BILL ANALYSIS Ó
AB 2006
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2006 (John A. Pérez)
As Amended August 6, 2012
Majority vote
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|ASSEMBLY: |57-13|(April 26, |SENATE: |35-4 |(August 9, |
| | |2012) | | |2012) |
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Original Committee Reference: B. & F.
SUMMARY : Authorizes a state-chartered credit union to sell
checks, money transfer instruments including international and
domestic electronic fund transfers to non-members for a fee.
Specifically, this bill :
1)Clarifies that the fee shall not exceed the cost of providing
the services.
2)Allows a state-chartered credit union to cash checks and
similar money transfer instruments and receive international
and domestic electronic fund transfers for a fee to
non-members.
3)Defines "checks" as a draft, other than a documentary draft,
payable on demand and drawn on a bank, a cashier's check or
teller's check, or a demand draft. An instrument may be a
check even though it is described on its face by another term,
such as "money order."
The Senate amendment clarifies that the fee under this measure
shall not exceed the cost of providing the services.
EXISTING FEDERAL LAW :
1)Amends the Financial Services Regulatory Relief Act of 2006
(Act) in July of 2011. The Act was amended to correlate with
the Dodd-Frank Act and made the following minor amendments:
a) To sell, to persons in the field of membership,
negotiable checks (including travelers checks), money
orders, and other similar money transfer instruments
(including international and domestic electronic fund
transfers and remittance transfers, as defined in United
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States Code (U.S.C.) Section 1693o-1 of Title 15); and,
b) To cash checks and money orders for persons in the field
of membership for a fee. (12 U.S.C. 1757) (Federal
Register, Vol. 76, No.230, Wednesday, November 30, 2011)
2)Establishes the Financial Services Regulatory Relief Act of
2006 (Public Law 109-351) which allows federally-chartered
credit unions to:
a) Sell, to persons in the field of membership, negotiable
checks, including traveler's checks, and money orders, and
other similar money transfer instruments, including
international and domestic electronic fund transfers; and,
b) Cash checks and money orders and receive international
and domestic electronic fund transfers for persons in the
field of membership for a fee.
3)Defines "remittance transfer" as an electronic (as defined in
Section 106(2) of the Electronic Signatures in Global and
National Commerce Act (15 U.S.C. 7006 (2))) transfer of funds
requested by a sender located in any state to a designated
recipient that is initiated by a remittance transfer provider,
whether or not the sender holds an account with the remittance
transfer provider or whether or not the remittance transfer is
also an electronic fund transfer.
4)Defines a "Federal credit union" as a cooperative association
organized in accordance with federal law for the purpose of
promoting thrift among its members and creating a source of
credit for provident or productive purposes. (12 U.S.C. 1752)
5)Provides that the membership of any Federal credit union shall
be limited to the membership described in one of the following
categories:
a) Single common-bond credit union-One group that has a
common bond of occupation or association;
b) Multiple common-bond credit union-More than one group:
i) each of which has (within the group) a common bond
of occupation or association; and,
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ii) the number of members, each of which (at the time
the group is first included within the field of
membership of a credit union described in this
paragraph).
c) Community credit union-Persons or organizations within a
well-defined local community, neighborhood, or rural
district. (12 U.S.C. 1759)
EXISTING STATE LAW :
1)Establishes that a credit union is a cooperative, organized
for the purposes of promoting thrift and savings among its
members, creating a source of credit for them at rates of
interest set by the board of directors, and providing an
opportunity for them to use and control their own money on a
democratic basis in order to improve their economic and social
conditions. As a cooperative, a credit union conducts its
business for the mutual benefit and general welfare of its
members with the earnings, savings, benefits, or services of
the credit union being distributed to its members as patrons.
(Financial Code, Section 14002)
2)Provides in the California Credit Union Law that it is
applicable to any person, other than a federal credit union
engaging in the business of a credit union in this state.
(Financial Code, Section 14001.1)
3)Prohibits an officer, director, committee member, or employee
of any credit union from approving a person for admission to
membership or admit an applicant for membership in the credit
union or extends any benefit or service of the credit union to
any person, unless that person is admitted to membership in
the credit union. (Financial Code, Section 14800)
4)Provides that every credit union may admit to membership those
persons eligible for membership, upon any of the following:
a) The purchase of a membership in the credit union as
provided in the credit union's bylaws;
b) The payment of an entrance fee established from time to
time by the board of directors; or,
c) The purchase of one or more shares in the credit union
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as provided by the credit union's bylaws. (Financial Code,
Section 14800)
5)Defines "check" as a draft, other than a documentary draft,
payable on demand and drawn on a bank, a cashier's check or
teller's check, or a demand draft. An instrument may be a
check even though it is described on its face by another term,
such as "money order." (Commercial Code, Section 3104)
6)Provides any officer, director, member of a committee of a
credit union, loan officer appointed, or employee who
knowingly permits the creation of an obligation with, or
participates in the creation of an obligation with, a
nonmember of the credit union, or knowingly permits the
creation of an obligation or participates in the creation of
an obligation which is not made in conformity with the
requirements of this division, is guilty of a misdemeanor.
(Financial Code, Section 14750)
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version passed by the Senate.
FISCAL EFFECT : None
COMMENTS : According to the Federal Credit Union Act of 1934,
the American credit union movement began as a cooperative effort
to serve the productive and provident credit needs of
individuals of modest means. Credit unions are created to
promote thrift and credit extension, a meaningful affinity and
bond among members, manifested by a commonality of routine
interaction, shared and related work experiences, interests, or
activities, or the maintenance of an otherwise well understood
sense of cohesion or identity is essential to the fulfillment of
the public mission of credit unions.
Credit unions, unlike many other participants in the financial
services market, are exempt from federal and most state taxes
because they are member-owned, democratically operated,
not-for-profit organizations generally managed by volunteer
boards of directors and because they have the specified mission
of meeting the credit and savings needs of consumers, especially
persons of modest means. Improved credit union safety and
soundness provisions will enhance the public benefit that
citizens receive from these cooperative financial services
institutions.
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Credit union members are united by a common bond of association
(also known as a field of membership), and democratically
operate the credit union. Credit unions can be chartered by the
federal or state government. Members of each credit union must
share a "common bond," such as the same workplace, church,
fraternal organization, or neighborhood.
As of December 2011, there are 7,324 credit unions in the United
States. About 424 of these are in California. Of the 92.6
million credit union members nationwide, 9.59 million are in
California. Of the 424 credit unions in California, 157 are
state chartered and 267 are federally chartered. The 424 credit
unions carry $129 billion in total assets in California. This
bill would allow 157 state chartered credit unions to provide
services that 267 federally chartered credit unions can already
provide. If anything, this measure takes away confusion and
provides parity. Consumers needing these services do not
understand the difference between a state chartered credit union
and a federally chartered credit union. It would not make sense
to a consumer to be turned away because the credit union was
state chartered rather than federally chartered. To make this
point clear, nationwide, every federally chartered credit union
can provide these services in their respective states.
Currently, seven states allow state chartered credit unions to
provide services to non-members. These states include:
Connecticut, Georgia, Michigan, New Mexico, Ohio, Virginia, and
Wisconsin. Most state statutes, such as Florida, New York and
Maryland, allow for credit unions to engage in activities that
are permissible to federal credit unions but require additional
approval by the state regulator. The provisions in the state
credit union acts of Alabama, Arizona, Illinois, Iowa,
Louisiana, Maine, Missouri, Nebraska, Oklahoma, Rhode Island,
Texas, and Washington do not require approval.
According to the Federal Deposit Insurance Corporation (FDIC) in
October 2010, 1,013,000 households in California were unbanked,
7.7% of all households in the state. Unbanked individuals
generally find themselves having to pay exorbitant fees to cash
checks or conduct other financial transactions. Permitting
state chartered credit unions to provide these individuals with
additional ways to transact basic financial services could
assist these individuals and ultimately lead to their full
participation in the legitimate financial marketplace. The
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unique structure and mission of credit unions make them the
ideal arena to help transition the "unbanked" into full
partnership in the California dream.
In 2006, President Bush signed the Financial Services Regulatory
Relief Act. The stated purpose of that legislation was "to
lessen the regulatory burden, so banks, thrifts, and credit
unions can better serve their customers and communities." An
element of the Act is intended to address the issue of the
"unbanked" by authorizing federal credit unions to provide check
cashing, money order, and money transmittal services to
individuals within a federal credit unions' field of membership.
This was an important step that provided additional options for
people to cash checks, purchase money orders, and send money to
family back home. However, the Act only applied to federal
credit unions. Leveling the playing field for the remaining
credit unions in California, those operating under a state
charter, will create even more choices for those who are
unbanked.
This bill would codify state law with the version of the
Financial Services Regulatory Relief Act passed in 2006. Since
the enactment of the Financial Services Regulatory Relief Act,
the National Credit Union Administration decided to amend its
rules to conform to amendments made to the Federal Credit Union
Act by the Dodd-Frank Wall Street Reform and Consumer Protection
Act. The Final Rule adds remittance transfers as now defined
under the Electronic Fund Transfer Act, as an example of money
transfer instruments credit unions may provide to persons within
their fields of membership. The Dodd-Frank Act also removed the
reference to the receipt of the international and domestic
electronic fund transfers to simply eliminate a redundancy.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081 FN:
0004533