BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1076|
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THIRD READING
Bill No: AB 1076
Author: Achadjian (R)
Amended: 6/6/11 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INST. COMMITTEE : 6-0, 6/29/11
AYES: Vargas, Blakeslee, Kehoe, Liu, Padilla, Walters
NO VOTE RECORDED: Evans
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/19/11 (Consent) - See last page
for vote
SUBJECT : Credit unions
SOURCE : California Credit Union League
DIGEST : This bill amends the circumstances under which a
credit union can enter into an obligation with a director,
officer, or member of the supervisory committee of the
credit committee of that credit union.
ANALYSIS :
Existing law:
1. Defines a credit union official as a director, officer,
or member of the supervisory committee or the credit
committee of a credit union (Financial Code ÝFIN]
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Section 15050).
2. Prohibits a state-chartered credit union from entering
into any obligation with any official of that credit
union, directly or indirectly, on terms that are more
favorable than those extended to other members of the
credit union, as specified (FIN Section 15050).
3. Prohibits a state-chartered credit union from entering
into any obligation with any official of that credit
union, unless all of the following requirements are
satisfied (FIN Section 15050):
A. Upon making the obligation, the aggregate amount
of obligations outstanding, except obligations fully
secured by shares, to all officials and alternate
members of the credit committee of that credit union
may not exceed 10 percent of the aggregate dollar
amount of all savings capital of that credit union,
for credit unions whose aggregate savings capital
exceeds $10 million; may not exceed 15 percent of the
aggregate dollar amount of all savings capital of
that credit union, for credit unions whose aggregate
savings capital is at least $5 million but below $10
million; and may not exceed 20 percent of the
aggregate dollar amount of all savings capital of
that credit union, for credit unions whose aggregate
savings capital is less than $5 million.
B. The obligation, except any portion of the
obligation fully secured by shares, may not exceed
the lesser of one percent of the aggregate dollar
amount of all savings capital of the credit union, or
the maximum obligation to the credit union prescribed
by specified subdivisions of Section 15100, for
credit unions whose aggregate savings capital exceeds
$10 million; may not exceed the lesser of three
percent of the aggregate dollar amount of all savings
capital of the credit union, or the maximum
obligation to the credit union prescribed by
specified subdivisions of FIN Section 15100, for
credit unions whose aggregate savings capital is at
least $5 million but below $10 million; and may not
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exceed the lesser of five percent of the aggregate
dollar amount of all savings capital of the credit
union, or the maximum obligation to the credit union
prescribed by specified subdivisions of Section
15100, for credit unions whose aggregate savings
capital is less than $5 million.
C. The obligation is approved by the credit
committee, as specified.
4. Prohibits any credit union from permitting an official
of that credit union or the credit manager to become
surety for any obligation created by the credit union
for anyone other than a member of their immediate family
(FIN Section 15050).
5. Prohibits a credit union from entering into obligations
with any credit union member, or any one family of a
credit union member, as defined, where the total
obligations of that member or that family, exclusive of
amounts secured by shares or certificates for funds,
exceed 10 percent of the aggregate dollar amount of the
credit union's savings capital (FIN Section 15100).
This bill:
1. Defines an "obligation" as any loan or approved line of
credit, including both used and unused portions, on
which an official of a credit union is a borrower,
coborrower, cosigner, endorser, or guarantor.
2. Retains the existing law requirement, which prohibits
any state-chartered credit union from entering into any
obligation with any official of that credit union,
directly or indirectly, on terms that are more favorable
than those extended to other members of the credit
union, as specified.
3. Prohibits a state-chartered credit union from entering
into any obligation with any official, directly or
indirectly, unless all of the following requirements are
satisfied:
A. Upon the making of the obligation, the aggregate
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amount of obligations outstanding to all officials of
the credit union, except obligations fully secured by
shares, may not exceed 20 percent of the aggregate
dollar amount of all savings capital of the credit
union.
B. The obligation, except any portion of the
obligation fully secured by shares, may not exceed 10
percent of the aggregate dollar amount of the credit
union's savings capital.
C. Any obligation that would cause the aggregate
amount of obligations outstanding to the official to
exceed $50,000, excluding any portion fully secured
by shares, must be approved by the credit committee
or the credit manager and by the board of directors.
The official would be prohibited from taking part in
any credit decision, directly or indirectly, for
his/her benefit, and from being present during any
portion of any committee or board meeting where
his/her credit application is under consideration.
Background
This bill is sponsored by the California Credit Union
League, to remove provisions in existing law that make it
difficult for state-chartered credit unions to attract
qualified members to serve on their boards.
In 1979, California capped the sizes of loans that could be
granted by state-chartered credit unions to those of their
members who served on the credit unions' boards of
directors. Those loan limits (summarized above in Existing
Law #3) were tiered, and were based on the asset sizes of
the credit unions. Unfortunately, although the intent of
the language was solid (ensuring that credit union board
members do not receive special treatment in connection with
loans they receive from their credit unions), the caps have
resulted in situations where many credit union board
members are unable to obtain loans, especially large loans
such as mortgages, even in cases where they meet the same
loan eligibility requirements as other members. This, in
turn, creates a disincentive for credit union members to
serve on the boards of state-licensed credit unions.
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Board members of federally-chartered credit unions are not
subject to the same tiered caps that apply to board members
of state-licensed credit unions. Instead, the Federal
Credit Union Act requires the board of directors of a
federally-chartered credit union to decide whether to
approve any loan of greater than $20,000 to an individual
official of that credit union (regulations contained in 12
Code of Federal Regulations Section 701.21(d)).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/16/11)
California Credit Union League (source)
ASSEMBLY FLOOR : 78-0, 5/19/11
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Alejo, Gorell
JJA:kc 8/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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