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 56 yeas to 1 nays (Record vote no. FC–13), 

a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 299 will permit 

certain privately insured credit unions to become eligible for membership in the Federal Home Loan Bank System. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 8, 2015. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 299, the Capital Access 

for Small Community Financial Institutions Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Martin von Gnechten. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 


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H.R. 299—Capital Access for Small Community Financial Institutions Act of 2015 

H.R. 299 would allow privately insured credit unions to become 

members of the Federal Home Loan Bank (FHLB) system. The bill 

also would direct the Government Accountability Office (GAO) to 

report to the Congress on privately insured institutions and their 

insurers. CBO estimates that implementing this legislation would 

have no significant effect on the federal budget. Enacting H.R. 299 

would not affect direct spending or revenues; therefore, pay-as-yougo procedures do not apply. 

The FHLB system is a cooperative, government-sponsored enterprise made up of 12 regional banks that offer financing to almost 

7,400 members (banks, thrift institutions, insurance companies, 

and credit unions). FHLBs make loans (known as ‘‘advances’’) and 

provide other credit services that members use to fund mortgages 

and other loans. Consolidated assets of the FHLBs totaled $913 billion at the end of calendar year 2014, including about $570 billion 

in advances. 

H.R. 299 would permit state-chartered, privately insured credit 

unions to become members of the FHLB system. Under current 

law, such credit unions may only gain membership if they are also 

community development financial institutions. Based on information provided by the National Credit Union Administration, there 

are about 130 privately insured credit unions holding about $14 billion in assets that would become eligible for membership under the 

bill. CBO believes that it is unlikely that any advances made to 

these institutions would alter the financial condition of the FHLBs 

given the relative size of the credit unions to the FHLB system and 

the requirement that all advances be fully secured. Because these 

credit unions are privately insured, spending by the Federal Deposit Insurance Corporation would not be affected if an institution 

ultimately failed. 

The bill also would direct GAO to report to the Congress on the 

adequacy of insurance reserves held by private deposit insurers 

and whether privately insured institutions comply with federal disclosure regulations. The cost of the study would be less than 

$500,000, CBO estimates, and would be subject to the availability 

of appropriated funds. 

H.R. 299 contains an intergovernmental mandate as defined in 

the Unfunded Mandates Reform Act (UMRA) because it would preempt state laws that allow liquidators to void specific types of contracts. However, the preemption would impose no duty on state 

governments that would result in additional spending, and the 

threshold established by UMRA for costs of intergovernmental 

mandates ($77 million in 2015, adjusted annually for inflation) 

would not be exceeded. 

H.R. 299 would impose a private-sector mandate, as defined in 

UMRA, on private insurers of deposits at credit unions that are 

members of the FHLB system. It would require such insurers to 

submit a copy of their annual independent audit to the Federal 

Housing Finance Agency. Based on information from the National 

Credit Union Administration, CBO estimates that the cost of complying with the mandate would be small and would fall well below 

the annual threshold for private-sector mandates established in 

UMRA ($154 million in 2015, adjusted annually for inflation). 


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The CBO staff contacts for this estimate are Martin von 

Gnechten (for federal costs), J’nell L. Blanco (for the intergovernmental mandate), and Paige Piper/Bach (for the private-sector 

mandate). The estimate was approved by Theresa Gullo, Assistant 

Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 299 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 299 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 299 does not require any directed 

rulemakings. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 299 as the ‘‘Capital Access for Small Community Financial Institutions Act of 2015.’’ 

Section 2. Privately insured credit unions authorized to become 

members of a Federal Home Loan Bank 

This section amends the Federal Home Loan Bank Act to treat 

certain privately insured credit unions as insured depository institutions for purposes of determining eligibility for membership in a 

federal home loan bank. This section also permits a credit union 


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which lacks federal deposit insurance and has applied for membership in a federal home loan bank to be treated as meeting all the 

eligibility requirements for federal deposit insurance if the supervisor of the chartering state has determined that it meets all federal deposit insurance eligibility requirements. If the supervisor 

fails to make an eligibility determination within six months of the 

credit union’s application, the credit union is deemed to have met 

the eligibility requirements. 

Additionally, this section prohibits the application of a state law 

authorizing a conservator or liquidating agent of a credit union to 

repudiate contracts to any extension of credit from a federal home 

loan bank to a credit union which is a member of that bank or security interest in the assets of the credit union securing such extension of credit. This section also requires, notwithstanding any 

state law to the contrary, that if a home loan bank’s interest in any 

collateral securing an advance to a state-chartered credit union 

that is not federally insured has the same priority and is afforded 

the same standing and rights that the security interest would have 

had if the advance had been made to a federally insured credit 

union, and the bank has the same right to access such collateral 

that it would have had if the advance had been made to a federally 

insured credit union. 

Finally, this section amends the Federal Deposit Insurance Act 

to require private deposit insurers of credit unions that are members of a federal home loan bank to submit copies of their audit reports to the Federal Housing Finance Agency within seven days 

after the audit is completed. 

Section 3. GAO report 

This section directs the Comptroller General to study the adequacy of insurance reserves held by a private deposit insurer that 

insures deposits in an insured credit union, and such credit union’s 

level of compliance with federal regulations relating to the disclosure of a lack of federal deposit insurance. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

FEDERAL HOME LOAN BANK ACT 

* * * * * * * 

ELIGIBILITY OF MEMBERS AND NONMEMBER BORROWERS

SEC. 4. (a) CRITERIA FOR ELIGIBILITY.— 

(1) IN GENERAL.—Any building and loan association, savings 

and loan association, cooperative bank, homestead association, 

insurance company, savings bank, community development financial institution, or any insured depository institution (as 

defined in section 2 of this Act), shall be eligible to become a 

member of a Federal Home Loan Bank if such institution— 


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(A) is duly organized under the laws of any State or of 

the United States; 

(B) is subject to inspection and regulation under the 

banking laws, or under similar laws, of the State or of the 

United States or, in the case of a community development 

financial institution, is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994; and 

(C) makes such home mortgage loans as, in the judgment of the Director, are long-term loans (except that in 

the case of a savings bank, this subparagraph applies only 

if, in the judgment of the Director, its time deposits, as defined in section 19 of the Federal Reserve Act, warrant its 

making such loans). 

(2) QUALIFIED THRIFT LENDER.—An insured depository institution that is not a member on January 1, 1989, may become 

a member of a Federal Home Loan Bank only if— 

(A) the insured depository institution (other than a community financial institution) has at least 10 percent of its 

total assets in residential mortgage loans; 

(B) the insured depository institution’s financial condition is such that advances may be safely made to such institution; and 

(C) the character of its management and its home-financing policy are consistent with sound and economical 

home financing. 

(3) CERTAIN INSTITUTIONS.—An insured depository institution commencing its initial business operations after January 

1, 1989, may become a member of a Federal Home Loan Bank 

if it complies with regulations and orders prescribed by the Director for the 10 percent asset requirement (described in the 

paragraph (2)) within one year after the commencement of its 

operations. 

(4) LIMITED EXEMPTION FOR COMMUNITY FINANCIAL INSTITUTIONS.—A community financial institution that otherwise 

meets the requirements of paragraph (2) may become a member without regard to the percentage of its total assets that is 

represented by residential mortgage loans, as described in subparagraph (A) of paragraph (2). 

(5) CERTAIN PRIVATELY INSURED CREDIT UNIONS.— 

(A) IN GENERAL.—Subject to the requirements of subparagraph (B), a credit union shall be treated as an insured depository institution for purposes of determining the eligibility of such credit union for membership in a Federal 

home loan bank under paragraphs (1), (2), and (3). 

(B) CERTIFICATION BY APPROPRIATE SUPERVISOR.— 

(i) IN GENERAL.—For purposes of this paragraph and 

subject to clause (ii), a credit union which lacks Federal deposit insurance and which has applied for membership in a Federal home loan bank may be treated 

as meeting all the eligibility requirements for Federal 

deposit insurance only if the appropriate supervisor of 

the State in which the credit union is chartered has determined that the credit union meets all the eligibility 


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requirements for Federal deposit insurance as of the 

date of the application for membership. 

(ii) CERTIFICATION DEEMED VALID.—If, in the case of 

any credit union to which clause (i) applies, the appropriate supervisor of the State in which such credit 

union is chartered fails to make a determination pursuant to such clause by the end of the 6-month period 

beginning on the date of the application, the credit 

union shall be deemed to have met the requirements of 

clause (i). 

(C) SECURITY INTERESTS OF FEDERAL HOME LOAN BANK

NOT AVOIDABLE.—Notwithstanding any provision of State 

law authorizing a conservator or liquidating agent of a 

credit union to repudiate contracts, no such provision shall 

apply with respect to— 

(i) any extension of credit from any Federal home 

loan bank to any credit union which is a member of 

any such bank pursuant to this paragraph; or 

(ii) any security interest in the assets of such credit 

union securing any such extension of credit. 

(D) PROTECTION FOR CERTAIN FEDERAL HOME LOAN BANK

ADVANCES.—Notwithstanding any State law to the contrary, if a Bank makes an advance under section 10 to a 

State-chartered credit union that is not federally insured— 

(i) the Bank’s interest in any collateral securing such 

advance has the same priority and is afforded the same 

standing and rights that the security interest would 

have had if the advance had been made to a federally 

insured credit union; and 

(ii) the Bank has the same right to access such collateral that the Bank would have had if the advance had 

been made to a federally insured credit union. 

(b) An institution eligible to become a member under this section 

may become a member only of, or secure advances from, the Federal Home Loan Bank of the district in which is located the institution’s principal place of business, or of the bank of a district adjoining such district, if demanded by convenience and then only with 

the approval of the Director. 

(c) Notwithstanding the provisions of clause (2) of subsection (a) 

of this section requiring inspection and regulation under law as a 

condition with respect to eligibility for membership, any building 

and loan association which would be eligible to become a member 

of a Federal Home Loan Bank except for the fact that it is not subject to inspection and regulation under the banking laws or similar 

laws of the State in which such association is organized shall, upon 

subjecting itself to such inspection and regulation as the Director 

shall prescribe, be eligible to become a member. 

* * * * * * * 

FEDERAL DEPOSIT INSURANCE ACT 

* * * * * * * 


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SEC. 43. DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE. 

(a) ANNUAL INDEPENDENT AUDIT OF PRIVATE DEPOSIT INSURERS.— 

(1) AUDIT REQUIRED.—Any private deposit insurer shall obtain an annual audit from an independent auditor using generally accepted auditing standards. The audit shall include a 

determination of whether the private deposit insurer follows 

generally accepted accounting principles and has set aside sufficient reserves for losses. 

(2) PROVIDING COPIES OF AUDIT REPORT.— 

(A) PRIVATE DEPOSIT INSURER.—The private deposit insurer shall provide a copy of the audit report— 

(i) to each depository institution the deposits of 

which are insured by the private deposit insurer, not 

later than 14 days after the audit is completed; øand¿ 

(ii) to the appropriate supervisory agency of each 

State in which such an institution receives deposits, 

not later than 7 days after the audit is completedø.¿; 

and 

(iii) in the case of depository institutions described in 

subsection (e)(2)(A) the deposits of which are insured 

by the private insurer which are members of a Federal 

home loan bank, to the Federal Housing Finance Agency, not later than 7 days after the audit is completed. 

(B) DEPOSITORY INSTITUTION.—Any depository institution the deposits of which are insured by the private deposit insurer shall provide a copy of the audit report, upon 

request, to any current or prospective customer of the institution. 

(3) ENFORCEMENT BY APPROPRIATE STATE SUPERVISOR.—Any 

appropriate State supervisor of a private deposit insurer, and 

any appropriate State supervisor of a depository institution 

which receives deposits that are insured by a private deposit 

insurer, may examine and enforce compliance with this subsection under the applicable regulatory authority of such supervisor. 

(b) DISCLOSURE REQUIRED.—Any depository institution lacking 

Federal deposit insurance shall, within the United States, do the 

following: 

(1) PERIODIC STATEMENTS; ACCOUNT RECORDS.—Include conspicuously in all periodic statements of account, on each signature card, and on each passbook, certificate of deposit, or share 

certificate. a notice that the institution is not federally insured, 

and that if the institution fails, the Federal Government does 

not guarantee that depositors will get back their money. 

(2) ADVERTISING; PREMISES.— 

(A) IN GENERAL.—Include clearly and conspicuously in 

all advertising, except as provided in subparagraph (B); 

and at each station or window where deposits are normally 

received, its principal place of business and all its 

branches where it accepts deposits or opens accounts (excluding automated teller machines or point of sale terminals), and on its main Internet page, a notice that the institution is not federally insured. 


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(B) EXCEPTIONS.—The following need not include a notice that the institution is not federally insured: 

(i) Any sign, document, or other item that contains 

the name of the depository institution, its logo, or its 

contact information, but only if the sign, document, or 

item does not include any information about the institution’s products or services or information otherwise 

promoting the institution. 

(ii) Small utilitarian items that do not mention deposit products or insurance if inclusion of the notice 

would be impractical. 

(3) ACKNOWLEDGMENT OF DISCLOSURE.— 

(A) NEW DEPOSITORS OBTAINED OTHER THAN THROUGH A

CONVERSION OR MERGER.—With respect to any depositor 

who was not a depositor at the depository institution before the effective date of the Financial Services Regulatory 

Relief Act of 2006, and who is not a depositor as described 

in subparagraph (B), receive any deposit for the account of 

such depositor only if the depositor has signed a written 

acknowledgement that— 

(i) the institution is not federally insured; and 

(ii) if the institution fails, the Federal Government 

does not guarantee that the depositor will get back the 

depositor’s money. 

(B) NEW DEPOSITORS OBTAINED THROUGH A CONVERSION

OR MERGER.—With respect to a depositor at a federally insured depository institution that converts to, or merges 

into, a depository institution lacking federal insurance 

after the effective date of the Financial Services Regulatory Relief Act of 2006, receive any deposit for the account of such depositor only if— 

(i) the depositor has signed a written acknowledgement described in subparagraph (A); or 

(ii) the institution makes an attempt, as described in 

subparagraph (D) and sent by mail no later than 45 

days after the effective date of the conversion or merger, to obtain the acknowledgment. 

(C) CURRENT DEPOSITORS.—Receive any deposit after the 

effective date of the Financial Services Regulatory Relief 

Act of 2006 for the account of any depositor who was a depositor on that date only if— 

(i) the depositor has signed a written acknowledgement described in subparagraph (A); or 

(ii) the institution has complied with the provisions 

of subparagraph (E) which are applicable as of the 

date of the deposit. 

(D) ALTERNATIVE PROVISION OF NOTICE TO NEW DEPOSI- TORS OBTAINED THROUGH A CONVERSION OR MERGER.— 

(i) IN GENERAL.—Transmit to each depositor who 

has not signed a written acknowledgement described 

in subparagraph (A)— 

(I) a conspicuous card containing the information described in clauses (i) and (ii) of subparagraph (A), and a line for the signature of the depositor; and 


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(II) accompanying materials requesting the depositor to sign the card, and return the signed 

card to the institution. 

(E) ALTERNATIVE PROVISION OF NOTICE TO CURRENT DEPOSITORS.— 

(i) IN GENERAL.—Transmit to each depositor who 

was a depositor before the effective date of the Financial Services Regulatory Relief Act of 2006, and has 

not signed a written acknowledgement described in 

subparagraph (A)— 

(I) a conspicuous card containing the information described in clauses (i) and (ii) of subparagraph (A), and a line for the signature of the depositor; and 

(II) accompanying materials requesting the depositor to sign the card, and return the signed 

card to the institution. 

(ii) MANNER AND TIMING OF NOTICE.— 

(I) FIRST NOTICE.—Make the transmission described in clause (i) via mail not later than three 

months after the effective date of the Financial 

Services Regulatory Relief Act of 2006. 

(II) SECOND NOTICE.—Make a second transmission described in clause (i) via mail not less 

than 30 days and not more than three months 

after a transmission to the depositor in accordance 

with subclause (I), if the institution has not, by 

the date of such mailing, received from the depositor a card referred to in clause (i) which has been 

signed by the depositor. 

(c) MANNER AND CONTENT OF DISCLOSURE.—To ensure that current and prospective customers understand the risks involved in 

foregoing Federal deposit insurance, the Bureau, by regulation or 

order, shall prescribe the manner and content of disclosure required under this section, which shall be presented in such format 

and in such type size and manner as to be simple and easy to understand. 

(d) EXCEPTIONS FOR INSTITUTIONS NOT RECEIVING RETAIL DEPOSITS.—The Bureau may, by regulation or order, make exceptions to 

subsection (b) for any depository institution that, within the United 

States, does not receive initial deposits of less than an amount 

equal to the standard maximum deposit insurance amount from individuals who are citizens or residents of the United States, other 

than money received in connection with any draft or similar instrument issued to transmit money. 

(e) DEFINITIONS.—For purposes of this section: 

(1) APPROPRIATE SUPERVISOR.—The ‘‘appropriate supervisor’’ 

of a depository institution means the agency primarily responsible for supervising the institution. 

(2) DEPOSITORY INSTITUTION.—The term ‘‘depository institution’’ includes— 

(A) any entity described in section 19(b)(1)(A)(iv) of the 

Federal Reserve Act; and 

(B) any entity that, as determined by the Bureau— 


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(i) is engaged in the business of receiving deposits; 

and 

(ii) could reasonably be mistaken for a depository institution by the entity’s current or prospective customers. 

(3) LACKING FEDERAL DEPOSIT INSURANCE.—A depository institution lacks Federal deposit insurance if the institution is 

not either— 

(A) an insured depository institution; or 

(B) an insured credit union, as defined in section 101 of 

the Federal Credit Union Act. 

(4) PRIVATE DEPOSIT INSURER.—The term ‘‘private deposit insurer’’ means any entity insuring the deposits of any depository institution lacking Federal deposit insurance. 

(5) BUREAU.—The term ‘‘Bureau’’ means the Bureau of Consumer Financial Protection. 

(f) ENFORCEMENT.— 

(1) LIMITED ENFORCEMENT AUTHORITY.—Compliance with the 

requirements of subsections (b), (c), and (e), and any regulation 

prescribed or order issued under such subsection, shall be enforced under the Consumer Financial Protection Act of 2010, 

by the Bureau, subject to subtitle B of the Consumer Financial 

Protection Act of 2010, and under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) by the Federal Trade Commission. 

(2) BROAD STATE ENFORCEMENT AUTHORITY.— (A) IN GENERAL.—Subject to subparagraph (C), an appropriate State supervisor of a depository institution lacking 

Federal deposit insurance may examine and enforce compliance with the requirements of this section, and any regulation prescribed under this section. 

(B) STATE POWERS.—For purposes of bringing any action 

to enforce compliance with this section, no provision of this 

section shall be construed as preventing an appropriate 

State supervisor of a depository institution lacking Federal 

deposit insurance from exercising any powers conferred on 

such official by the laws of such State. 

(C) LIMITATION ON STATE ACTION WHILE FEDERAL ACTION

PENDING.—If the Bureau or Federal Trade Commission has 

instituted an enforcement action for a violation of this section, no appropriate State supervisory agency may, during 

the pendency of such action, bring an action under this 

section against any defendant named in the complaint of 

the Bureau or Federal Trade Commission for any violation 

of this section that is alleged in that complaint. 

* * * * * * * 

Æ 


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