I 

108TH CONGRESS 

1ST SESSION H. R. 3579

To ease credit union regulatory burdens, advance credit union efforts to 

promote economic growth, and modernize credit union capital standards. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 21, 2003

Mr. ROYCE (for himself, Mr. KANJORSKI, Mr. LATOURETTE, and Mrs. 

MALONEY) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL

To ease credit union regulatory burdens, advance credit 

union efforts to promote economic growth, and modernize 

credit union capital standards.

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 Regu5 latory Improvements Act of 2003’’. 
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1 TITLE I—REGULATORY 

2 FLEXIBILITY 

3 SEC. 102. LEASES OF LAND ON FEDERAL FACILITIES FOR 

4 CREDIT UNIONS. 

5 (a) IN GENERAL.—Section 124 of the Federal Credit 

6 Union Act (12 U.S.C. 1770) is amended—

7 (1) by striking ‘‘Upon application by any credit 

8 union’’ and inserting ‘‘Notwithstanding any other 

9 provision of law, upon application by any credit 

10 union’’; 

11 (2) by inserting ‘‘on lands reserved for the use 

12 of, and under the exclusive or concurrent jurisdiction 

13 of, the United States or’’ after ‘‘officer or agency of 

14 the United States charged with the allotment of 

15 space’’; 

16 (3) by inserting ‘‘lease land or’’ after ‘‘such of17 ficer or agency may in his or its discretion’’; and 

18 (4) by inserting ‘‘or the facility built on the 

19 leased land’’ after ‘‘credit union to be served by the 

20 allotment of space’’. 

21 (b) CLERICAL AMENDMENT.—The heading for sec22 tion 124 is amended by inserting ‘‘OR FEDERAL LAND’’ 

23 after ‘‘BUILDINGS’’. 
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1 SEC. 103. INVESTMENTS IN SECURITIES BY FEDERAL CRED2 IT UNIONS. 

3 Section 107 of the Federal Credit Union Act (12 

4 U.S.C. 1757) is amended—

5 (1) in the matter preceding paragraph (1) by 

6 striking ‘‘A Federal credit union’’ and inserting ‘‘(a) 

7 IN GENERAL.—Any Federal credit union’’; and 

8 (2) by adding at the end the following new sub9 section:

10 ‘‘(b) INVESTMENT FOR THE CREDIT UNION’S OWN

11 ACCOUNT.—

12 ‘‘(1) IN GENERAL.—A Federal credit union may 

13 purchase and hold for its own account such invest14 ment securities of investment grade as the Board 

15 may authorize by regulation, subject to such limita16 tions and restrictions as the Board may prescribe in 

17 the regulations. 

18 ‘‘(2) PERCENTAGE LIMITATIONS.— 

19 ‘‘(A) SINGLE OBLIGOR.—In no event may 

20 the total amount of investment securities of any 

21 single obligor or maker held by a Federal credit 

22 union for the credit union’s own account exceed 

23 at any time an amount equal to 10 percent of 

24 the net worth of the credit union. 

25 ‘‘(B) AGGREGATE INVESTMENTS.—In no 

26 event may the aggregate amount of investment 
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1 securities held by a Federal credit union for the 

2 credit union’s own account exceed at any time 

3 an amount equal to 10 percent of the assets of 

4 the credit union. 

5 ‘‘(3) INVESTMENT SECURITY DEFINED.—

6 ‘‘(A) IN GENERAL.—For purposes of this 

7 subsection, the term ‘investment security’ 

8 means marketable obligations evidencing the in9 debtedness of any person in the form of bonds, 

10 notes, or debentures and other instruments 

11 commonly referred to as investment securities. 

12 ‘‘(B) FURTHER DEFINITION BY BOARD.—

13 The Board may further define the term ‘invest14 ment security’. 

15 ‘‘(4) INVESTMENT GRADE DEFINED.—The term 

16 ‘investment grade’ means with respect to an invest17 ment security purchased by a credit union for its 

18 own account, an investment security that at the time 

19 of such purchase is rated in one of the 4 highest rat20 ing categories by at least 1 nationally recognized 

21 statistical rating organization. 

22 ‘‘(5) CLARIFICATION OF PROHIBITION ON

23 STOCK OWNERSHIP.—No provision of this subsection 

24 shall be construed as authorizing a Federal credit 

25 union to purchase shares of stock of any corporation
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1 for the credit union’s own account, except as other2 wise permitted by law.’’. 

3 SEC. 104. INCREASE IN GENERAL 12-YEAR LIMITATION OF 

4 TERM OF FEDERAL CREDIT UNION LOANS TO 

5 15 YEARS. 

6 Section 107(a)(5) of the Federal Credit Union Act 

7 (12 U.S.C. 1757(5)) (as so designated by section 103 of 

8 this title) is amended—

9 (1) in the matter preceding subparagraph (A), 

10 by striking ‘‘to make loans, the maturities of which 

11 shall not exceed twelve years except as otherwise 

12 provided herein’’ and inserting ‘‘to make loans, the 

13 maturities of which shall not exceed 15 years or any 

14 longer maturity as the Board may allow, in regula15 tions, except as otherwise provided in this Act’’; 

16 (2) in subparagraph (A)—

17 (A) by striking clause (ii); 

18 (B) by redesignating clauses (iii) through 

19 (x) as clauses (ii) through (ix), respectively; and 

20 (C) by inserting ‘‘and’’ after the semicolon 

21 at the end of clause (viii) (as so redesignated). 

22 SEC. 105. INCREASE IN 1 PERCENT INVESTMENT LIMIT IN 

23 CREDIT UNION SERVICE ORGANIZATIONS. 

24 Section 107(a)(7)(I) of the Federal Credit Union Act 

25 (12 U.S.C. 1757(7)(I)) (as so designated by section 103 
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1 of this title) is amended by striking ‘‘up to 1 per centum 

2 of the total paid’’ and inserting ‘‘up to 3 percent of the 

3 total paid’’. 

4 SEC. 106. MEMBER BUSINESS LOAN EXCLUSION FOR LOANS 

5 TO NONPROFIT RELIGIOUS ORGANIZATIONS. 

6 Section 107A(a) of the Federal Credit Union Act (12 

7 U.S.C. 1757a(a)) is amended by inserting ‘‘, excluding 

8 loans made to nonprofit religious organizations,’’ after 

9 ‘‘total amount of such loans’’. 

10 SEC. 107. CHECK CASHING AND MONEY TRANSFER SERV11 ICES OFFERED WITHIN THE FIELD OF MEM12 BERSHIP. 

13 Paragraph (12) of section 107(a) of the Federal 

14 Credit Union Act (12 U.S.C. 1757(12)) (as so designated 

15 by section 103 of this title) is amended to read as follows: 

16 ‘‘(12) in accordance with regulations prescribed 

17 by the Board—

18 ‘‘(A) to sell, to persons in the field of 

19 membership, negotiable checks (including trav20 elers checks), money orders, and other similar 

21 money transfer instruments (including elec22 tronic fund transfers); and 

23 ‘‘(B) to cash checks and money orders and 

24 provide electronic fund transfer services for per25 sons in the field of membership for a fee;’’. 
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1 SEC. 108. VOLUNTARY MERGERS INVOLVING MULTIPLE 

2 COMMON-BOND CREDIT UNIONS. 

3 Section 109(d)(2) of the Federal Credit Union Act 

4 (12 U.S.C. 1759(d)(2)) is amended—

5 (1) by striking ‘‘or’’ at the end of clause (ii) of 

6 subparagraph (B); 

7 (2) by striking the period at the end of sub8 paragraph (C) and inserting ‘‘; or’’; and 

9 (3) by adding at the end the following new sub10 paragraph: 

11 ‘‘(D) a merger involving any such Federal 

12 credit union approved by the Board on or after 

13 August 7, 1998.’’. 

14 SEC. 109. CONVERSIONS INVOLVING COMMON-BOND CRED15 IT UNIONS. 

16 Section 109(g) of the Federal Credit Union Act (12 

17 U.S.C. 1759(g)) is amended by inserting after paragraph 

18 (2) the following new paragraph: 

19 ‘‘(3) CRITERIA FOR CONTINUED MEMBERSHIP

20 OF CERTAIN MEMBER GROUPS IN COMMUNITY CHAR21 TER CONVERSIONS.—In the case of a voluntary con22 version of a common-bond credit union described in 

23 paragraph (1) or (2) of subsection (b) into a com24 munity credit union described in subsection (b)(3), 

25 the Board shall prescribe, by regulation, the criteria 

26 under which the Board may determine that a mem-
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1 ber group or other portion of a credit union’s exist2 ing membership, that is located outside the well-de3 fined local community, neighborhood, or rural dis4 trict that shall constitute the community charter, 

5 can be satisfactorily served by the credit union and 

6 remain within the community credit union’s field of 

7 membership.’’. 

8 SEC. 110. CREDIT UNION GOVERNANCE. 

9 (a) EXPULSION OF MEMBERS FOR JUST CAUSE.—

10 Subsection (b) of section 118 of the Federal Credit Union 

11 Act (12 U.S.C. 1764(b)) is amended to read as follows: 

12 ‘‘(b) POLICY AND ACTIONS OF BOARDS OF DIREC13 TORS OF FEDERAL CREDIT UNIONS.—

14 ‘‘(1) EXPULSION OF MEMBERS FOR NON15 PARTICIPATION OR FOR JUST CAUSE.—The board of 

16 directors of a Federal credit union may, by majority 

17 vote of a quorum of directors, adopt and enforce a 

18 policy with respect to expulsion from membership, 

19 by a majority vote of such board of directors, based 

20 on just cause, including disruption of credit union 

21 operations, or on nonparticipation by a member in 

22 the affairs of the credit union. 

23 ‘‘(2) WRITTEN NOTICE OF POLICY TO MEM24 BERS.—If a policy described in paragraph (1) is 

25 adopted, written notice of the policy as adopted and 
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1 the effective date of such policy shall be provided 

2 to—

3 ‘‘(A) each existing member of the credit 

4 union not less than 30 days prior to the effec5 tive date of such policy; and 

6 ‘‘(B) each new member prior to or upon 

7 applying for membership.’’. 

8 (b) TERM LIMITS AUTHORIZED FOR BOARD MEM9 BERS OF FEDERAL CREDIT UNIONS.—Section 111(a) of 

10 the Federal Credit Union Act (12 U.S.C. 1761(a)) is 

11 amended by adding at the end the following new sentence: 

12 ‘‘The bylaws of a Federal credit union may limit the num13 ber of consecutive terms any person may serve on the 

14 board of directors of such credit union.’’. 

15 (c) REIMBURSEMENT FOR LOST WAGES DUE TO

16 SERVICE ON CREDIT UNION BOARD NOT TREATED AS

17 COMPENSATION.—Section 111(c) of the Federal Credit 

18 Union Act (12 U.S.C. 1761(c)) is amended by inserting 

19 ‘‘, including lost wages,’’ after ‘‘the reimbursement of rea20 sonable expenses’’. 

21 SEC. 111. PROVIDING THE NATIONAL CREDIT UNION AD22 MINISTRATION WITH GREATER FLEXIBILITY 

23 IN RESPONDING TO MARKET CONDITIONS. 

24 Section 107(a)(5)(A)(v)(I) of the Federal Credit 

25 Union Act (12 U.S.C. 1757(5)(A)(v)(I)) (as so designated
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1 by sections 103 and 104 of this title) is amended by strik2 ing ‘‘six-month period and that prevailing interest rate lev3 els’’ and inserting ‘‘6-month period or that prevailing in4 terest rate levels’’. 

5 SEC. 112. CREDIT UNIONS AUTHORIZED TO LEASE SPACE 

6 IN BUILDINGS IN CREDIT UNION OFFICES IN 

7 UNDERSERVED AREAS. 

8 (a) IN GENERAL.—Section 107(a) of the Federal 

9 Credit Union Act (12 U.S.C. 1757) (as so designated by 

10 section 103 of this title) is amended—

11 (1) by striking ‘‘and’’ at the end of paragraph 

12 (16); 

13 (2) by redesignating paragraph (17) as para14 graph (18); and 

15 (3) by inserting after paragraph (16) the fol16 lowing new paragraph: 

17 ‘‘(17) with regard to any building purchased or 

18 constructed by the credit union for a credit union of19 fice or credit union operations in an underserved 

20 area, to lease office space in such building that is 

21 separate and clearly distinct from any office or oper22 ation of the credit union to any business enterprise, 

23 subject to such regulations the Board may prescribe, 

24 taking into account the safety and soundness of the 

25 credit union; and’’. 
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1 (b) UNDERSERVED AREA DEFINED.—Section 101 of 

2 the Federal Credit Union Act (12 U.S.C. 1752) is amend3 ed by adding at the end the following new paragraph: 

4 ‘‘(10) UNDERSERVED AREA.—The term ‘under5 served area’ means an area consisting of 1 or more 

6 census tracts that have—

7 ‘‘(A) a poverty rate of 20 percent or great8 er, based on the most recent census data; or 

9 ‘‘(B) a median family income that does not 

10 exceed 80 percent of the greater of—

11 ‘‘(i) the median family income for the 

12 metropolitan area in which such census 

13 tract or tracts are located; or 

14 ‘‘(ii) the median family income for the 

15 State in which such census tract or tracts 

16 are located.’’. 

17 SEC. 113. CREDIT UNION CONVERSION VOTING REQUIRE18 MENTS. 

19 Section 205(b)(2)(B) of the Federal Credit Union 

20 Act (12 U.S.C. 1785(b)(2)(B)) is amended by inserting 

21 ‘‘, in a vote in which at least 20 percent of the credit union 

22 membership participates’’ before the period at the end. 
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1 SEC. 114. EXEMPTION FROM PRE-MERGER NOTIFICATION 

2 REQUIREMENT OF THE CLAYTON ACT. 

3 Section 7A(c)(7) of the Clayton Act (15 U.S.C. 

4 18a(c)(7)) is amended by inserting ‘‘section 205(b)(3) of 

5 the Federal Credit Union Act (12 U.S.C. 1785(b)(3)),’’ 

6 before ‘‘or section 3’’. 

7 SEC. 115. TREATMENT OF CREDIT UNIONS AS DEPOSITORY 

8 INSTITUTIONS UNDER SECURITIES LAWS. 

9 (a) DEFINITION OF BANK UNDER THE SECURITIES

10 EXCHANGE ACT OF 1934.—Section 3(a)(6) of the Securi11 ties Exchange Act of 1934 (15 U.S.C. 78c(a)(6)) (as 

12 amended by section 201(a)(1) of this Act) is amended—

13 (1) by striking ‘‘this title, and (D) a receiver’’ 

14 and inserting ‘‘this title, (D) an insured credit union 

15 (as defined in section 101(7) of the Federal Credit 

16 Union Act) but only for purposes of paragraphs (4) 

17 and (5) of this subsection and only for activities oth18 erwise authorized by applicable laws to which such 

19 credit unions are subject, and (E) a receiver’’; and 

20 (2) in subparagraph (E) (as so redesignated by 

21 paragraph (1) of this subsection) by striking ‘‘(A), 

22 (B), or (C)’’ and inserting ‘‘(A), (B), (C), or (D)’’. 

23 (b) DEFINITION OF BANK UNDER THE INVESTMENT

24 ADVISERS ACT OF 1940.—Section 202(a)(2) of the In25 vestment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(2)) 
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1 (as amended by section 201(b)(1) of this Act) is amend2 ed—

3 (1) by striking ‘‘this title, and (D) a receiver’’ 

4 and inserting ‘‘this title, (D) an insured credit union 

5 (as defined in section 101(7) of the Federal Credit 

6 Union Act) but only for activities otherwise author7 ized by applicable laws to which such credit unions 

8 are subject, and (E) a receiver’’; and 

9 (2) in subparagraph (E) (as so redesignated by 

10 paragraph (1) of this subsection) by striking ‘‘(A), 

11 (B), or (C)’’ and inserting ‘‘(A), (B), (C), or (D)’’. 

12 (c) DEFINITION OF APPROPRIATE FEDERAL BANK13 ING AGENCY.—Section 210A(c) of the Investment Advis14 ers Act of 1940 (15 U.S.C. 80b–10a(c)) is amended by 

15 inserting ‘‘and includes the National Credit Union Admin16 istration Board, in the case of an insured credit union (as 

17 defined in section 101(7) of the Federal Credit Union 

18 Act)’’ before the period at the end. 

19 TITLE II—MEMBER BUSINESS 

20 LENDING 

21 SEC. 201. LIMITS ON MEMBER BUSINESS LOANS. 

22 Section 107A(a) of the Federal Credit Union Act (12 

23 U.S.C. 1757a(a)) is amended by striking ‘‘the lesser

24 of—’’ and all that follows and inserting ‘‘20 percent of 

25 the total assets of the credit union.’’. 
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1 SEC. 202. DEFINITION OF MEMBER BUSINESS LOAN. 

2 Section 107A(c)(1)(B)(iii) of the Federal Credit 

3 Union Act (12 U.S.C. 1757a(c)(1)(B)(iii)) is amended by 

4 striking ‘‘$50,000’’ and inserting ‘‘an amount, not to ex5 ceed $100,000, which the Board shall prescribe by regula6 tion’’. 

7 SEC. 203. RESTRICTION ON MEMBER BUSINESS LOANS. 

8 Section 216(g)(2) of the Federal Credit Union Act 

9 (12 U.S.C. 1790d(g)(2)) is amended by striking ‘‘until 

10 such time as the credit union becomes adequately capital11 ized’’ and inserting ‘‘unless otherwise approved by the 

12 Board’’. 

13 TITLE III—CAPITAL LEVELS 

14 SEC. 301. AMENDMENTS TO NET WORTH CATEGORIES. 

15 Section 216 of the Federal Credit Union Act (12 

16 U.S.C. 1790d) is amended—

17 (1) by striking subsection (o)(3) and inserting 

18 the following new paragraph: 

19 ‘‘(3) NET WORTH RATIO.—The term ‘net worth 

20 ratio’ means, with respect to a credit union, the 

21 ratio of the net worth of the credit union to the risk 

22 assets of the credit union as defined by the Board.’’; 

23 (2) by striking subsection (d) and inserting the 

24 following new subsection 

25 ‘‘(d) [Repealed]’’; and 
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1 (3) by striking subparagraph (E) of subsection 

2 (c)(1) and inserting the following new subparagraph: 

3 ‘‘(E) CRITICALLY UNDERCAPITALIZED.—

4 An insured credit union is ‘critically under5 capitalized’ if the credit union has—

6 ‘‘(i) a net worth of less than 2 percent 

7 of actual assets; or 

8 ‘‘(ii) a net worth ratio of less than a 

9 minimum net worth ratio prescribed by the 

10 Board in excess of 2 percent but not more 

11 than 3 percent.’’.

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