I
107TH CONGRESS
2D SESSION
H. R. 5621
To amend the Federal Credit Union Act to expand membership, service,
and investment opportunities for credit unions, to expand credit union
services within financially underserved communities, to enhance member
protections in certain credit union conversions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 10, 2002
Mr. LAFALCE introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To amend the Federal Credit Union Act to expand member-
ship, service, and investment opportunities for credit
unions, to expand credit union services within financially
underserved communities, to enhance member protections
in certain credit union conversions, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Federal Credit Union
Services Expansion Act of 2002’’.
SEC. 2. EXPANSION OF CREDIT UNION MEMBERSHIP.
(a) VOLUNTARY MERGERS INVOLVING MULTIPLE
COMMON-BOND CREDIT UNIONS.—Section 109(d)(2) of
the Federal Credit Union Act (12 U.S.C. 1759(d)(2)) is
amended—
(1) by striking ‘‘or’’ at the end of clause (ii) of
subparagraph (B);
(2) by striking the period at the end of sub-
paragraph (C) and inserting ‘‘; or’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(D) a merger involving any such Federal
credit union approved by the Board on or after
August 7, 1998.’’.
(b) EXPANSION OF SERVICES TO STUDENTS.—Sec-
tion 109(d) of the Federal Credit Union Act (12 U.S.C.
1759(d)) (as amended by subsection (a) of this section)
is amended—
(1) by redesignating paragraph (3) as para-
graph (4); and
(2) by inserting after paragraph (2) the fol-
lowing new paragraph:
‘‘(3) EXCEPTION FOR STUDENT GROUPS.—
‘‘(A) IN GENERAL.—In the case of a com-
mon-bond credit union described in paragraph
(1) or (2) of subsection (b), the numerical limi-
tation contained in paragraph (1) (of this sub-
section) shall not apply with respect to any
group of students, whether the identifiable stu-
dent group comprises all or part of an institu-
tion of higher education, elementary school, sec-
ondary school, or school district, subject to the
conditions of subparagraph (B).
‘‘(B) 
CONDITIONS.—Subparagraph 
(A)
shall apply with respect to a Federal credit
union only if the credit union—
‘‘(i) establishes a program to provide
appropriate financial education materials
and counseling services for members of a
student group referred to in such subpara-
graph, as determined by the Board; and
‘‘(ii) does not provide financial prod-
ucts or services to members of any such
student group at a higher cost or under
less favorable terms than the costs and
terms generally available to other members
of the credit union.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph, the following definitions shall apply:
‘‘(i) ELEMENTARY
AND
SECONDARY
SCHOOL.—The terms ‘elementary school’
and ‘secondary school’ have the same
meanings as in section 14101 of the Ele-
mentary and Secondary Education Act of
1965.
‘‘(ii) INSTITUTION OF HIGHER EDU-
CATION.—The term ‘institution of higher
education’ has the same meaning as in sec-
tion 101(a) of the Higher Education Act of
1965.
(c) RETENTION OF CERTAIN MEMBER GROUPS IN
COMMUNITY CREDIT UNION CHARTER CONVERSIONS.—
Section 109(g) of the Federal Credit Union Act (12
U.S.C. 1759(g)) is amended by inserting after paragraph
(2) the following new paragraph:
‘‘(3) CRITERIA FOR CONTINUED MEMBERSHIP
OF CERTAIN MEMBER GROUPS IN COMMUNITY CHAR-
TER CONVERSIONS.—In the case of a voluntary con-
version of a common-bond credit union described in
paragraph (1) or (2) of subsection (b) into a com-
munity credit union described in subsection (b)(3),
the Board shall prescribe, by regulation, the criteria
under which the Board may determine that a mem-
ber group or other portion of a credit union’s exist-
ing membership, that is located outside the well-de-
fined local community, neighborhood, or rural dis-
trict that shall constitute the community charter,
can be satisfactorily served by the credit union and
remain within the community credit union’s field of
membership.’’.
SEC. 3. EXPANSION OF AFFORDABLE SERVICES TO NON-
MEMBERS.
Paragraph (12) of section 107(a) of the Federal
Credit Union Act (12 U.S.C. 1757(12)) (as so designated
by section 303 of this title) is amended to read as follows:
‘‘(12) in accordance with regulations prescribed
by the Board—
‘‘(A) to sell, to persons in the field of
membership, negotiable checks (including trav-
elers checks), money orders, and other similar
money transfer instruments (including elec-
tronic fund transfers); and
‘‘(B) to cash checks and money orders and
receive electronic fund transfers for persons in
the field of membership for a fee;’’.
SEC. 4. EXPANSION OF CREDIT UNION BUSINESS LENDING.
(a) EXPANSION OF BUSINESS LOANS TO CREDIT
UNION MEMBERS.—Paragraphs (1) and (2) of section
107A(a) of the Federal Credit Union Act (12 U.S.C.
1757a(a)) are each amended by striking ‘‘1.75’’ and in-
serting ‘‘2.5’’.
(b) PROVIDING FOR CREDIT UNION PARTICIPATION
IN SBA GUARANTEED LOAN PROGRAMS.—Section 7(a) of
the Small Business Act (15 U.S.C. 636(a)) is amended—
(1) in paragraph (17), by adding at the end the
following new sentence: ‘‘In administering this sub-
section, the Administration shall not include in any
regulation prescribed, or policy or procedure estab-
lished and maintained, by the Administration under
this paragraph any condition that would exclude, or
cause to be excluded, any Federal credit union (as
defined in section 101 of the Federal Credit Union
Act) from other financial institutions, or types of fi-
nancial institutions, which the Administration is au-
thorizing to make loans under this subsection.’’; and
(2) in paragraph (20), by adding at the end the
following new subparagraph:
‘‘(D) In administering this paragraph, the
Administration shall not include in any regula-
tion prescribed, or policy or procedure estab-
lished and maintained, by the Administration
any condition that would exclude, or cause to be
excluded, any Federal credit union (as defined
in section 101 of the Federal Credit Union Act)
from other financial institutions with whom the
Administration is cooperating under this para-
graph.’’.
SEC. 5. EXPANSION OF CREDIT UNION SERVICES TO UN-
DERSERVED COMMUNITIES.
(a) EXPANDED AUTHORITY TO SERVE MEMBERS IN
UNDERSERVED COMMUNITIES.—Section 109(c)(2) of the
Federal Credit Union Act (12 U.S.C. 1759(c)(2)) is
amended by striking ‘‘subsection (b)(2)’’ and inserting
‘‘subsection (b)’’.
(b) EXPANDED
DEFINITION
OF
UNDERSERVED
AREA.—Section 109(c)(2) of the Federal Credit Union
Act (12 U.S.C. 1759(c)(2)) (as amended by subsection (a)
of this section) is amended—
(1) in subparagraph (A)(ii), by inserting ‘‘or
has significant unmet needs for affordable short-
term credit from depository institutions, based on
data of the Board, such Federal banking agencies,
and the Federal Trade Commission, showing a high
concentration of noninsured commercial credit facili-
ties offering high-cost credit and money transfer
services and products’’ before the semicolon at the
end; and
(2) in subparagraph (B), by inserting ‘‘, and
provides debt management and counseling services,’’
after ‘‘office or facility’’.
SEC. 6. EXPANSION OF CREDIT UNION ELIGIBILITY FOR
CDFI ASSISTANCE.
Section 103(14) of the Community Development
Banking and Financial Institutions Act of 1994 (12
U.S.C. 4702(14)) is amended by inserting ‘‘and includes
a nonprofit organization owned collectively by insured
credit unions pursuant to section 107(7)(I) of such Act’’
before the period at the end.
SEC. 7. EXPANSION OF CREDIT UNION INVESTMENT AU-
THORITY.
Section 107 of the Federal Credit Union Act (12
U.S.C. 1757) is amended—
(1) in the matter preceding paragraph (1) by
striking ‘‘A Federal credit union’’ and inserting ‘‘(a)
IN GENERAL.—Any Federal credit union’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) INVESTMENT FOR THE CREDIT UNION’S OWN
ACCOUNT.—
‘‘(1) IN GENERAL.—A Federal credit union may
purchase and hold for its own account such invest-
ment securities of investment grade as the Board
may authorize by regulation, subject to such limita-
tions and restrictions as the Board may prescribe in
the regulations.
‘‘(2) PERCENTAGE LIMITATIONS.—
‘‘(A) SINGLE OBLIGOR.—In no event may
the total amount of investment securities of any
single obligor or maker held by a Federal credit
union for the credit union’s own account exceed
at any time an amount equal to 10 percent of
the net worth of the credit union.
‘‘(B) AGGREGATE
INVESTMENTS.—In no
event may the aggregate amount of investment
securities held by a Federal credit union for the
credit union’s own account exceed at any time
an amount equal to 10 percent of the assets of
the credit union.
‘‘(3) INVESTMENT SECURITY DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘investment security’
means marketable obligations evidencing the in-
debtedness of any person in the form of bonds,
notes, or debentures and other instruments
commonly referred to as investment securities.
‘‘(B) FURTHER DEFINITION BY BOARD.—
The Board may further define the term ‘invest-
ment security’.
‘‘(4) INVESTMENT GRADE DEFINED.—The term
‘investment grade’ means with respect to an invest-
ment security purchased by a credit union for its
own account, an investment security that at the time
of such purchase is rated in one of the 4 highest rat-
ing categories by at least 1 nationally recognized
statistical rating organization.
‘‘(5) CLARIFICATION
OF
PROHIBITION
ON
STOCK
OWNERSHIP.—No provision of this sub-
section shall be construed as authorizing a Federal
credit union to purchase shares of stock of any cor-
poration for the credit union’s own account, except
as otherwise permitted by law.’’.
SEC. 8. ASSURING MEMBERSHIP PARTICIPATION AND
INDEPENDENT DECISION MAKING IN CON-
NECTION WITH CERTAIN CREDIT UNION CON-
VERSIONS TO MUTUAL SAVINGS INSTITU-
TIONS.
(a) CONVERSION OF INSURED CREDIT UNIONS TO
MUTUAL SAVINGS BANKS.—Section 205(b)(2) of the Fed-
eral Credit Union Act (12 U.S.C. 1785(b)(2)) is
amended—
(1) in subparagraph (A), by striking ‘‘approval
of the Board, subject to’’ and inserting ‘‘approval of
the Board, subject to any requirements and proce-
dures the Board may prescribe in regulations and
subject to’’;
(2) in the 2nd sentence of subparagraph (B),
by inserting ‘‘in a member vote on such proposal in
which not less than a majority of the members of
the insured credit union who are eligible to vote on
the matter participate in such member vote’’ before
the period at the end;
(3) in subparagraph (C)—
(A) by striking ‘‘PROPOSAL
TO
MEM-
BERS.—An insured credit union’’ and inserting
‘‘PROPOSAL TO MEMBERS.—
‘‘(i) IN GENERAL.—An insured credit
union’’;
(B) by redesignating clauses (i), (ii), and
(iii) as subclauses (I), (II), and (III) and mov-
ing the left margin of such subclauses (as so re-
designated) 2 ems to the right; and
(C) by adding at the end the following new
clause:
‘‘(ii) REGULATIONS.—The Board shall
prescribe regulations specifying the format
and wording of such notices, as necessary,
to assure that notice of the vote on the
conversion is provided clearly and con-
spicuously and in a manner that is easily
read and understood by members.’’; and
(4) in subparagraph (D) by striking ‘‘during
the 90-day period preceding the date of the comple-
tion of the conversion’’ and inserting ‘‘before the be-
ginning of the 90-day period for notice to members
of the date of the member vote on the conversion’’.
(b) CONVERSIONS OF FORMER CREDIT UNIONS.—
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the fol-
lowing new subsection:
‘‘(x) CONVERSIONS INVOLVING FORMER CREDIT
UNIONS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law—
‘‘(A) an insured credit union may not con-
vert into an insured depository institution; and
‘‘(B) an insured depository institution
which results from a prior conversion of an in-
sured credit union into such insured depository
institution may not convert from the mutual
form to the stock form of depository institution
and may not convert from 1 form of depository
institution into another,
unless the appropriate Federal banking agency for the in-
sured depository institution which would result from any
such conversion reviews the conversion and determines
that the requirements of paragraphs (2) and (3) have been
met.
‘‘(2) PROHIBITION
ON
ECONOMIC
BENEFIT
FROM CONVERSION FOR CREDIT UNION OFFICERS,
DIRECTORS, AND COMMITTEE MEMBERS.—An indi-
vidual who is or, at any time during the 5-year pe-
riod preceding any conversion described in para-
graph (1), was a director, committee member, or
senior management official of an insured credit
union described in subparagraph (A) or (B) of such
paragraph (in connection with such conversion) may
not receive any economic benefit as a result of the
conversion with regard to the shares or interests of
such director, member, or officer in the former in-
sured credit union or in any resulting insured depos-
itory institution.
‘‘(3) ACKNOWLEDGEMENT
AND
ATTESTATION
BY OFFICERS, DIRECTORS, AND COMMITTEE MEM-
BERS.—Any insured credit union or insured deposi-
tory institution which is seeking to engage in a con-
version which is subject to this subsection shall
submit—
‘‘(A) a written acknowledgement, in such
form and manner as the appropriate Federal
banking agency may prescribe, by every indi-
vidual who is subject to the prohibition con-
tained in paragraph (2), that such individual is
aware of such prohibition; and
‘‘(B) an attestation that the conversion
under review will not result in a violation of
such prohibition.
‘‘(4) DEFINITIONS.—For purposes of this sec-
tion, the following definitions shall apply:
‘‘(A) INSURED CREDIT UNION.—The term
‘insured credit union’ has the meaning given to
such term in section 101(7) of the Federal
Credit Union Act.
‘‘(B) SENIOR
MANAGEMENT
OFFICIAL.—
The term ‘senior management official’ means a
chief executive officer, an assistant chief execu-
tive officer, a chief financial officer, and any
other senior executive officer (as defined by the
appropriate Federal banking agency pursuant
to section 32(f)).’’.
SEC. 9. ASSURING APPROPRIATE MEMBERSHIP PARTICIPA-
TION 
AND 
DISCLOSURE 
IN 
CONNECTION
WITH THE TERMINATION OF FEDERAL SHARE
INSURANCE.
(a) ENHANCING MEMBER PARTICIPATION IN CREDIT
UNION DECISIONS TO TERMINATE SHARE INSURANCE.—
Section 206(d)(2) of the Federal Credit Union Act (12
U.S.C. 1786(d)(2) is amended by striking ‘‘at least 20 per
centum of the total membership of the credit union par-
ticipates’’ and inserting ‘‘not less than a majority of the
members of the insured credit union who are eligible to
vote on the matter participate in such vote’’.
(b) PROVIDING PROMPT AND CONSPICUOUS NOTICE
TO CREDIT UNION MEMBERS OF TERMINATION OF FED-
ERAL SHARE INSURANCE.—Section 206(d) of the Federal
Credit Union Act (12 U.S.C. 1786(d)) is amended—
(1) by striking the fourth sentence in paragraph
(2);
(2) by redesignating paragraph (3) as para-
graph (4); and
(3) by inserting after paragraph (2) the fol-
lowing new paragraph:
‘‘(3) In the event a proposition for the conver-
sion of a credit union from status as an insured
credit union is approved by the membership, the
credit union shall provide prompt and reasonable no-
tice of insurance conversion to all members and
shall, at a time and in such manner as the Board
shall determine by regulation, shall—
‘‘(A) include conspicuously in all adver-
tising and at each place where share deposits
are normally received a notice that the credit
union is not federally insured;
‘‘(B) include conspicuously in all periodic
statements of account, on each signature card,
and on each certificate of deposit or other in-
strument indicating a share deposit, a notice
that the credit union is not federally insured
and that if the credit union fails the National
Credit Union Administration or any other agen-
cy of the Federal Government does not guar-
antee that the depositor will get back their
money; and
‘‘(C) receive deposits only for the account
of members who have signed a written acknowl-
edgment that the credit union is not federally
insured, and that if the institution fails, the
National Credit Union Administration or any
other agency of the Federal Government does
not guarantee that they will get back their
money.’’.
(c) ASSURING INDEPENDENT DECISION MAKING IN
CONNECTION WITH TERMINATION OF FEDERAL SHARE
INSURANCE.—Section 206(a) of the Federal Credit Union
Act (12 U.S.C. 1786) is amended by adding at the end
the following new paragraph:
‘‘(3) ASSURING INDEPENDENT DECISION MAK-
ING.—
‘‘(A) IN GENERAL.—An individual who is
or, at any time during the 1-year period pro-
ceeding any conversion described in paragraph
(2), was a director, committee member, or sen-
ior management official of an insured credit
union may not receive any economic benefit
from the insuring corporation described in such
paragraph for a period of 5 years following
such conversion.
‘‘(B) SENIOR MANAGEMENT OFFICIAL DE-
FINED.—For purposes of this paragraph, the
term ‘senior management official’ means a chief
executive officer, an assistant chief executive of-
ficer, a chief financial officer, and any other
senior executive officer as defined by the
Board.’’.
SEC. 10. PROVIDING FOR PARITY IN REQUIREMENTS GOV-
ERNING FEDERAL AND STATE CHARTERED
INSURED CREDIT UNIONS.
Section 205 of the Federal Credit Union Act (12
U.S.C. 1785) is amended by inserting at the end the fol-
lowing new subsection: