I 
110TH CONGRESS 
1ST SESSION H. R. 1537 
To modernize credit union net worth standards, advance credit union efforts 
to promote economic growth, and modify credit union regulatory stand-
ards and reduce burdens, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 15, 2007 
Mr. KANJORSKI (for himself, Mr. ROYCE, Mrs. MALONEY of New York, Mr. 
LATOURETTE, Mr. SHERMAN, Mr. BURTON of Indiana, Mr. GUTIERREZ, 
Mr. PAUL, Mrs. NAPOLITANO, Mr. CHABOT, Mr. ORTIZ, and Mr. CAL-
VERT) introduced the following bill; which was referred to the Committee 
on Financial Services 
A BILL 
To modernize credit union net worth standards, advance 
credit union efforts to promote economic growth, and 
modify credit union regulatory standards and reduce bur-
dens, and for other purposes. 
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 ‘‘Credit Union Regu-
latory Improvements Act of 2007’’. 
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TITLE I—CAPITAL 
MODERNIZATION 
SEC. 101. AMENDMENTS TO NET WORTH CATEGORIES. 
Section 216(c)(1) of the Federal Credit Union Act 
(12 U.S.C. 1790d(c)(1)) is amended as follows: 
(1) WELL CAPITALIZED.— 
(A) In subparagraph (A)(i), by striking ‘‘7 
percent’’ and inserting ‘‘5.25 percent’’. 
(B) In subparagraph (A)(ii), by striking 
‘‘it meets any applicable risk-based net worth 
requirement under subsection (d) of this sec-
tion’’ and inserting ‘‘it has a risk-based net 
worth ratio of not less than 10 percent’’. 
(2) ADEQUATELY CAPITALIZED.— 
(A) In subparagraph (B)(i), by striking ‘‘6 
percent’’ and inserting ‘‘4.25 percent’’. 
(B) In subparagraph (B)(ii), by striking 
‘‘it meets any applicable risk-based net worth 
requirement under subsection (d) of this sec-
tion’’ and inserting ‘‘it has a risk-based net 
worth ratio of not less than 8 percent’’. 
(3) UNDERCAPITALIZED.— 
(A) In subparagraph (C)(i), by striking ‘‘6 
percent’’ and inserting ‘‘4.25 percent’’. 
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(B) In subparagraph (C)(ii), by striking 
‘‘it fails to meet any applicable risk-based net 
worth requirement under subsection (d)’’ and 
inserting ‘‘it has a risk-based net worth ratio of 
less than 8 percent’’. 
(4) SIGNIFICANTLY
UNDERCAPITALIZED.—By 
striking subparagraph (D) and inserting the fol-
lowing new subparagraph: 
‘‘(D) 
SIGNIFICANTLY
UNDERCAPITAL-
IZED.—An insured credit union is ‘significantly 
undercapitalized’ if— 
‘‘(i) the credit union has a net worth 
ratio of less than 3.25 percent; 
‘‘(ii) the credit union has a net worth 
ratio of less than 4.25 percent and ei-
ther— 
‘‘(I) fails to submit an acceptable 
net worth restoration plan within the 
time allowed under subsection (f); or 
‘‘(II) materially fails to imple-
ment a net worth restoration plan ap-
proved by the Board; or 
‘‘(iii) the credit union has a risk-based 
net worth ratio of less than 6 percent.’’. 
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(5) RELEVANT
CAPITAL
MEASURES.—Section 
216(c)(2) is amended by striking ‘‘leverage limit’’ 
each place such term appears and inserting ‘‘rel-
evant capital measures’’. 
(6) ADJUSTMENT BY FEDERAL DEPOSIT INSUR-
ANCE
CORPORATION.—Section 
216(c)(2)(A) 
is 
amended— 
(A) by striking ‘‘Federal banking agencies 
increase or decrease’’ and inserting ‘‘Federal 
Deposit Insurance Corporation increases or de-
creases one of’’; and 
(B) by striking ‘‘level’’ each place such 
term appears and inserting ‘‘levels’’. 
(7) ADJUSTING NET WORTH LEVELS.—Section 
216(c)(2)(A) is amended by striking ‘‘not more than 
the difference between the required minimum level 
most recently established by the Federal banking 
agencies and 4 percent of total assets (with respect 
to institutions regulated by those agencies)’’ and in-
serting ‘‘the increase or decrease made by the Fed-
eral Deposit Insurance Corporation’’. 
(8) CONSULTATION
WITH
FEDERAL
DEPOSIT 
INSURANCE CORPORATION.—Section 216(c)(2)(B)(i) 
is amended by striking ‘‘Federal banking agencies’’ 
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and inserting ‘‘Federal Deposit Insurance Corpora-
tion’’. 
SEC. 102. AMENDMENTS RELATING TO RISK-BASED NET 
WORTH REQUIREMENTS. 
(a) IN GENERAL.—Section 216(d) of the Federal 
Credit Union Act (12 U.S.C. 1790d(d)) is amended— 
(1) in paragraph (1)— 
(A) by striking ‘‘that are complex, as de-
fined by the Board’’; and 
(B) by inserting ‘‘, as defined by the 
Board’’ before the period at the end; and 
(2) by striking paragraph (2) and inserting the 
following new paragraph: 
‘‘(2) STANDARD.—The Board shall design the 
risk-based net worth requirement to take account of 
any material risks as defined by the Board applica-
ble to insured credit unions that are taken account 
of by comparable standards applicable to institutions 
insured by the Federal Deposit Insurance Corpora-
tion.’’. 
(b) TECHNICAL AND CONFORMING AMENDMENT.— 
The heading for subsection (d) of section 216 of the Fed-
eral Credit Union Act (12 U.S.C. 1790d(d)) is amended 
by striking ‘‘FOR COMPLEX CREDIT UNIONS’’. 
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SEC. 103. TREATMENT BASED ON OTHER CRITERIA. 
Section 216(h)(2) of the Federal Credit Union Act 
(12 U.S.C. 1790d(h)(2)) is amended by inserting ‘‘, except 
to reclassify an insured credit union into the next lower 
net worth category, based on interest rate risk, to the ex-
tent any such reclassification by a delegatee may be re-
viewed by the Board,’’ after ‘‘to reclassify an insured cred-
it union into a lower net worth category’’. 
SEC. 104. DEFINITIONS RELATING TO NET WORTH. 
(a) SECONDARY CAPITAL ACCOUNTS FOR PURPOSES 
OF DETERMINING NET WORTH.—Section 216(o)(2)(B) of 
the Federal Credit Union Act (12 U.S.C. 1790d(o)(2)(B)) 
is amended by inserting ‘‘, subject to limitations set by 
the Board to address the safe and sound use of secondary 
capital to carry out the purpose of this section,’’ after 
‘‘secondary capital accounts’’. 
(b) NET WORTH RATIO.—Paragraph (3) of section 
216(o) of the Federal Credit Union Act (12 U.S.C. 
1790d(o)(3)) is amended— 
(1) by inserting ‘‘minus its deposit in the 
Fund,’’ after ‘‘net worth of the credit union’’; and 
(2) by inserting ‘‘minus its deposit in the 
Fund’’ after ‘‘total assets of the credit union’’. 
(c) RISK-BASED
NET
WORTH
RATIO.—Section 
216(o) of the Federal Credit Union Act (12 U.S.C. 
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1790d)(o)) is amended by inserting after paragraph (4) 
the following new paragraph: 
‘‘(5) RISK-BASED
NET
WORTH
RATIO.—The 
term ‘risk-based net worth ratio’ means, with respect 
to any credit union, the ratio of the net worth of the 
credit union, plus any loan loss reserves (subject to 
limitations established by the Board) and minus the 
credit union’s deposit in the Fund, to the risk assets 
of the credit union, as defined by the Board.’’. 
SEC. 105. AMENDMENTS RELATING TO NET WORTH RES-
TORATION PLANS. 
(a) TEMPORARY WAIVER OF NET WORTH RESTORA-
TION PLAN REQUIREMENT
IN RESPONSE
TO DISAS-
TERS.—Subsection 216(f)(1) of the Federal Credit Union 
Act (12 U.S.C. 1790d(f)(1)) is amended by striking ‘‘Each 
insured credit union’’ and inserting ‘‘Except as deter-
mined by the Board in the case of a credit union that 
becomes or remains no less than undercapitalized due to 
the impact of a major natural or man-made disaster, each 
insured credit union’’. 
(b) NET WORTH RESTORATION REQUIREMENT FOR 
CREDIT UNIONS THAT ARE NOT WELL CAPITALIZED.— 
Section 216(e) of the Federal Credit Union Act (12 U.S.C. 
1790d(e) is amended to read as follows: 
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‘‘(e) NET WORTH RESTORATION PLAN REQUIRE-
MENT APPLICABLE TO CREDIT UNIONS THAT ARE NOT 
WELL CAPITALIZED.—The Board may require an insured 
credit union that is not well capitalized to submit a net 
worth restoration plan, as required under subsection (f), 
if— 
‘‘(1) material safety and soundness concerns 
caused the credit union to become less than well cap-
italized; and 
‘‘(2) the safety and soundness concerns remain 
unresolved.’’. 
(c) BOARD ACTION MAY INCLUDE ORDER TO CREDIT 
UNION.—Subparagraph (B) of section 216(i)(1) of the 
Federal Credit Union Act (12 U.S.C. 1790d(i)(1)(B)) is 
amended— 
(1) by inserting ‘‘order the credit union to’’ be-
fore ‘‘take such other action’’; and 
(2) by inserting ‘‘, in the discretion of the 
Board,’’ after ‘‘as the Board’’. 
(d) SUBSTITUTION OF 90 CALENDAR DAYS.—Sub-
paragraph (A) of section 216(i)(3) of the Federal Credit 
Union Act (12 U.S.C. 1790d(i)(3)(A)) is amended— 
(1) by striking ‘‘calendar quarter’’ and insert-
ing ‘‘90 calendar days’’; and 
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(2) by inserting ‘‘first’’ after ‘‘the date on 
which the credit union’’. 
(e) CLARIFICATION
OF COORDINATION REQUIRE-
MENT.—Clause (ii) of section 216(l)(3)(A) of the Federal 
Credit Union Act (12 U.S.C. 1790d(l)(3)(A)) is amended 
by inserting ‘‘if the Board determines that such action by 
the official will carry out the purpose of this section’’. 
TITLE II—ECONOMIC GROWTH 
SEC. 201. LIMITS ON MEMBER BUSINESS LOANS. 
Section 107A(a) of the Federal Credit Union Act (12 
U.S.C. 1757a(a)) is amended by striking ‘‘the lesser of— 
’’ and all that follows and inserting ‘‘20 percent of the 
total assets of the credit union.’’. 
SEC. 202. DEFINITION OF MEMBER BUSINESS LOAN. 
Section 107A(c)(1)(B)(iii) of the Federal Credit 
Union Act (12 U.S.C. 1757a(c)(1)(B)(iii)) is amended by 
striking ‘‘$50,000’’ and inserting ‘‘an amount, not to ex-
ceed $100,000, that the Board shall prescribe by regula-
tion’’. 
SEC. 203. RESTRICTION ON MEMBER BUSINESS LOANS. 
Section 216(g)(2) of the Federal Credit Union Act 
(12 U.S.C. 1790d(g)(2)) is amended by striking ‘‘until 
such time as the credit union becomes adequately capital-
ized’’ and inserting ‘‘unless otherwise approved by the 
Board’’. 
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SEC. 204. MEMBER BUSINESS LOAN EXCLUSION FOR LOANS 
TO NONPROFIT RELIGIOUS ORGANIZATIONS. 
Section 107A(a) of the Federal Credit Union Act (12 
U.S.C. 1757a(a)) is amended by inserting ‘‘, excluding 
loans made to nonprofit religious organizations,’’ after 
‘‘total amount of such loans’’. 
SEC. 205. CREDIT UNIONS AUTHORIZED TO LEASE SPACE 
IN BUILDINGS IN CREDIT UNION OFFICES IN 
UNDERSERVED AREAS. 
Section 107 of the Federal Credit Union Act (12 
U.S.C. 1757) is amended— 
(1) by striking ‘‘and’’ at the end of paragraph 
(16); 
(2) by redesignating paragraph (17) as para-
graph (18); and 
(3) by inserting after paragraph (16) the fol-
lowing new paragraph: 
‘‘(17) with regard to any building purchased or 
constructed by the credit union for a credit union of-
fice or credit union operations in an underserved 
area, to lease office space in such building that is 
separate and clearly distinct from any office or oper-
ation of the credit union to any business enterprise, 
subject to such regulations the Board may prescribe, 
taking into account the safety and soundness of the 
credit union; and’’. 
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SEC. 206. AMENDMENTS RELATING TO CREDIT UNION 
SERVICE TO UNDERSERVED AREAS. 
Paragraph (2) of section 109(c) of the Federal Credit 
Union Act (12 U.S.C. 1759(c)(2)) is amended— 
(1) in that portion of the paragraph that pre-
cedes subparagraph (A), by striking ‘‘the field of 
membership category of which is described in sub-
section (b)(2),’’; 
(2) by striking subparagraph (A) and inserting 
the following new subparagraph: 
‘‘(A) the Board determines, at any time 
after August 7, 1998, that the local community, 
neighborhood, or rural district is an under-
served area; and’’; and 
(3) in subparagraph (B), by inserting ‘‘not later 
than 2 years of having an underserved area added 
to the credit union’s charter’’ before ‘‘the credit 
union’’. 
SEC. 207. UNDERSERVED AREA DEFINED. 
Section 101 of the Federal Credit Union Act (12 
U.S.C. 1752) is amended— 
(1) by striking ‘‘and’’ at the end of paragraph 
(8); 
(2) by striking the period at the end of para-
graph (9) and inserting ‘‘; and’’; and 
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(3) by adding at the end the following new 
paragraph: 
‘‘(10) the term ‘underserved area’ means a geo-
graphic area consisting of one or more population 
census tracts, that encompass or are located with-
in— 
‘‘(A) an investment area designated under 
section 103(16) of the Community Development 
or Banking and Financial Institutions Act of 
1994; or 
‘‘(B) a low income community, as defined 
in section 45D(e) of the Internal Revenue Code 
of 1986.’’. 
TITLE III—REGULATORY 
MODIFICATIONS 
SEC. 301. INVESTMENTS IN SECURITIES BY FEDERAL CRED-
IT UNIONS. 
Section 107 of the Federal Credit Union Act (12 
U.S.C. 1757) (as amended by section 205 of this Act) is 
amended by inserting after subsection (a) the following 
new subsection: 
‘‘(b) INVESTMENT FOR THE CREDIT UNION’S OWN 
ACCOUNT.— 
‘‘(1) IN GENERAL.—In addition to the invest-
ments authorized in subsection (a), a Federal credit 
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union may purchase and hold for its own account 
such investment securities of investment grade as 
the Board may authorize by regulation, subject to 
such limitations 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. 
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‘‘(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 subsection 
shall be construed as authorizing a Federal credit 
union to purchase shares of stock of any corporation 
for the credit union’s own account, except as other-
wise permitted by law.’’. 
SEC. 302. AUTHORITY OF NCUA TO ESTABLISH LONGER MA-
TURITIES 
FOR 
CERTAIN 
CREDIT 
UNION 
LOANS. 
Section 107(5) of the Federal Credit Union Act (12 
U.S.C. 1757(5)) is amended in the matter preceding sub-
paragraph (A), by striking ‘‘except as otherwise provided 
herein’’ and inserting ‘‘or any longer maturity as the 
Board may allow, in regulations’’. 
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SEC. 303. INCREASE IN LENDING AND INVESTMENT LIMITS 
IN CREDIT UNION SERVICE ORGANIZATIONS. 
(a) 
LENDING.—The 
1st 
sentence 
of 
section 
107(5)(D) of the Federal Credit Union Act (12 U.S.C. 
1757(5)(D)) is amended— 
(1) by striking ‘‘up to 1 per centum of the total 
paid-in’’ and inserting ‘‘up to 2 percent of the total 
paid-in’’; and 
(2) by inserting ‘‘, except that the percentage 
limitation on any such loans by any credit union 
may be reduced by order of the Board when the 
Board determines such reduction is appropriate to 
preserve the safety and soundness of the credit 
union’’ before the period at the end. 
(b) INVESTING.—Section 107(7)(I) of the Federal 
Credit Union Act (12 U.S.C. 1757(7)(I)) is amended— 
(1) by striking ‘‘up to 1 per centum of the total 
paid’’ and inserting ‘‘up to 2 percent of the total 
paid’’; and 
(2) by inserting ‘‘, and such approval authority 
includes the authority to reduce the percentage limi-
tation on any such investment by any credit union 
if the Board determines such reduction is appro-
priate to preserve the safety and soundness of the 
credit union’’ after ‘‘with the approval of the 
Board’’. 
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SEC. 304. 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 by striking subpara-
graph (C) and inserting the following new subparagraph: 
‘‘(C) any group transferred in connection 
with a voluntary merger of any such Federal 
credit union with another insured credit union, 
as approved by the Board on or after August 
7, 1998, in accordance with guidelines and reg-
ulations issued under section 120.’’. 
SEC. 305. CONVERSIONS OF CERTAIN CREDIT UNIONS TO A 
COMMUNITY CHARTER. 
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 credit union described in paragraph (1) 
or (2) of subsection (b) into a community credit 
union described in subsection (b)(3), the Board shall 
prescribe, by regulation, the criteria under which the 
Board may determine that a member group or other 
portion of a credit union’s existing membership, that 
is located outside the well-defined local community, 
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neighborhood, or rural district that shall constitute 
the community charter, can be satisfactorily served 
by the credit union and remain within the commu-
nity credit union’s field of membership permitting 
new members to be added from such groups.’’. 
SEC. 306. CREDIT UNION GOVERNANCE. 
(a) EXPULSION OF MEMBERS FOR JUST CAUSE.— 
Subsection (b) of section 118 of the Federal Credit Union 
Act (12 U.S.C. 1764(b)) is amended to read as follows: 
‘‘(b) POLICY AND ACTIONS OF BOARDS OF DIREC-
TORS OF FEDERAL CREDIT UNIONS.— 
‘‘(1) EXPULSION
OF
MEMBERS
FOR
NON-
PARTICIPATION OR FOR JUST CAUSE.—The board of 
directors of a Federal credit union may, by majority 
vote of a quorum of directors, adopt and enforce a 
policy with respect to expulsion from membership, 
by a majority vote of such board of directors, based 
on just cause, including disruption of credit union 
operations, or on nonparticipation by a member in 
the affairs of the credit union. 
‘‘(2) WRITTEN
NOTICE
OF
POLICY
TO
MEM-
BERS.—If a policy described in paragraph (1) is 
adopted, written notice of the policy as adopted and 
the effective date of such policy shall be provided 
to— 
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‘‘(A) each existing member of the credit 
union not less than 30 days prior to the effec-
tive date of such policy; and 
‘‘(B) each new member prior to or upon 
applying for membership.’’. 
(b) TERM LIMITS AUTHORIZED FOR BOARD MEM-
BERS OF FEDERAL CREDIT UNIONS.—Section 111(a) of 
the Federal Credit Union Act (12 U.S.C. 1761(a)) is 
amended by adding at the end the following new sentence: 
‘‘The bylaws of a Federal credit union may limit the num-
ber of consecutive terms any person may serve on the 
board of directors of such credit union.’’. 
SEC. 307. PROVIDING THE NATIONAL CREDIT UNION AD-
MINISTRATION WITH GREATER FLEXIBILITY 
IN RESPONDING TO MARKET CONDITIONS. 
Section 107(5)(A)(vi)(I) of the Federal Credit Union 
Act (12 U.S.C. 1757(5)(A)(vi)(I)) is amended by striking 
‘‘six-month period and that prevailing interest rate levels’’ 
and inserting ‘‘6-month period or that prevailing interest 
rate levels’’. 
SEC. 308. CREDIT UNION CONVERSION VOTING REQUIRE-
MENTS. 
Section 205(b)(2) of the Federal Credit Union Act 
(12 U.S.C. 1785(b)(2)(B)) is amended— 
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(1) by redesignating subparagraphs (E), (F), 
and (G) as subparagraphs (F), (G), and (H), respec-
tively; 
(2) by inserting after subparagraph (D) the fol-
lowing new subparagraph: 
‘‘(E) 
CONVERSION
VOTING
REQUIRE-
MENTS.— 
‘‘(i) IN GENERAL.—Approval of a pro-
posal for conversion in an election set by a 
majority of the directors of an insured 
credit union under subparagraph (B) shall 
be by the affirmative vote of a majority of 
the members of the insured credit union 
who vote on the proposal, in a vote in 
which at least 30 percent of the credit 
union membership participates. 
‘‘(ii) SPECIAL
MEMBERSHIP
MEET-
ING.—An insured credit union which pro-
vides notices to its members under sub-
paragraph (C) of a proposed conversion 
shall— 
‘‘(I) hold a special meeting of the 
membership to provide information re-
garding the proposal at least 30 days 
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before making any ballots available to 
its members; and 
‘‘(II) include a notice of such 
meeting in the notices provided under 
subparagraph (C). 
‘‘(iii) PROHIBITION ON INCENTIVES.— 
An insured credit union proposing to con-
vert under subparagraph (A)— 
‘‘(I) is expressly prohibited from 
using or providing any incentive in 
any form of prize raffles, contests, 
giveaways, or other voting incentives 
in connection with the member vote 
on conversion; and 
‘‘(II) may make no mention of 
any incentive in the notices to mem-
bers or in other materials it sends or 
otherwise communicates to members 
pursuant to subparagraph (C).’’; and 
(3) by striking the ultimate sentence of sub-
paragraph (B). 
SEC. 309. EXEMPTION FROM PRE-MERGER NOTIFICATION 
REQUIREMENT OF THE CLAYTON ACT. 
Section 7A(c)(7) of the Clayton Act (15 U.S.C. 
18a(c)(7)) is amended by inserting ‘‘section 205(b)(3) of 
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the Federal Credit Union Act (12 U.S.C. 1785(b)(3)),’’ 
before ‘‘or section 3’’. 
Æ 
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