CERTIFICATION OF ENROLLMENT

 

                        SENATE BILL 6355

 

 

 

 

                        55th Legislature

                      1998 Regular Session

Passed by the Senate March 7, 1998

  YEAS 45   NAYS 0

 

 

 

President of the Senate

 

Passed by the House February 27, 1998

  YEAS 95   NAYS 0

             CERTIFICATE

 

I, Mike O=Connell, Secretary of the Senate of the State of Washington, do hereby certify that the attached is  SENATE BILL 6355 as passed by the Senate and the House of Representatives on the dates hereon set forth.

 

 

 

Speaker of the

      House of Representatives

                            Secretary

 

 

Approved Place Style On Codes above, and Style Off Codes below. 

                                FILED

          

 

 

Governor of the State of Washington

                   Secretary of State

                  State of Washington


          _______________________________________________

 

                         SENATE BILL 6355

          _______________________________________________

 

             Passed Legislature - 1998 Regular Session

 

                      AS AMENDED BY THE HOUSE

 

State of Washington      55th Legislature     1998 Regular Session

 

By Senators Winsley, Prentice, Sellar, Heavey, Benton and Hale; by request of Department of Financial Institutions

 

Read first time 01/16/98.  Referred to Committee on Financial Institutions, Insurance & Housing.

Regulating share insurance for credit unions.


    AN ACT Relating to share insurance for credit unions; amending RCW 31.12A.007, 31.12.407, and 31.12.408; adding new sections to chapter 31.12A RCW; adding a new section to chapter 31.12 RCW; and providing expiration dates.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

 

    Sec. 1.  RCW 31.12A.007 and 1996 c 5 s 4 are each amended to read as follows:

    (1) Members with a composite capital, asset quality, management, earnings, and liquidity rating by the department of three, four, or five shall, by September 1, 1996, file a:

    (a) Completed application for insurance of share accounts with the national credit union administration to become insured under the federal share insurance program, with a copy promptly forwarded to the director by the applicant;

    (b) Completed application to merge into a credit union with the director under RCW ((31.12.695)) 31.12.461; or

    (c) Detailed notice of liquidation of the credit union with the director under RCW ((31.12.725)) 31.12.474.

    Members with a composite capital adequacy, asset quality, management, earnings, and liquidity rating of one or two shall accomplish one of the acts set forth in (a) through (c) of this subsection by December 1, 1996.

    Each member shall promptly forward a copy of the application or notice to the association.

    If a member fails to file the application or notice as required by this section the failure will constitute an unsafe and unsound condition or practice that seriously jeopardizes the interests of the member's depositors and shareholders.  The failure shall constitute grounds for the director to issue a temporary order under RCW 31.12.595 requiring the member to complete the application or notice and to take such other action as the director deems necessary, and shall constitute grounds for the director to issue a notice of charges under RCW 31.12.585.

    (2) The association's guarantee of a member credit union will cease upon the earlier of:  (a) The member's completion of conversion to insurance of share accounts under the federal share insurance program, or merger into a federally insured credit union, or liquidation, as applicable; or (b) December 31, 1998.

    (3) If a member whose application for insurance of share accounts is approved by the national credit union administration fails to complete the insurance conversion in the time allowed by the national credit union administration, the failure will constitute an unsafe and unsound condition or practice that seriously jeopardizes the interests of the member's depositors and shareholders.  The failure shall constitute grounds for the director to issue a temporary order under RCW 31.12.595 requiring the member to complete the insurance conversion and to take such other action as the director deems necessary, and shall constitute grounds for the director to issue a notice of charges under RCW 31.12.585.  The authority granted to the director under this subsection may be exercised only after January 1, 1998.

    (4) In addition to the action authorized in subsection (3) of this section, if a member fails to obtain federal share insurance, merge into a federally insured credit union, or liquidate by December 31, 1998, the director may appoint a liquidating agent, conservator, or receiver for ((the involuntary liquidation of)) the member under ((RCW 31.12.675 and 31.12.685)) chapter 31.12 RCW as if the member were insolvent, unless the member is insured or guaranteed by an interim share insurance or guaranty program approved by the director under section 7 of this act.

    (5) Members that obtain share insurance under the federal share insurance program or merge with a credit union insured under the federal share insurance program shall continue to maintain their contingency reserve under RCW 31.12A.050, and capital reserve required by the association, and shall continue to be liable for assessments under RCW 31.12A.090, as if they were members, until December 31, 1998.  The amount of these reserves is based on the member's guaranteeable outstanding share and deposit balances as of December 31st of the year prior to the conversion or merger, as appropriate.

    (6) The contingency and capital reserve required by the association shall be included as capital for determining composite capital adequacy, asset quality, management, and earnings and liquidity ratings by regulatory authorities.

 

    NEW SECTION.  Sec. 2.  A new section is added to chapter 31.12A RCW to read as follows:

    (1) Definition.  As used in this chapter, "qualified former member" means a member as of December 31, 1995.

    (2) Dissolution‑-Liquidation.  The association shall dissolve effective December 31, 1998, and be fully liquidated by December 31, 2000, in accordance with a written plan to be adopted by the association's board of directors and approved by the director.

    (3) Effect of dissolution.  (a) During the period of liquidation, the association shall continue its existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:

    (i) Collecting its assets;

    (ii) Converting to cash its properties that will not be distributed in kind;

    (iii) Discharging or making provision for discharging its debts, liabilities, and obligations; and

    (iv) Distributing or making provision for the distribution of its property and assets.

    (b) After discharging or making provision for discharging all debts, liabilities, and obligations, including but not limited to payment or provision for payment of all contracted assistance or guarantees, any remaining property and assets of the association, including but not limited to funds representing the capital reserves maintained by qualified former members or their successors, shall be distributed pro rata to qualified former members of the association or their successors.  The pro rata distribution shall be based on guaranteeable outstanding share and deposit balances of qualified former members as of December 31, 1995, except to the extent any contracted assistance or guarantees with a qualified former member or its successor expressly provides otherwise. 

    (4) Not affected by dissolution.  The association's dissolution does not:

    (a) Transfer title to its property;

    (b) Prevent transfer of its assets;

    (c) Subject its directors or officers to standards of conduct other than those prescribed in this chapter;

    (d) Change quorum or voting requirements for its board of directors or member credit unions; change provisions for selection, resignation, or removal of its directors or officers or both; or change provisions for amending its bylaws;

    (e) Prevent commencement of a proceeding by or against it in its name; or

    (f) Abate or suspend proceedings pending by or against it or to which it is a party as agent or otherwise on the effective date of dissolution.

    (5) This section expires December 31, 2000.

 

    NEW SECTION.  Sec. 3.  A new section is added to chapter 31.12A RCW to read as follows:

    (1) Notice to creditors‑-Manner.  The association shall within thirty days after the effective date of dissolution give a notice to the association's creditors informing them of the dissolution and requiring all those with claims against the association to serve the claim on the association within one hundred twenty days after the date of the first publication of the notice, known and referred to as the one hundred twenty-day limitation period.  This notice shall be given as follows:

    (a) The association will give actual notice, as provided in subsection (3) of this section, to the creditors that it knows of and to those creditors who become known to the association within the one hundred twenty-day limitation period; and

    (b) The association will cause the notice to be published once in each week for three successive weeks in a legal newspaper of general circulation in the county in which the association's principal place of business is located.

    Except as otherwise provided in subsection (3) of this section, any claim not filed within the one hundred twenty-day limitation period is forever barred, if not already barred by any otherwise applicable statute of limitations.

    (2) Known and ascertainable creditors.  The association shall exercise due diligence within the one hundred twenty-day limitation period to discover reasonably ascertainable creditors of the association.  The association will have exercised due diligence in ascertaining creditors upon (a) conducting, within the one hundred twenty-day limitation period, a reasonable review of the association's books, records, accounts, resolutions, minutes, and correspondence, including correspondence received after the effective date of dissolution, and financial records, including checkbooks, bank statements, etc., that are in the association's possession or are reasonably available to it, and (b) having made reasonable inquiry of the association's directors, officers, employees, and agents regarding claimants.  If the association conducts the review and makes the inquiry, it is presumed to have exercised reasonable diligence to ascertain creditors of the association and creditors not ascertained in the review or in an inquiry are presumed not reasonably ascertainable.  These presumptions may be rebutted only by clear, cogent, and convincing evidence.  In any proceeding against the association involving a late claim, the association may, in addition to any other methods of proof available under the rules of evidence, prove the review and inquiry by filing an affidavit or declaration to that effect in the proceeding.

    (3) Notice to creditors‑-Time limits.  The actual notice described in subsection  (1)(a) of this section, as to creditors known and those becoming known to the association within the one hundred twenty-day limitation period, shall be given to the creditors by personal service or regular first class mail, addressed to the creditor's last known address, postage prepaid.  The actual notice shall be given before the later of the expiration of the one hundred twenty-day limitation period or thirty days after any creditor became known to the association within the one hundred twenty-day limitation period.  Any known creditor is barred unless the creditor has filed a claim, as otherwise provided in this section, within the one hundred twenty-day limitation period or within thirty days following the date of actual notice to that creditor, whichever is later.  If notice is given by mail, the date of mailing shall be the date of notice.

    (4) Claims against the association‑-Time limits.  Whether or not notice under subsection (1) of this section has been given or should have been given, any person having a claim against the association who has not filed a claim within twelve months from the effective date of the association's dissolution shall be forever barred from making a claim against the association, or commencing an action against the association, if the claim or action is not already barred by any otherwise applicable statute of limitations.  However, the twelve-month limitation does not apply to any claims where the association has not given the actual notice described in subsection (1) of this section and during the twelve-month period following the effective date of the association's dissolution, partial performance has been made on the obligation underlying the claim.  An otherwise applicable statute of limitations applies without regard to the tolling provisions of RCW 4.16.190.  Any claim filed within twelve months from the effective date of the association's dissolution and not otherwise barred under this chapter shall be made in the form and manner provided under subsection (6) of this section, as if the notice under subsection (1) of this section had been given.

    (5) Deposit with state treasurer.  Association assets that should be transferred to a creditor or claimant of the association who cannot be found or who is not competent to receive them may be reduced to cash and deposited with the state treasurer, and if the creditor or claimant furnishes satisfactory proof of entitlement to the amount deposited, the state treasurer or other appropriate state official shall pay that person or that person's representative that amount.

    (6) Notice‑-Form.  Notice under RCW 31.12A.---(1) (subsection (1) of this section) shall be in substantially the following form:

 

    Washington Credit Union Share Guaranty Association (hereafter referred to as WCUSGA) has been dissolved by section 2 of this act.  The effective date of dissolution is December 31, 1998.  Persons having claims against WCUSGA must, prior to the time such claims would be barred by any otherwise applicable statute of limitations, serve their claims on WCUSGA at the address stated below within one hundred twenty days after the date of first publication of this notice or, except under those provisions included in RCW 31.12A.---(3) (subsection 3 of this section), the claim will be forever barred. Claims submitted must contain the information required below.

 

           DATE OF FIRST

           PUBLICATION:..............................

 

    WCUSGA ADDRESS:  (Here designate WCUSGA's address for notice purposes)

 

           INFORMATION REQUIRED IN CLAIMS:

 

               1. The name and address of the claimant;

           2. The name, business address (if different from that of the claimant), and nature of authority of any person signing the claim on behalf of the claimant;

           3. A written statement of the facts or circumstances constituting the basis upon which the claim is submitted;

           4. The amount of the claim; and

           5. Whether the claim is secured, unliquidated or contingent, or not yet due; the nature of the security; the nature of any uncertainty; and the due date of the claim: Provided however, That failure to describe correctly the security, nature of any uncertainty, or the due date of a claim not yet due, if such failure is not substantially misleading, does not invalidate the claim.

 

    (7) Allowance or rejection of claims‑-Time limitations for rejection‑-Notification of rejection‑-Requirements‑-Compromise of claim.  The association may accept claims, reject claims, or accept claims in part and reject them in part.

    (a) If the association rejects a claim, in whole or in part, it shall notify the claimant of the rejection.  If the rejection is for part of the claim, the notification shall state the amount of the claim rejected and the amount of the claim accepted.  The notification shall be by certified mail, postage prepaid, addressed to the claimant at the claimant's address stated in the claim; if a person other than the claimant signed the claim for or on behalf of the claimant, and that person's business address as stated in the claim is different from that of the claimant, notification of rejection shall also be made by certified mail, postage prepaid, upon that person; the date of the postmark is the date of notification.  The notification of rejection shall advise the claimant, and the person making claim on his, her, or its behalf, if any, that the claimant must bring suit in the proper court against the association within thirty days after notification of rejection or before expiration of the time for serving and filing claims against the association, whichever period is longer, and that otherwise the claim will be forever barred.

    (b) The association may, either before or after rejection of any claim, compromise the claim, whether due or not, absolute or contingent, or liquidated or unliquidated, if it appears to the association that such a compromise is in its best interests.

    (8) Effect of acceptance.  Every claim that has been accepted by the association shall be ranked among the association's acknowledged debts to be paid in the course of liquidation.

    (9) Suit on rejected claim.  When a claim is rejected by the association, the holder must bring suit in the proper court against the association within thirty days after notification of the rejection or before expiration of the time for serving and filing claims against the association, whichever period is longer, otherwise the claim is forever barred.

    (10) Outlawed claims.  No claim that is barred by the statutes of limitation shall be accepted by the association or by a court.

    (11) Claims must be presented.  A holder of any claim against the association shall not maintain an action thereon unless the claim has been first presented as provided in this chapter.

    (12) Partial acceptance of claim‑-Costs.  Whenever any claim is presented to the association and a part thereof is accepted, as reflected in the association's notice of rejection, and if the claimant rejects the amount so offered by the association in satisfaction of the claim, the claimant shall recover no costs in any action brought against the association unless the claimant's recovery, exclusive of interest and costs, is greater than the amount accepted by the association.

    (13) Judgment against association‑-Payment.  If any judgment has been rendered against the association prior to the effective date of its dissolution, no execution shall issue thereon after the effective date of its dissolution.  The claim shall be presented to the association as any other claim, but need not be supported by the information otherwise required to be included in creditors' claims.  If the claim is justly due and unsatisfied, it shall be paid in due course of liquidation.  If there is a lien on any property of the association, that property may be sold for the satisfaction of the lien, and the officer making the sale shall account to the association for any surplus.

    (14) This section expires December 31, 2000.

 

    NEW SECTION.  Sec. 4.  A new section is added to chapter 31.12A RCW to read as follows:

    (1) After the dissolution and liquidation of the association have been completed in accordance with this chapter, an officer of the association shall execute articles of dissolution and file the articles with the director.  The articles of dissolution shall set forth:

    (a) The name of the association;

    (b) The approved plan for the dissolution of the association;

    (c) That all debts, liabilities, and obligations of the association have been paid and discharged or that adequate provision has been made in accordance with this chapter;

    (d) That all the remaining property and assets of the association have been transferred, conveyed, or distributed, or that adequate provision has been made in accordance with this chapter;

    (e) That there are no suits pending against the association in any court or, if any suits are pending against it, that adequate provision has been made for the satisfaction of any judgment, order, or decree which may be entered; and

    (f) That a copy of a revenue clearance certificate issued under chapter 82.32 RCW, if applicable, is included.

    Upon the filing of the articles of dissolution with the director, the dissolution and liquidation of the association shall be deemed complete.

    (2) This section expires December 31, 2000.

 

    Sec. 5.  RCW 31.12.407 and 1996 c 5 s 5 are each amended to read as follows:

    Credit unions must be insured by the federal share insurance program under the national credit union administration, or be insured or guaranteed by an interim share insurance or guaranty program approved by the director under section 7 of this act, on or before December 31, 1998.

 

    Sec. 6.  RCW 31.12.408 and 1996 c 5 s 6 are each amended to read as follows:

    (1) After December 31, 1998, credit unions must be insured under the federal share insurance program or an equivalent share insurance program as defined in this section, or an interim share insurance or guaranty program approved by the director under section 7 of this act.  For the purposes of this section an equivalent share insurance program is a program that:  (a) Holds reserves proportionately equal to the federal share insurance program; (b) maintains adequate reserves and access to additional sources of funds through replenishment features, reinsurance, or other sources of funds; and (c) has share insurance contracts that reflect a national geographic diversity.

    (2) Before any credit union may insure its share deposits with a share insurance program other than (a) the federal share insurance program or (b) an interim share insurance or guaranty program approved under section 7 of this act, the director must make a finding that the alternative share insurance program meets the standards set forth in this section, following a public hearing and a report on the basis for such finding to the appropriate standing committees of the legislature.  All such findings shall be made before December 1st of any year and shall not take effect until the end of the regular legislative session of the following year.

    (3) Any alternative share insurance program approved under this section shall be reviewed annually by the director to determine whether the program currently meets the standards in this section.  The director shall prepare a written report of his or her findings including supporting analysis and forward the report to the appropriate standing committees of the legislature.  If the director finds that the alternative share insurance program does not currently meet the standards of this section the director shall notify all credit unions that insure their shares under the alternative share insurance program, and shall include notice of a public hearing for the purpose of receiving comment on the director's finding.  Following the hearing the director may either rescind his or her finding or reaffirm the finding that the alternative share insurance program does not meet the standards in this section.  If the finding is reaffirmed, the director shall order all credit unions whose shares are insured with the alternative share insurance program to file, immediately, an application with the national credit union administration to convert to the federal share insurance program.

 

    NEW SECTION.  Sec. 7.  A new section is added to chapter 31.12 RCW to read as follows:

    (1) A credit union with a composite capital adequacy, asset quality, management, earnings, and liquidity rating of one or two, which has filed a completed application for insurance of share accounts with the national credit union administration in compliance with RCW 31.12A.007(1), and which has not been approved for such insurance by September 30, 1998, may obtain a form of interim share insurance or guaranty substantially similar to the coverage of the federal share insurance program, with the prior approval of the director, for the period from December 31, 1998, through July 1, 2001.  An interim share insurance or guaranty program approved by the director under this section is not subject to RCW 31.12.408.

    (2) If a credit union insured or guaranteed by an interim share insurance or guaranty program approved by the director under this section fails to obtain federal share insurance, merge into a federally insured credit union, or liquidate by July 1, 2001, or fails to obtain insurance under an equivalent share insurance program under RCW 31.12.408 by July 1, 2001, the director may appoint a liquidating agent, conservator, or receiver for the credit union under this chapter as if the credit union were insolvent.

    (3) This section expires September 1, 2001.

 

    NEW SECTION.  Sec. 8.  Section 1 of this act expires December 31, 2000.

 

    NEW SECTION.  Sec. 9.  Sections 5 and 6 of this act expire July 1, 2001.

 


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