Minnesota Session Laws - 1984, Regular Session

  

                         Laws of Minnesota 1984 

                        CHAPTER 512-H.F.No. 1481
           An act relating to financial institutions; credit 
          unions; authorizing credit unions to offer various 
          classes of shares, share certificates, deposits, or 
          deposit certificates; authorizing the board of 
          directors to establish different classes of shares and 
          place certain restrictions on one class of shares; 
          allowing credit unions to designate the par value of 
          shares; specifying certain components of the capital 
          of a credit union; adding investment losses to the 
          category of contingencies against which credit unions 
          are required to reserve; permitting the board to pay 
          no dividend; permitting the exclusion of one share of 
          a member from the requirement for insurance; amending 
          Minnesota Statutes 1982, sections 52.12; 52.17, 
          subdivision 1; 52.18; and 52.24, by adding a 
          subdivision; Minnesota Statutes 1983 Supplement, 
          sections 52.01; 52.04, subdivision 1; 52.05; and 
          52.09, subdivision 2. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1983 Supplement, section 
52.01, is amended to read:  
    52.01 [ORGANIZATION.] 
    Any seven residents of the state may apply to the 
commissioner of banks for permission to organize a credit union. 
    A credit union is a cooperative society, incorporated for 
the two-fold purpose of promoting thrift among its members and 
creating a source of credit for them at legitimate rates of 
interest for provident purposes. 
    A credit union is organized in the following manner: 
    (1) The applicants execute, in duplicate, a certificate of 
organization by the terms of which they agree to be bound, which 
shall state: 
    (a) the name and location of the proposed credit union; 
    (b) the names and addresses of the subscribers to the 
certificate and the number of shares subscribed by each; 
    (c) the par value of the shares of the credit union, which 
shall not exceed $10 each;  
    (2) The applicants submit the following in the form 
prescribed by the commissioner of banks:  
    (a) a statement of the common bond of the proposed credit 
union;  
    (b) the number of potential members;  
    (c) the geographic dispersion of the potential members;  
    (d) evidence of interest, including willingness of 
potential members to assume responsibility for leadership and 
service;  
     (e) a two-year forecast of probable levels of assets, 
shares and deposits, and income and expense;  
     (f) the availability of other credit union services to the 
potential members;  
     (g) other information the commissioner requires;  
     (3) They next prepare and adopt bylaws for the general 
governance of the credit union consistent with the provisions of 
this chapter, and execute them in duplicate; 
     (4) The certificate and the bylaws, both executed in 
duplicate, are forwarded to the commissioner of banks with a 
$100 application fee; 
     (5) The commissioner of banks shall, within 60 days of the 
receipt of the certificate, the information required by 
paragraph (2), the bylaws, and a commitment for insurance of 
accounts as required by section 52.24, subdivision 2, determine 
whether they comply with the provisions of this chapter, and 
whether or not the organization of the credit union in question 
would benefit its members, be economically feasible, and be 
consistent with the purposes of this chapter; 
     (6) Thereupon the commissioner of banks shall notify the 
applicants of his decision.  If it is favorable, the 
commissioner shall issue a certificate of approval, attached to 
the duplicate certificate of organization, and return them with 
the duplicate bylaws to the applicants.  If it is unfavorable, 
the applicants may, within 60 days after the decision, appeal 
for a review in a court of competent jurisdiction; 
     (7) The applicants shall thereupon file the duplicate of 
the certificate of organization, with the certificate of 
approval attached thereto, with the secretary of state, who 
shall make a record of the certificate and return it, with a 
certificate of record attached thereto, to the commissioner of 
banks for permanent records; and 
     (8) Thereupon the applicants shall be a credit union 
incorporated in accordance with the provisions of this chapter. 
     In order to simplify the organization of credit unions, the 
commissioner of banks shall prepare approved forms of 
certificate of organization and bylaws, consistent with this 
chapter, which may be used by credit union incorporators for 
their guidance, and on written application of seven residents of 
the state, shall supply them without charge with a blank 
certificate of organization and a copy of the form of suggested 
bylaws. 
    Sec. 2.  Minnesota Statutes 1983 Supplement, section 52.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  A credit union has the following powers: 
    (1) To offer its members and other credit unions various 
classes of shares, share certificates, deposits, or deposit 
certificates;  
    (2) To receive the savings of its members either as payment 
on shares or as deposits, including the right to conduct 
Christmas clubs, vacation clubs, and other thrift organizations 
within its membership; 
    (2) (3) To make loans to members for provident or 
productive purposes as provided in section 52.16; 
    (3) (4) To make loans to a cooperative society or other 
organization having membership in the credit union; 
    (4) (5) To deposit in state and national banks and trust 
companies authorized to receive deposits; 
    (5) (6) To invest in any investment legal for savings banks 
or for trust funds in the state and, notwithstanding clause (2) 
(3), to invest in and make loans of unsecured days funds 
(federal funds or similar unsecured loans) to financial 
institutions insured by an agency of the federal government and 
a member of the Federal Reserve System or required to maintain 
reserves at the Federal Reserve;  
    (6) (7) To borrow money as hereinafter indicated; 
    (7) (8) To adopt and use a common seal and alter the same 
at pleasure; 
    (8) (9) To make payments on shares of and deposit with any 
other credit union chartered by this or any other state or 
operating under the provisions of the federal credit union act, 
in amounts not exceeding in the aggregate 25 percent of its 
unimpaired assets.  However, payments on shares of and deposit 
with credit unions chartered by other states are restricted to 
credit unions insured by the National Credit Union 
Administration.  The restrictions imposed by this clause do not 
apply to share accounts and deposit accounts of the Minnesota 
corporate credit union in U.S. central credit union or to share 
accounts and deposit accounts of credit unions in the Minnesota 
corporate credit union; 
    (9) (10) To contract with any licensed insurance company or 
society to insure the lives of members to the extent of their 
share accounts, in whole or in part, and to pay all or a portion 
of the premium therefor; 
    (10) (11) To indemnify each director, officer, or committee 
member, or former director, officer, or committee member against 
all expenses, including attorney's fees but excluding amounts 
paid pursuant to a judgment or settlement agreement, reasonably 
incurred by him in connection with or arising out of any action, 
suit, or proceeding to which he is a party by reason of being or 
having been a director, officer, or committee member of the 
credit union, except with respect to matters as to which he is 
finally adjudged in the action, suit, or proceeding to be liable 
for negligence or misconduct in the performance of his duties.  
The indemnification is not exclusive of any other rights to 
which he may be entitled under any bylaw, agreement, vote of 
members, or otherwise; 
    (11) (12) Upon written authorization from a member, 
retained at the credit union, to make payments to third parties 
by withdrawals from the member's share or deposit accounts or 
through proceeds of loans made to such member, or by permitting 
the credit union to make those payments from the member's funds 
prior to deposit; to permit draft withdrawals from member 
accounts; however, this clause does not permit a credit union to 
establish demand deposits (checking accounts) for its members, 
but a credit union proposing to permit draft withdrawals shall 
notify the commissioner of banks, in the form prescribed, of its 
intent not less than 90 days prior to authorizing draft 
withdrawals.  The board of directors of a credit union may 
restrict one class of shares to the extent that it may not be 
redeemed, withdrawn, or transferred except upon termination of 
membership in the credit union; 
    (12) (13) To inform its members as to the availability of 
various group purchasing plans which are related to the 
promotion of thrift or the borrowing of money for provident and 
productive purposes by means of informational materials placed 
in the credit union's office, through its publications, or by 
direct mailings to members by the credit union; 
    (13) (14) To facilitate its members' voluntary purchase of 
types of insurance incidental to promotion of thrift or the 
borrowing of money for provident and productive purposes 
including, but not limited to the following types of group or 
individual insurance:  Fire, theft, automobile, life and 
temporary disability; to be the policy holder of a group 
insurance plan or a sub-group under a master policy plan and to 
disseminate information to its members concerning the insurance 
provided thereunder; to remit premiums to an insurer or the 
holder of a master policy on behalf of a credit union member, if 
the credit union obtains written authorization from the member 
for remittance by share or deposit withdrawals or through 
proceeds of loans made by the members, or by permitting the 
credit union to make the payments from the member's funds prior 
to deposit; and to accept from the insurer reimbursement for 
expenses incurred or in the case of credit life and accident and 
health insurance within the meaning of chapter 62B commissions 
for the handling of the insurance.  The amount reimbursed or the 
commissions received may constitute the general income of the 
credit union.  The directors, officers, committee members and 
employees of a credit union shall not profit on any insurance 
sale facilitated through the credit unions; 
    (14) (15) To contract with another credit union to furnish 
services which either could otherwise perform.  Contracted 
services under this clause are subject to regulation and 
examination by the commissioner of banks like other services; 
    (15) (16) In furtherance of the twofold purpose of 
promoting thrift among its members and creating a source of 
credit for them at legitimate rates of interest for provident 
purposes, and not in limitation of the specific powers 
hereinbefore conferred, to have all the powers enumerated, 
authorized, and permitted by this chapter, and such other 
rights, privileges and powers incidental to, or necessary for, 
the accomplishment of the objectives and purposes of the credit 
union; 
    (16) (17) To rent safe deposit boxes to its members if the 
credit union obtains adequate insurance or bonding coverage for 
losses which might result from the rental of safe deposit boxes; 
    (17) (18) Notwithstanding the provisions of section 52.05, 
to accept deposits of public funds in an amount secured by 
insurance or other means pursuant to chapter 118; 
    (18) (19) To accept and maintain treasury tax and loan 
accounts of the United States and to pledge collateral to secure 
the treasury tax or loan accounts, in accordance with the 
regulations of the Department of Treasury of the United States; 
    (19) (20) To accept deposits pursuant to section 149.12, 
notwithstanding the provisions of section 52.05, if the deposits 
represent funding of prepaid funeral plans of members; 
    (20) (21) To sell, in whole or in part, real estate secured 
loans provided that:  
    (a) The loan is secured by a first lien;  
    (b) The board of directors approves the sale;  
    (c) If the sale is partial, the agreement to sell a partial 
interest shall, at a minimum:  
    (i) Identify the loan or loans covered by the agreement;  
    (ii) Provide for the collection, processing, remittance of 
payments of principal and interest, taxes and insurance premiums 
and other charges or escrows, if any;  
    (iii) Define the responsibilities of each party in the 
event the loan becomes subject to collection, loss or 
foreclosure;  
    (iv) Provide that in the event of loss, each owner shall 
share in the loss in proportion to its interest in the loan or 
loans;  
    (v) Provide for the distribution of payments of principal 
to each owner proportionate to its interest in the loan or loans;
    (vi) Provide for loan status reports;  
    (vii) State the terms and conditions under which the 
agreement may be terminated or modified; and 
    (d) The sale is without recourse or repurchase unless the 
agreement:  
    (i) Requires repurchase of a loan because of any breach of 
warranty or misrepresentation;  
    (ii) Allows the seller to repurchase at its discretion; or 
    (iii) Allows substitution of one loan for another;  
    (21) (22) In addition to the sale of loans secured by a 
first lien on real estate, to sell, pledge, discount, or 
otherwise dispose of, in whole or in part, to any source, a loan 
or group of loans, other than a self-replenishing line of credit;
provided, that within a calendar year beginning January 1 the 
total dollar value of loans sold, other than loans secured by 
real estate or insured by a state or federal agency, shall not 
exceed 25 percent of the dollar amount of all loans and 
participating interests in loans held by the credit union at the 
beginning of the calendar year, unless otherwise authorized in 
writing by the commissioner;  
    (23) To designate the par value of the shares of the credit 
union by board resolution.  
    Sec. 3.  Minnesota Statutes 1983 Supplement, section 52.05, 
is amended to read: 
    52.05 [MEMBERSHIP.] 
    Credit union membership consists of the incorporators and 
other persons as may be elected to membership and subscribe to 
at least one share as designated by the board of directors, pay 
the initial installment thereon and the entrance fee if any.  In 
addition to a regularly qualified member, the spouse of a 
member, the blood or adoptive relatives of either of them and 
their spouses may be members.  When an individual member of a 
credit union leaves the field of membership, the member, and all 
persons who became members by virtue of his or her membership 
may continue as members.  The surviving spouse of a regularly 
qualified member, and the blood or adoptive relatives of either 
of them and their spouses may become members.  Organizations, 
incorporated or otherwise, composed for the most part of the 
same general group as the credit union membership may be 
members.  Credit unions chartered by this or any other state, or 
any federal credit union may be members.  Credit union 
organizations shall be limited to groups, of both large and 
small membership, having a common bond of occupation, or 
association, or to residents within a well-defined neighborhood, 
community, or rural district. 
    Any 25 residents of the state representing a group may 
apply to the commissioner, advising him of the common bond of 
the group and its number of potential members, for a 
determination whether it is feasible for the group to form a 
credit union.  Upon a determination that it is not feasible to 
organize because the number of potential members is too small, 
the applicants will be certified by the commissioner as eligible 
to petition for membership in an existing credit union 
geographically situated to adequately service the group.  If the 
credit union so petitioned resolves to accept the group into 
membership, it shall follow the bylaw amendment and approval 
procedure set forth in section 52.02.  
    Sec. 4.  Minnesota Statutes 1983 Supplement, section 52.09, 
subdivision 2, is amended to read: 
    Subd. 2.  [PARTICULAR DUTIES.] The directors shall manage 
the affairs of the credit union and shall: 
     (1) act on applications for membership.  This power may be 
delegated to a membership chairman who serves at the pleasure of 
the board of directors and is subject to its rules.  An 
application must contain a certification signed by the 
membership chairman or a member of the board showing the basis 
of membership; 
     (2) determine interest rates on loans and on deposits.  The 
interest period on deposits may be on a daily, monthly, 
quarterly, semi-annual or annual basis, and may be paid on all 
deposits whether or not the deposits have been withdrawn during 
the interest period.  Interest may be computed on a daily 
basis.  At the discretion of the board of directors, interest 
need not be paid on deposit accounts of less than $10; 
     (3) fix the amount of the surety bond required of all 
officers and employees handling money; 
     (4) declare dividends and transmit to the members 
recommended amendments to the bylaws; 
     (5) fill vacancies in the board and in the credit committee 
until successors are chosen and qualify at the next annual 
meeting; 
     (6) limit the number of shares and deposits which may be 
owned by a member, not to exceed ten percent of the outstanding 
shares and deposits, or $2,000, whichever is larger, and the 
maximum individual loan which can be made with and without 
security, including liability indirectly as a co-maker, 
guarantor, or endorser to ten percent of outstanding shares and 
deposits.  The ten percent share and deposit limitation is not 
applicable to the Minnesota corporate credit union, or to credit 
unions insured by the National Credit Union Administration; 
     (7) have charge of investments including loans to members, 
unless a credit committee is established pursuant to section 
52.08 or paragraph (13) of this subdivision; 
     (8) fix the salaries of the treasurer and other employees, 
which must be on a fixed monthly or annual basis, in dollars 
(not percentage); 
    (9) designate the bank or banks depository institution in 
which the funds of the credit union will be deposited; 
    (10) authorize the officers of the credit union to borrow 
money from any source, as provided in section 52.15; 
    (11) with the permission of the commissioner of banks, 
suspend any member of the credit committee or supervisory 
committee if it deems this action necessary to the proper 
conduct of the credit union, and call the members together to 
act on the suspension within a reasonable time after the 
suspension.  The members at the meeting may, by majority vote of 
those present, sustain the suspension and remove the committee 
members permanently or may reinstate the committee members;  
    (12) provide financial assistance to the supervisory 
committee in carrying out its audit responsibilities; and 
    (13) if the bylaws so provide and no credit committee has 
been elected pursuant to section 52.08, appoint a credit manager 
or a credit committee of not less than three members; and 
     (14) to establish different classes of shares.  
    Sec. 5.  Minnesota Statutes 1982, section 52.12, is amended 
to read: 
    52.12 [CAPITAL; ENTRANCE FEES; UNION TO HAVE LIEN.] 
    The capital of a credit union shall consist of the payments 
that have been made to it by the several members thereof on 
includes shares, share certificates, any special class of 
shares, undivided earnings, reserves, and any entrance or 
membership fees.  The credit union shall have a lien on the 
shares and deposits of a member for any sum due to the credit 
union from the member, or for any loan endorsed by him.  A 
credit union may, at its discretion, charge an entrance or 
annual membership fee.  Any entrance fee shall be if authorized 
by the bylaws.  
    Sec. 6.  Minnesota Statutes 1982, section 52.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PROVISION FOR LOSSES.] Every credit union 
shall maintain a reserve fund, which shall be used as a reserve 
against bad losses on loans, losses on investments, and other 
losses, and shall not be used to pay expenses of the credit 
union or otherwise distributed, except in case of liquidation.  
At the end of each monthly accounting period the gross income 
shall be determined.  From this amount, there shall be set 
aside, as a statutory reserve against losses on loans, losses on 
investments, and against other losses as may be specified in 
rules prescribed by the commissioner of banks, sums in 
accordance with the following schedule: 
    (a) A credit union in operation for more than four years 
and having assets of $500,000 or more shall set aside (1) ten 
percent of gross income until the statutory reserve shall equal 
four percent of the total of outstanding loans and risk assets, 
then (2) five percent of gross income until the statutory 
reserve shall equal six percent of the total of outstanding 
loans and risk assets; 
    (b) A credit union in operation less than four years or 
having assets of less than $500,000 shall set aside (1) ten 
percent of gross income until the statutory reserve shall equal 
seven percent of the total of outstanding loans and risk assets, 
then (2) five percent of gross income until the statutory 
reserve shall equal ten percent of the total outstanding loans 
and risk assets. 
     Whenever the statutory reserve falls below the percent of 
the total of outstanding loans and risk assets required by 
clause (a) or (b), it shall be replenished in the manner 
provided by clause (a) or (b) by regular contributions to 
maintain the stated reserve goals.  The commissioner may waive 
the requirements in paragraph (a), clause (2), and paragraph 
(b), clause (2), based on applications by credit unions 
demonstrating need and considering levels of total reserves and 
other factors bearing on the credit union's safety and 
soundness.  The commissioner may also require special reserves 
to protect the interests of members either by rule or by an 
individual credit union in any special case.  
     The following shall not be included in computing 
outstanding loans and risk assets pursuant to clauses (a) and 
(b):  loans to other credit unions; loans fully secured by a 
pledge of savings in the lending credit union equal to and 
maintained to at least the amount of the loan outstanding; loans 
which are purchased or acquired from liquidating or merging 
credit unions and guaranteed by an insurance corporation 
pursuant to section 52.24; loans insured or guaranteed by the 
United States or the state of Minnesota, any agency or 
instrumentality of the United States or the state of Minnesota, 
to the amount of the insurance or guarantee. 
    Sec. 7.  Minnesota Statutes 1982, section 52.18, is amended 
to read: 
    52.18 [DIVIDENDS.] 
    The directors of a credit union may, on a daily, monthly, 
quarterly, semi-annual, or annual basis as its board of 
directors may determine, declare and pay a dividend from net 
earnings or accumulated net undivided profits remaining after 
statutory reserve has been set aside, which dividend may be paid 
on all shares whether or not they have been withdrawn during the 
dividend period.  Dividends may be computed on a daily basis.  
The board of directors may classify its share accounts according 
to character, amount and duration and declare dividends which 
may be at variable rates with due regard to the conditions that 
pertain to each class of shares, or pay no dividend at all.  A 
dividend shall be uniform within a classification.  At the 
discretion of the board of directors dividends may not be 
declared or paid on share accounts of less than $10.  Shares 
which become fully paid up during a dividend period shall be 
entitled to a proportional part of the dividend calculated from 
the first day of the month following the payment in full.  For 
the purpose of this section, shares which become fully paid up 
by the fifteenth day of any month may be treated as being paid 
up from the first day of the month. 
    Sec. 8.  Minnesota Statutes 1982, section 52.24, is amended 
by adding a subdivision to read: 
    Subd. 3.  [EXCLUSION.] Notwithstanding the provisions of 
subdivisions 1 and 2, any one share of a member, as designated 
in the bylaws of the credit union, may be excluded from the 
requirement for insurance.  At the time a share so designated as 
an uninsured, nonwithdrawable membership share is subscribed to, 
the person subscribing will be provided the following separate 
notification printed in not less than the equivalent of 8-point 
type, 0.075 inch computer type, or elite-sized typewriter 
numerals, or shall be legibly handwritten:  
 "Membership shares are not insured by any state or federal 
agency and may be used to pay the expenses and losses of 
the credit union in the event all other available reserves 
have been depleted." 
    Approved April 25, 1984