State of Washington
64th Legislature
2015 Regular Session
By Representative Ryu
Read first time 02/02/15. Referred to Committee on Business & Financial Services.
AN ACT Relating to credit unions' capital; and amending RCW 31.12.005 and 31.12.402.
Sec. 1.  RCW 31.12.005 and 2013 c 34 s 1 are each amended to read as follows:
Unless the context clearly requires otherwise, as used in this chapter:
(1) "Board" means the board of directors of a credit union.
(2) "Board officer" means an officer of the board elected under RCW 31.12.265(1).
(3) "Branch" of a credit union, out-of-state credit union, or foreign credit union means any facility that meets all of the following criteria:
(a) The facility is a staffed physical facility;
(b) The facility is owned or leased in whole or part by the credit union or its credit union service organization; and
(c) Deposits and withdrawals may be made, or shares purchased, through staff at the facility.
(4) "Capital" means a credit union's reserves, undivided earnings, and allowance for loan and lease losses, payments received on instruments or accounts issued pursuant to RCW 31.12.402(24), and other items that may be included under RCW 31.12.413 or by rule or order of the director.
(5) "Credit union" means a credit union organized and operating under this chapter.
(6) "Credit union service organization" means an organization that a credit union has invested in pursuant to RCW 31.12.436(1)(h), or a credit union service organization invested in by an out-of-state, federal, or foreign credit union.
(7) "Department" means the department of financial institutions.
(8) "Director" means the director of financial institutions.
(9) "Federal credit union" means a credit union organized and operating under the laws of the United States.
(10) "Financial institution" means any commercial bank, trust company, savings bank, or savings and loan association, whether state or federally chartered, and any credit union, out-of-state credit union, or federal credit union.
(11) "Foreign credit union" means a credit union organized and operating under the laws of another country or other foreign jurisdiction.
(12) "Insolvency" means:
(a) If, under United States generally accepted accounting principles, the recorded value of the credit union's assets are less than its obligations to its share account holders, depositors, creditors, and others; or
(b) If it is likely that the credit union will be unable to pay its obligations or meet its share account holders' and depositors' demands in the normal course of business.
(13) "Loan" means any loan, overdraft line of credit, extension of credit, or lease, in whole or in part.
(14) "Material violation of law" means:
(a) If the credit union or person has violated a material provision of:
(i) Law;
(ii) Any cease and desist order issued by the director;
(iii) Any condition imposed in writing by the director in connection with the approval of any application or other request of the credit union; or
(iv) Any supervisory agreement, or any other written agreement entered into with the director;
(b) If the credit union or person has concealed any of the credit union's books, papers, records, or assets, or refused to submit the credit union's books, papers, records, or affairs for inspection to any examiner of the state or, as appropriate, to any examiner of the national credit union administration; or
(c) If a member of a credit union board of directors or supervisory committee, or an officer of a credit union, has breached his or her fiduciary duty to the credit union.
(15) "Membership share" means an initial share that a credit union may require a person to purchase in order to establish and maintain membership in a credit union.
(16) "Net worth" means a credit union's capital, less the allowance for loan and lease losses.
(17) "Operating officer" means an employee of a credit union designated as an officer pursuant to RCW 31.12.265(2).
(18) "Organization" means a corporation, partnership, association, limited liability company, trust, or other organization or entity.
(19) "Out-of-state credit union" means a credit union organized and operating under the laws of another state or United States territory or possession.
(20) "Person" means an organization or a natural person including, but not limited to, a sole proprietorship.
(21) "Principally" or "primarily" means more than one-half.
(22) "Senior operating officer" includes:
(a) An operating officer who is a vice president or above; and
(b) Any employee who has policy-making authority.
(23) "Significantly undercapitalized" means a net worth to total assets ratio of less than four percent.
(24) "Small credit union" means a credit union with up to ten million dollars in total assets.
(25) "Unsafe or unsound condition" means, but is not limited to:
(a) If the credit union is insolvent;
(b) If the credit union has incurred or is likely to incur losses that will deplete all or substantially all of its net worth;
(c) If the credit union is in imminent danger of losing its share and deposit insurance or guarantee; or
(d) If the credit union is significantly undercapitalized.
(26) "Unsafe or unsound practice" means any action, or lack of action, which is contrary to generally accepted standards of prudent operation, the likely consequences of which, if continued, would be abnormal risk of loss or danger to a credit union, its members, or an organization insuring or guaranteeing its shares and deposits.
Sec. 2.  RCW 31.12.402 and 2011 c 303 s 6 are each amended to read as follows:
A credit union may:
(1) Issue shares to and receive deposits from its members in accordance with RCW 31.12.416;
(2) Make loans to its members in accordance with RCW 31.12.426 and 31.12.428;
(3) Pay dividends and interest to its members in accordance with RCW 31.12.418;
(4) Impose reasonable charges for the services it provides to its members;
(5) Impose financing charges and reasonable late charges in the event of default on loans, subject to applicable law, and recover reasonable costs and expenses, including, but not limited to, collection costs, and reasonable attorneys' fees incurred both before and after judgment, incurred in the collection of sums due, if provided for in the note or agreement signed by the borrower;
(6) Acquire, lease, hold, assign, pledge, sell, or otherwise dispose of interests in personal property and in real property in accordance with RCW 31.12.438;
(7) Deposit and invest funds in accordance with RCW 31.12.436;
(8) Borrow money, up to a maximum of fifty percent of its total shares, deposits, and net worth;
(9) Discount or sell any of its assets, or purchase any or all of the assets of another credit union, out-of-state credit union, or federal credit union. However, a credit union may not discount or sell all, or substantially all, of its assets without the approval of the director;
(10) Accept deposits of deferred compensation of its members;
(11) Act as fiscal agent for and receive payments on shares and deposits from the federal government or this state, and any agency or political subdivision thereof;
(12) Engage in activities and programs as requested by the federal government, this state, and any agency or political subdivision thereof, when the activities or programs are not inconsistent with this chapter;
(13) Hold membership in credit unions, out-of-state credit unions, or federal credit unions and in organizations controlled by or fostering the interests of credit unions, including, but not limited to, a central liquidity facility organized under state or federal law;
(14) Pay additional dividends and interest to members, or an interest rate refund to borrowers;
(15) Enter into lease agreements, lease contracts, and lease-purchase agreements with members;
(16) Act as insurance agent or broker for the sale to members of:
(a) Group life, accident, health, and credit life and disability insurance; and
(b) Other insurance that other types of Washington state-chartered financial institutions are permitted to sell, on the same terms and conditions that these institutions are permitted to sell such insurance;
(17) Impose a reasonable service charge for the administration and processing of accounts that remain dormant for a period of time specified by the credit union;
(18) Establish and operate on-premises or off-premises electronic facilities;
(19) Enter into formal or informal agreements with another credit union for the purpose of fostering the development of the other credit union;
(20) Work with community leaders to develop and prioritize efforts to improve the areas where their members reside by making investments in the community through contributions to organizations that primarily serve either a charitable, social, welfare, or educational purpose, or are exempt from taxation pursuant to section 501(c)(3) of the internal revenue code;
(21) Limit the personal liability of its directors in accordance with provisions of its articles of incorporation that conform with RCW 23B.08.320;
(22) Indemnify its directors, supervisory committee members, officers, employees, and others in accordance with provisions of its articles of incorporation or bylaws that conform with RCW 23B.08.500 through 23B.08.600;
(23) Conduct a promotional contest of chance as authorized in RCW 9.46.0356(l)(b), as long as the conditions of RCW 9.46.0356(5) and ((30.22.260))30A.22.260 are complied with to the satisfaction of the director; ((and))
(24) Subject to any applicable rules adopted by the director, receive payments on accounts or instruments subject to the terms, rates, and conditions as may be established by the board, and that:
(a) Are not shares or deposits;
(b) Do not provide voting or other membership rights to their holder;
(c) Do not alter the cooperative nature of the credit union;
(d) Are subordinate to the claims of all creditors of the credit union including claims of shareholders, depositors, and the insurer under the federal share insurance program or equivalent as required by RCW 31.12.408;
(e) Are not subject to share or deposit insurance pursuant to RCW 31.12.408; and
(f) Are available to be applied to cover operating losses of the credit union in excess of its retained earnings, and to the extent so applied, will not be replenished; and
(25) Exercise such incidental powers as are necessary or convenient to enable it to conduct the business of a credit union.
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