Researcher: KLM Page 1 3/27/25
OLR Bill Analysis
sHB 7083
AN ACT CONCERNING VARIOUS REVISIONS TO THE CREDIT
UNION STATUTES RELATING TO NONMEMBER PAYMENTS,
MEMBER BUSINESS LOANS, CHARITABLE CONTRIBUTIONS,
EXTENSIONS OF CREDIT, CAPITAL AND NET WORTH.
SUMMARY
This bill makes the following changes to laws governing state-
chartered credit unions:
1. allows them to extend credit with preferential rates or terms to
insiders, employees, and governing board members if there is a
written policy to do so and it will not result in financial loss (§§ 1
& 7);
2. expands the list of loans exempt from credit union business loan
requirements (§ 5);
3. shifts, from a credit union’s governing board to its senior
management, the authority to approve the credit union’s
charitable contributions or gifts that fall below a certain threshold
(§ 6);
4. removes regular reserves from being included in certain
calculations of capital and net worth (§§ 1 & 8); and
5. allows credit unions certified as community development
financial institutions to accept nonmember deposits up to certain
caps, but no more $1.5 million (§§ 3 & 4).
The bill also makes minor, technical, and conforming changes,
including specifying that a “loan officer” is someone who accepts loan
applications or offers or negotiates the terms of personal, business, or
other loan products for, or with the expectation of, compensation or
gain, but not someone who acts only as a loan processor or underwriter. 2025HB-07083-R000319-BA.DOCX
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EFFECTIVE DATE: July 1, 2025
§§ 1 & 7 — CONFLICT OF INTEREST POLICY & PREFE RENTIAL
RATES
By law, a credit union must have a written conflict of interest policy
governing transactions involving insiders, insiders’ immediate family
members, or certain other individuals with a common interest to the
insiders and family members.
The bill potentially narrows the applicability of these policies by
limiting who is considered an “immediate family member.” Currently,
this individual is anyone related by blood, adoption, or marriage to
someone who is in the credit union’s field of membership or an
appointed director. The bill ties the term only to the family relationship
and specifies how far removed the relationship applies. Under the bill,
only the following have the designation: a spouse; parent, child, sibling
(including step or in-law relations); or grandparent, grandchild, or his
or her spouse.
An “insider,” under current law and the bill, is a credit union’s
director or appointed director, loan officer, or member of a board-
appointed committee or senior management.
Preferential Rates
The bill creates an exemption from the ban on insiders and certain
other individuals from (1) getting credit from the credit union with
preferential rates, terms, or conditions or (2) acting as a guarantor or
endorser for the credit.
The bill allows insiders and credit union employees or governing
board members to get the preferential credit or act as a guarantor or
endorser if it is done according to a written policy from the credit
union’s governing board. The policy must (1) require offering uniform
preferential rates, terms, or conditions to these people and (2) prohibit
offering to extend credit if the credit union reasonably expects that, at
the time of extending it, doing so would be a financial loss.
2025HB-07083-R000319-BA.DOCX
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§ 5 — MEMBER BUSINESS LOAN S
The bill exempts loans for personal use and certain nonmember
commercial loans from the law’s credit union business lending
requirements.
State law prohibits credit unions from making member business
loans unless they have adequate net worth and a Department of
Banking-approved member business loan program and policy. It sets
specific requirements for these programs, including on risk control,
employee lending experience, and thresholds for aggregate outstanding
loan balances and individual loan-to-value ratios. The loans covered by
these programs generally include those for commercial, corporate,
investment property, business venture, or agricultural purposes.
The bill expands the list of loans exempt from the program, which
currently includes, among others, certain fully secured loans, loans
below a certain amount, and loans fully insured or guaranteed by a
federal, state, or local agency. Under the bill, also exempt are (1) loans
intended for personal use and (2) commercial loans to nonmembers (or
participation interests in them) that a federally insured credit union
lawfully acquires and that are not traded for a member business loan in
order to avoid state law’s limits on these loans.
§ 6 — CHARITABLE CONTRIBUTIONS
One of the powers the law gives to credit unions is the ability to make
charitable contributions or gifts, but it currently only allows a credit
union’s governing board to make these decisions. The bill shifts this
authority to senior management under certain circumstances.
Under the bill, credit union senior management may approve
contributions or gifts if:
1. these total contributions or gifts for the fiscal year are .01% or less
of the credit union’s net assets as of the prior fiscal year’s end and
2. none of these are to a recipient with a director or senior
management member who is also an insider of the credit union
or the insider’s immediate family member (see above). 2025HB-07083-R000319-BA.DOCX
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The bill specifies that, as under current law, a majority of the
governing board may approve contributions or gifts that exceed the
above .01% threshold or are to recipients with credit union insiders or
immediate family members in the above authoritative positions. But the
bill requires the board’s decisions to be documented in its meeting
minutes, which is not currently required.
Lastly, in both cases, the bill requires the credit union to have and
maintain a record of contributions or gifts it makes.
§§ 1 & 8 — REGULAR RESERVES
The bill removes regular reserves from being included in a credit
union’s calculation of (1) capital and (2) net worth for purposes of
contributions to an account for loan and lease loss allowance. Generally,
regular reserves are funds set aside to cover losses.
Consequently, under the bill, a credit union’s “capital” includes
undivided earnings; special purpose reserves; donated equity; and
accumulated, unrealized securities gains or losses. Among other things,
by law, the amount of capital is a factor in determining whether a credit
union may expand its membership, merge with another credit union,
pay dividends, or make certain investments.
Existing law requires credit unions to have an account containing the
amount of the estimated losses on loans and leases. It specifies the
amount that credit unions must contribute to the account from its
earnings, as net worth (the “retained earnings”; generally, assets minus
liabilities). The bill removes regular reserves from this “net worth”
calculation by no longer considering it part of a credit union’s “retained
earnings.”
§§ 3 & 4 — NONMEMBER DEPOSITS
The bill allows credit unions federally designated as a community
development financial institution (CDFI) to accept deposits from
nonmembers, but it caps the amount of any such deposit at the lesser of
(1) $1.5 million or (2) 25% of the total value of the credit union’s shares
(accounts) (see BACKGROUND). 2025HB-07083-R000319-BA.DOCX
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Current law generally prohibits credit unions from receiving deposits
from nonmembers. The exceptions to this, which are unchanged by the
bill, include deposits from (1) an individual into an account held jointly
with a credit union member; (2) the United States, Connecticut, or a
Connecticut municipality or other political subdivision; (3) a federally
recognized tribe; or (4) another credit union (regardless of where it is
chartered).
BACKGROUND
CDFI Certification
The U.S. Department of the Treasury’s Community Development
Financial Institutions Fund operates a program to invest, support, and
train CDFIs assisting underserved populations and communities. To be
eligible for assistance under this program, a CDFI must apply to the
fund for certification and show that it meets the following requirements:
1. be a legal non-governmental financing entity at the time of
application, and not under the control of a governmental entity
(excluding tribal governments);
2. have a primary mission of promoting community development;
3. primarily serve one or more target markets and maintain
accountability to its target market; and
4. provide development services along with its financing activities.
COMMITTEE ACTION
Banking Committee
Joint Favorable Substitute
Yea 9 Nay 4 (03/11/2025)