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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 339-S.F.No. 2650 
                  An act relating to financial institutions; modifying 
                  regulation of credit unions; amending Minnesota 
                  Statutes 2000, sections 52.02, subdivision 3; 52.04, 
                  subdivision 3; 52.05, subdivisions 1, 2; 52.09, 
                  subdivision 3; 52.12; 52.15, subdivision 1; 52.19, 
                  subdivision 2; Minnesota Statutes 2001 Supplement, 
                  section 52.04, subdivision 1; proposing coding for new 
                  law in Minnesota Statutes, chapter 52. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  [52.001] [DEFINITIONS.] 
           Subdivision 1.  [APPLICATION.] For purposes of this 
        chapter, the terms defined in this section have the meanings 
        given. 
           Subd. 2.  [BOARD.] "Board" means the board of directors of 
        a credit union. 
           Subd. 3.  [COMMISSIONER.] "Commissioner" means the 
        commissioner of the department of commerce. 
           Subd. 4.  [CREDIT UNION.] "Credit union" means a 
        cooperative, not-for-profit financial institution formed and 
        operating under this chapter. 
           Subd. 5.  [COMMUNITY.] "Community" means an identifiable 
        local neighborhood, community, rural district, or other 
        geographically well-defined area in which individuals have 
        common interests or interact.  "Well-defined" means the proposed 
        area has specific geographic boundaries, including a school 
        district, city, township, county, or clearly identifiable 
        neighborhood, but does not include the state as a whole. 
           Subd. 6.  [DIRECTOR.] "Director" means a member of the 
        board. 
           Subd. 7.  [FEDERAL CREDIT UNION.] "Federal credit union" 
        means a credit union organized and operating under the laws of 
        the United States. 
           Subd. 8.  [INSOLVENT.] "Insolvent" means the condition that 
        results when the cash value of assets realizable in a reasonable 
        period of time is less than the liabilities that must be met 
        within that time. 
           Subd. 9.  [MEMBER.] "Member" means a person whose 
        application for membership has been approved as meeting the 
        membership criteria of the credit union, who has paid any 
        required entrance or membership fee, and who has paid for one or 
        more shares. 
           Subd. 10.  [ORGANIZATION.] "Organization" means any 
        corporation, association, partnership, limited liability 
        company, cooperative, trust, or other legal entity. 
           Subd. 11.  [OUT-OF-STATE CREDIT UNION.] "Out-of-state 
        credit union" means a credit union organized under the laws of 
        another state or United States territory or possession. 
           Subd. 12.  [SMALL GROUP.] "Small group" means a group that 
        has less than 500 potential members that has made a written 
        request to a credit union for credit union services. 
           Subd. 13.  [UNSAFE OR UNSOUND PRACTICE.] "Unsafe or unsound 
        practice" means any action or lack of action that is contrary to 
        generally accepted standards of prudent operation and that poses 
        an abnormal risk of loss to the credit union or its members. 
           Sec. 2.  Minnesota Statutes 2000, section 52.02, 
        subdivision 3, is amended to read: 
           Subd. 3.  [APPROVAL.] Amendments to the certificate of 
        organization or bylaws, other than the addition to the field of 
        membership of a small group or a group determined by the 
        commissioner under section 52.05 to be too small to form its own 
        credit union, must be approved by the commissioner of commerce 
        before they become operative.  The commissioner shall not 
        unreasonably withhold approval if the amendments do not violate 
        any provision of this chapter or other state law.  In any event, 
        the commissioner shall approve or disapprove the proposed 
        amendment within 60 days of the date the proposed amendment is 
        submitted to the commissioner by the credit union.  In case of 
        disapproval the credit union shall have the right to appeal to a 
        court of competent jurisdiction within the time limits stated in 
        section 52.01, clause (6).  In case any amendment to the 
        certificate of organization is adopted, the resolution, 
        containing a full text of the amendment and verified by its 
        president or treasurer and approved by the commissioner of 
        commerce, shall be recorded in the office of the secretary of 
        state.  Upon addition to the field of membership of a small 
        group or a group determined by the commissioner under section 
        52.05 to be too small to form its own credit union, a credit 
        union must provide timely written notice to the commissioner, 
        and the commissioner shall have 30 days from receipt of the 
        notice to reject the addition of that group; if the commissioner 
        does not reject the addition within that period, it is deemed 
        approved. 
           Sec. 3.  Minnesota Statutes 2001 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.  Trust funds received by a real estate 
        broker or the broker's salespersons in trust may be deposited in 
        a credit union; 
           (3) to make loans to members for provident or productive 
        purposes as provided in section 52.16; 
           (4) to make loans to a cooperative society or other 
        organization having membership in the credit union; 
           (5) to deposit in state and national banks and trust 
        companies authorized to receive deposits; 
           (6) to invest in any investment legal for savings banks or 
        for trust funds in the state and, notwithstanding clause (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; 
           (7) to borrow money as hereinafter indicated; 
           (8) to adopt and use a common seal and alter the same at 
        pleasure; 
           (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 United States central credit union or 
        to share accounts and deposit accounts of credit unions in the 
        Minnesota corporate credit union; 
           (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; 
           (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 in connection with or arising out of any action, suit, 
        or proceeding to which that person 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 that 
        person is finally adjudged in the action, suit, or proceeding to 
        be liable for negligence or misconduct in the performance of 
        duties.  The indemnification is not exclusive of any other 
        rights to which that person may be entitled under any bylaw, 
        agreement, vote of members, or otherwise; 
           (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, but a credit union proposing to permit draft 
        withdrawals shall notify the commissioner of commerce, 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; 
           (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; 
           (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 subgroup 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, accident and health, and 
        involuntary unemployment 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; 
           (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 commerce like other services; 
           (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; 
           (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; 
           (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 118A or section 
        9.031 or other applicable law and to receive deposits of trust 
        funds provided that either the provider or the beneficial owner 
        of the funds is a member of the credit union accepting the 
        deposit; 
           (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; 
           (20) to accept deposits pursuant to section 149A.97, 
        subdivision 5, notwithstanding the provisions of section 52.05, 
        if the deposits represent funding of prepaid funeral plans of 
        members; 
           (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; 
           (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; 
           (24) to exercise by resolution the powers set forth in 
        United States Code, title 12, section 1757.  Before exercising 
        each power, the board must submit a plan to the commissioner of 
        commerce detailing implementation of the power to be used; 
           (25) to offer self-directed individual retirement accounts 
        and Keogh accounts and act as custodian and trustee of these 
        accounts if: 
           (1) all contributions of funds are initially made to a 
        deposit, share or share certificate account in the credit union; 
           (2) any subsequent transfer of funds to other assets is 
        solely at the direction of the member and the credit union 
        exercises no investment discretion and provides no investment 
        advice with respect to plan assets; and 
           (3) the member is clearly notified of the fact that 
        National Credit Union Share Insurance Fund coverage is limited 
        to funds held in deposit, share or share certificate accounts of 
        National Credit Union Share Insurance Fund-insured credit 
        unions; 
           (26) to impose reasonable charges for the services it 
        provides to its members; 
           (27) to impose financing charges and reasonable late 
        charges in the event of default on loans, and recover reasonable 
        costs and expenses, including, but not limited to, actual 
        collection costs and 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; 
        and 
           (28) to acquire, lease, hold, assign, pledge, sell, or 
        otherwise dispose of interests in a loan or groups of loans 
        other than a self-replenishing line of credit. 
           Sec. 4.  Minnesota Statutes 2000, section 52.04, 
        subdivision 3, is amended to read: 
           Subd. 3.  [COMPARABILITY WITH FEDERAL CREDIT UNIONS 
        PARITY.] The commissioner of commerce may authorize credit union 
        activity in which credit unions subject to the jurisdiction of 
        the federal government may be authorized to engage by federal 
        legislation, ruling, or regulation.  Notwithstanding any other 
        provision of law, and in addition to all powers and activities, 
        express, implied, or incidental, that a credit union has under 
        the laws of this state, a credit union may exercise the powers 
        and activities of, or take any action permitted for, a federal 
        credit union, upon approval of the commissioner.  The 
        commissioner must approve or deny a request under this 
        subdivision within 60 days after submission of the request by a 
        credit union.  The commissioner may not authorize state credit 
        unions subject to this chapter to engage in credit union 
        activity prohibited by the laws of this state. 
           Sec. 5.  Minnesota Statutes 2000, section 52.05, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [REQUIREMENTS.] 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 that individual's 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 persons within one or more 
        groups or any combination of 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. 
           Sec. 6.  Minnesota Statutes 2000, section 52.05, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPLICATION.] Any two persons representing a 
        group of 30 or less or any 15 persons representing a larger 
        group may apply to the commissioner, advising the commissioner 
        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 capable of serving 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.  
           The commissioner shall may adopt rules to implement this 
        subdivision.  If adopted, these rules must provide that: 
           (1) for the purpose of this subdivision, groups with a 
        potential membership of less than 1,500 500 will be considered 
        too small to be feasible as a separate credit union, unless 
        there are compelling reasons to the contrary, relevant to the 
        objectives of this subdivision; 
           (2) for the purpose of this subdivision, groups with a 
        potential membership of at least 500 but less than 3,000 may be 
        considered to be too small to be feasible as a separate credit 
        union, based upon criteria developed by the commissioner, taking 
        into account the objectives of this subdivision; 
           (3) groups with a potential membership in excess of 1,500 
        3,000 or more will be considered in light of all circumstances 
        relevant to the objectives of this subdivision; and 
           (3) (4) all group applications, except for applications 
        from groups made up of members of existing credit unions or 
        groups made up of people who have a common employer which 
        qualifies them for membership in an existing credit union, will 
        be considered separately from any consideration of the 
        membership provisions of existing credit unions; except that, 
        groups made up of members of an existing credit union may be 
        certified under this subdivision with the agreement of the 
        credit union. 
           Sec. 7.  Minnesota Statutes 2000, section 52.09, 
        subdivision 3, is amended to read: 
           Subd. 3.  [OFFICERS, BYLAWS; COMPENSATION.] The duties of 
        the officers shall be as determined in the bylaws, except that 
        the treasurer may be the general manager.  No member of the 
        board, the supervisory committee or an elected credit committee 
        shall receive a salary as such, but may be reimbursed for 
        necessary expenses incurred while serving in such capacity and 
        may be compensated for time actually spent in official duties at 
        an hourly rate as determined by the annual meeting of 
        members.  Provision of reasonable health, accident, and similar 
        insurance protection shall not be considered compensation, and 
        is subject to approval by the membership. 
           Sec. 8.  Minnesota Statutes 2000, section 52.12, is amended 
        to read: 
           52.12 [CAPITAL; ENTRANCE FEES; CREDIT UNION TO HAVE LIEN.] 
           The capital of a credit union includes shares, share 
        certificates, any special class of shares, undivided earnings, 
        reserves, member investment shares, non-member subordinated 
        debt, member paid-in capital, 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 that member.  In 
        addition to any other statutory right of setoff or lien and 
        subject to any contractual provision, if any party to an account 
        is indebted to a credit union, the credit union has a right to 
        setoff against any account in which the party has or had 
        immediately before death a present right of withdrawal.  A 
        credit union may, at its discretion, charge an entrance or 
        annual membership fee if authorized by the bylaws. 
           Sec. 9.  Minnesota Statutes 2000, section 52.15, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [40 50 PERCENT OF UNIMPAIRED ASSETS.] A 
        credit union may borrow from any source, or sources, sums not 
        exceeding in the aggregate 40 50 percent of its unimpaired 
        assets.  For the purposes of this subdivision, "unimpaired 
        assets" mean total assets less borrowings, including all forms 
        of indebtedness, accounts payable, and any amount by which 
        reserves and undivided earnings will not be adequate to meet the 
        reserve requirements caused by classified assets.  
           Sec. 10.  Minnesota Statutes 2000, section 52.19, 
        subdivision 2, is amended to read: 
           Subd. 2.  The board of directors may adopt a procedure and 
        policy for expulsion of members for cause and for 
        nonparticipation in the affairs of the credit union.  
        The nonparticipation policy must be based on:  
           (1) failure to purchase and maintain at least one credit 
        union share or to pay entrance or membership fees, if any; or 
           (2) causing monetary loss to the credit union. 
        If adopted, written notice of the procedure and policy and their 
        effective date shall be mailed not less than 30 days before 
        their effective date to each member of the credit union at the 
        member's address on the credit union records.  Each new member 
        shall be provided written notice of the procedure and policy 
        before or upon applying for membership. 
           Presented to the governor April 12, 2002 
           Signed by the governor April 16, 2002, 11:59 a.m.