I 

109TH CONGRESS 

1ST SESSION H. R. 3206

To amend the Federal Credit Union Act provisions relating to any conversion 

of a credit union charter to a mutual savings bank or savings association 

charter, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 12, 2005

Mr. MCHENRY (for himself, Mr. TOWNS, Mr. GILLMOR, Mr. KING of New 

York, and Mr. SAM JOHNSON of Texas) introduced the following bill; 

which was referred to the Committee on Financial Services 

A BILL

To amend the Federal Credit Union Act provisions relating 

to any conversion of a credit union charter to a mutual 

savings bank or savings association charter, and for 

other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Credit Union Charter 

5 Choice Act’’. 
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1 SEC. 2. CONVERSIONS OF CREDIT UNIONS TO SAVINGS AS2 SOCIATIONS OR MUTUAL SAVINGS BANKS. 

3 (a) IN GENERAL.—Section 205(b)(2) of the Federal 

4 Credit Union Act (12 U.S.C. 1785(b)) is amended—

5 (1) in subparagraph (G)—

6 (A) by striking ‘‘CONSISTENT RULES’’ in 

7 the heading of such subparagraph and all that 

8 follows through ‘‘, the Administration shall pro9 mulgate’’ (where such term appears in clause 

10 (i) of such subparagraph) and inserting ‘‘CON11 SISTENT RULES.—The Board shall prescribe’’; 

12 and 

13 (B) by striking clause (ii); 

14 (2) by redesignating subparagraphs (E), (F), 

15 and (G) (as amended by paragraph (1)) as subpara16 graphs (K), (L), and (M), respectively; and 

17 (3) by striking subparagraph (D) and inserting 

18 the following new subparagraphs: 

19 ‘‘(D) NOTICE OF PROPOSAL TO BOARD.—

20 An insured credit union that proposes to con21 vert to a mutual savings bank or savings asso22 ciation under subparagraph (A) shall submit to 

23 the Board, or a designee of the Board, for re24 view and approval by the Board or such des25 ignee a copy of the written notice, ballot and 
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1 such other materials to be mailed to members 

2 pursuant to subparagraph (C). 

3 ‘‘(E) CONTENTS OF NOTICE TO BOARD.—

4 In addition to the requirements of subpara5 graph (D), a notice submitted under such sub6 paragraph shall include the following: 

7 ‘‘(i) The date that the membership 

8 vote will be taken and the date by which 

9 ballots must be received by the inspector of 

10 elections to be counted. 

11 ‘‘(ii) A brief statement of why the di12 rectors of the converting credit union are 

13 considering the conversion and the board’s 

14 recommendation to the members of the 

15 credit union. 

16 ‘‘(iii) A brief statement of the mate17 rial effects of the conversion on the credit 

18 union, as converted, and the members of 

19 the credit union, including any differences 

20 in powers between a credit union and a 

21 mutual savings bank or savings association 

22 that the converting credit union deems to 

23 be material to such members. 

24 ‘‘(F) RESTRICTIONS ON REGULATION OF

25 CONTENT OF PROPOSED CONVERSION NOTICE
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1 TO MEMBERS.—A converting credit union may 

2 not be required to include in the notice provided 

3 under subparagraph (C) any information or 

4 statements that—

5 ‘‘(i) are speculative with respect to the 

6 future operations, governance, or form of 

7 organization of the financial institution 

8 that will result from the conversion, or 

9 may occur after the completion of the con10 version; 

11 ‘‘(ii) are inaccurate with respect to a 

12 proposed conversion of the converting cred13 it union or the application for a mutual 

14 savings bank or savings association charter 

15 filed in connection with the conversion; 

16 ‘‘(iii) conflict with regulations of other 

17 financial regulators, including the Director 

18 of the Office of Thrift Supervision, related 

19 to the subsequent conversion of the result20 ing financial institution from mutual to 

21 stock form; 

22 ‘‘(iv) distort the impact of conversion 

23 on the members of the credit union; or 

24 ‘‘(v) are attributable to the Board or 

25 state the Board’s position on conversions. 
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1 ‘‘(G) BOARD APPROVAL PROCESS.—

2 ‘‘(i) IN GENERAL.—The Board shall 

3 approve the materials submitted by the 

4 converting credit union pursuant to sub5 paragraph (D) if such materials comply 

6 with the requirements of subparagraph 

7 (E), unless the Board determines that the 

8 conversion is being made to circumvent a 

9 pending supervisory action that is about to 

10 be or has been initiated by the Board or by 

11 the State board, commission, or authority 

12 having jurisdiction over the credit union, in 

13 the case of converting State-chartered 

14 credit union, because of a concern over the 

15 safety and soundness of the converting 

16 credit union. 

17 ‘‘(ii) NOTICE WITHIN 30 DAYS.—The 

18 Board, or the designee of the Board, shall 

19 provide the converting credit union with 

20 written approval of the materials submitted 

21 by a converting credit union pursuant to 

22 subparagraph (D) or comments thereto 

23 within 30 days of the initial receipt by the 

24 Board or such designee of such materials. 
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1 ‘‘(iii) REVISIONS TO NOTICE.—Any re2 vised materials filed with the Board by a 

3 converting credit union shall be acted upon 

4 by the later of the end of the 30-day period 

5 referred to in clause (ii) or the end of the 

6 10-day period beginning when such revised 

7 materials are filed. 

8 ‘‘(H) OTHER RESTRICTIONS ON THE

9 BOARD.—

10 ‘‘(i) PROHIBITION ON SUBMISSION

11 AND REVIEW OF OTHER COMMUNICATIONS

12 WITH MEMBERS.—Other than the written 

13 materials being mailed to the converting 

14 credit union’s members pursuant to sub15 paragraph (C), the converting credit union 

16 shall not be required to submit any other 

17 communications involving the conversion to 

18 the Board for approval and the Board 

19 shall have no authority to regulate the con20 tent of any such communications. 

21 ‘‘(ii) EXCEPTION FOR INCONSISTENT, 

22 MISLEADING, OR FALSE COMMUNICA23 TIONS.—Clause (i) shall not apply so as to 

24 to restrict the Board’s authority to prevent 

25 or correct communications under subpara-
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1 graph (C) that are inconsistent with the 

2 material facts contained in the notice of 

3 proposed conversion or are knowingly false 

4 or misleading. 

5 ‘‘(iii) LIMITATION ON AUTHORITY TO

6 REQUIRE NEW MEMBERSHIP VOTE.—The 

7 Board shall not have the authority to re8 quire a new vote on the basis of the con9 tents of the notice required under subpara10 graph (C) or any other communication 

11 from the converting insured credit union to 

12 the members of the credit union, unless 

13 the notice or communication contains a 

14 knowingly false statement that affects the 

15 outcome of a conversion vote. 

16 ‘‘(I) CONDUCT AND SUPERVISION OF

17 ELECTION.—

18 ‘‘(i) SECRET BALLOT.—The vote on 

19 the conversion shall be conducted by secret 

20 ballot. 

21 ‘‘(ii) INDEPENDENT INSPECTOR OF

22 ELECTION.—

23 ‘‘(I) IN GENERAL.—The con24 verting credit union shall appoint an 

25 independent inspector of elections to 
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1 receive and tally the votes cast on the 

2 conversion proposal. 

3 ‘‘(II) INELIGIBLE PERSONS.—

4 The inspector shall not be an em5 ployee, officer, or director of the con6 verting credit union or have a family 

7 relationship with any employee, officer 

8 or director of the credit union. 

9 ‘‘(III) FAMILY RELATIONSHIP

10 DEFINED.—For purposes of subclause 

11 (II), the term ‘family relationship’ 

12 means any relationship by blood, mar13 riage or adoption, that is not more re14 mote than first cousin. 

15 ‘‘(iii) CERTIFICATION.—The board of 

16 directors of the converting credit union 

17 shall certify to the Board (or the designee 

18 of the Board) and the Federal banking 

19 agency or the appropriate State bank su20 pervisor (as such terms are defined in sec21 tion 3 of the Federal Deposit Insurance 

22 Act) that will have jurisdiction over the in23 stitution after the conversion—

24 ‘‘(I) the results of the member25 ship vote, based on the report of the 
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1 inspector of elections, within 10 cal2 endar days after the vote is taken or 

3 as promptly thereafter as possible; 

4 and 

5 ‘‘(II) at the same time, that the 

6 notice, ballot and other written mate7 rials provided to members were iden8 tical in all material respects to those 

9 submitted to the Board (or the des10 ignee of the Board) pursuant to sub11 paragraph (D) and approved by the 

12 Board or such designee. 

13 ‘‘(J) RESTRICTION ON POST-ELECTION RE14 VIEW OR APPROVAL.—Absent fraud or reckless 

15 disregard for fairness during the voting process 

16 that affects the outcome of the vote, the Board 

17 shall have no further review or approval author18 ity over the conversion process following the 

19 submission and review of the certification under 

20 subparagraph (I)(iii).’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this Act shall apply to all credit union conversions de23 scribed in section 205(b)(2) of the Federal Credit Union 

24 Act that are pending on the date of the enactment of this 

25 Act and any conversion commenced on or after such date 
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1 of enactment pursuant to a notice provided to the National 

2 Credit Union Administration Board in accordance with 

3 section 205(b)(2)(D) of the Federal Credit Union Act (as 

4 amended by subsection (a) of this section). 

5 (c) REGULATIONS.—Before the end of the 60-day pe6 riod beginning on the date of the enactment of this Act, 

7 the National Credit Union Administration Board shall 

8 publish proposed amendments to existing regulations of 

9 the Board governing conversions of insured credit unions 

10 to mutual savings banks or savings associations that are 

11 necessary to conform such regulations with the require12 ments of the amendments made by this Act.

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