Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H1033 Compare Versions

Only one version of the bill is available at this time.

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1	1	1 of 1
2	2	HOUSE DOCKET, NO. 1503 FILED ON: 1/18/2023
3	3	HOUSE . . . . . . . . . . . . . . . No. 1033
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Patricia A. Haddad
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act to strengthen the state credit union charter.
13	13	_______________
14	14	PETITION OF:
15	15	NAME:DISTRICT/ADDRESS :DATE ADDED:Patricia A. Haddad5th Bristol1/18/2023 1 of 11
16	16	HOUSE DOCKET, NO. 1503 FILED ON: 1/18/2023
17	17	HOUSE . . . . . . . . . . . . . . . No. 1033
18	18	By Representative Haddad of Somerset, a petition (accompanied by bill, House, No. 1033) of
19	19	Patricia A. Haddad relative to credit unions. Financial Services.
20	20	The Commonwealth of Massachusetts
21	21	_______________
22	22	In the One Hundred and Ninety-Third General Court
23	23	(2023-2024)
24	24	_______________
25	25	An Act to strengthen the state credit union charter.
26	26	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
27	27	of the same, as follows:
28	28	1 SECTION 1. The first paragraph of section 4 of chapter 167I of the General Laws, as
29	29	2appearing in the 2020 Official Edition, is hereby amended by inserting after the first sentence the
30	30	3following sentence:-
31	31	4 Any 1 or more mutual banks or subsidiary banking institutions and any 1 or more credit
32	32	5unions may merge or consolidate into a single credit union upon terms approved by a vote of at
33	33	6least 2/3 of the board of each mutual bank and the board of directors of each credit union, and
34	34	7shall have been approved in writing by the commissioner.
35	35	8 SECTION 2. Said chapter 167I is hereby further amended by inserting after section 12
36	36	9the following section:-
37	37	10 Section 121/2. By any votes required and the filing of such documents as the
38	38	11commissioner shall prescribe and under such terms and conditions as the commissioner may
39	39	12impose, a mutual bank, upon approval by the commissioner, shall be converted into a credit 2 of 11
40	40	13union chartered pursuant to chapter 171, and shall not, in connection with or upon such
41	41	14conversion, be subject to the requirements of the General Laws with respect to the organization
42	42	15and commencement of business of such a credit union. The depositors of any mutual bank shall
43	43	16become members of the credit union within 2 years after such transaction is approved or for such
44	44	17longer period as may be approved by the commissioner. A mutual bank so converted into a credit
45	45	18union shall have 2 years after such transaction is approved or for such longer period as may be
46	46	19approved by the commissioner to dispose of any asset or investment that is not permissible for a
47	47	20credit union.
48	48	21 If permissible under federal law, a mutual federal savings bank or a mutual federal
49	49	22savings and loan association may also convert into a credit union under this section.
50	50	23 SECTION 3. Section 57 of chapter 171 of the General Laws, as so appearing, is hereby
51	51	24amended by striking out the fourth paragraph.
52	52	25 SECTION 4. Section 67 of said chapter 171, as so appearing, is hereby amended by
53	53	26adding after clause (v) the following 4 clauses:-
54	54	27 (w) in asset-backed securities in an aggregate amount not to exceed 10% of the assets of a
55	55	28credit union;
56	56	29 (x) in the shares, stocks, or obligations of any organization organized and operated for the
57	57	30purpose of providing services which are closely related to banking as determined by the
58	58	31commissioner in an aggregate amount not to exceed 10% of the assets of a credit union provided,
59	59	32however, that such authority does not include the power to acquire control directly or indirectly,
60	60	33another financial institution, nor invest in shares, stocks or obligations of an insurance company, 3 of 11
61	61	34trade association, liquidity facility or any other similar organization, corporation, or association
62	62	35not otherwise permitted by chapter 171 of the general laws;
63	63	36 (y) to participate in the activities of the Massachusetts Capital Growth Corporation
64	64	37created under chapter 40W by making capital available to the corporation by making an
65	65	38investment or deposit in or grant to said corporation, an affiliate or subsidiary of said corporation
66	66	39or any fund managed by said corporation in an aggregate amount not to exceed 10% of the assets
67	67	40of a credit union; and
68	68	41 (z) a credit union may or in participation with a federal credit union or foreign credit
69	69	42union, as defined in section 1 of chapter 171, invest in, establish, operate or subscribe for
70	70	43services from another federal credit union, out-of-state credit union or any other business entity
71	71	44for the purpose of obtaining for or furnishing to the credit union technology, trust services,
72	72	45financial planning, compliance, internal audits, human resource or other operation functions,
73	73	46management staff or other banking services.
74	74	47 SECTION 5. Said chapter 171 is hereby further amended by striking out section 78A, as
75	75	48so appearing, and inserting in place thereof the following section:-
76	76	49 Section 78A. Any 1 or more credit unions, as defined in section 1 of chapter 171, may
77	77	50merge or consolidate with 1 or more savings banks, as defined in section 1 of chapter 168, or 1
78	78	51or more co-operative banks, as defined in section 1 of chapter 170, or 1 or more subsidiary
79	79	52banking institutions, as defined in section 1 of chapter 167H and section 4 of chapter 167I, with
80	80	53either as the surviving corporation.
81	81	54 SECTION 6. Said chapter 171 is hereby further amended by striking out section 80A and
82	82	55inserting in place thereof the following section:- 4 of 11
83	83	56 Section 80A. (a) A credit union subject to this section may convert into a mutual savings
84	84	57bank governed by chapter 168, a mutual co-operative bank governed by chapter 170, a mutual
85	85	58federal savings bank or a mutual federal savings and loan association which exist under authority
86	86	59of the United States. A mutual savings bank governed by chapter 168 or a mutual co-operative
87	87	60bank governed by chapter 170 may convert into a credit union. If permissible under federal law,
88	88	61a mutual federal savings bank or a mutual federal savings and loan association may also convert
89	89	62into a credit union. The conversion shall comply with all applicable federal laws and regulations.
90	90	63A credit union insured by the Massachusetts Credit Union Share Insurance Corporation shall file
91	91	64notification of its intent to convert with said corporation at least 90 days before the date of the
92	92	65proposed special meeting of the members of the credit union. A mutual savings or co-operative
93	93	66bank insured by the Depositors Insurance Fund shall file notification of its intent to convert with
94	94	67said fund at least 90 days before the date of the proposed special meeting of the corporators or
95	95	68shareholders of the mutual savings or cooperative bank. No credit union, mutual savings bank, or
96	96	69co-operative bank may convert pursuant to this section so long as any financial assistance
97	97	70provided by the Depositors Insurance Fund or the Massachusetts Credit Union Share Insurance
98	98	71Corporation to such credit union, mutual savings bank, or co-operative bank remains unpaid or
99	99	72has not been compromised or settled. Any such repayment, compromise or settlement shall be
100	100	73approved by the commissioner.
101	101	74 (b) A mutual savings bank, co-operative bank or credit union shall file with the
102	102	75commissioner, at the same time, notices, disclosures and communications required by or sent to
103	103	76the National Credit Union Administration or the Federal Deposit Insurance Corporation. The
104	104	77commissioner may require changes and additions to said notices, disclosures or communications,
105	105	78except as required by federal law or regulation. 5 of 11
106	106	79 (c) A mutual savings bank, co-operative bank or credit union that is adequately
107	107	80capitalized and has received at least a satisfactory rating in its most recent examination for
108	108	81compliance with the Community Reinvestment Act may submit a plan of conversion approved
109	109	82by a 2/3 vote of the entire board of directors or trustees to the commissioner. Unless waived by
110	110	83the commissioner, the plan shall include but not be limited to:
111	111	84 (1) a 3 year business plan for the appropriate chartered mutual savings bank, co-operative
112	112	85bank or credit union which shall include pro forma financial statements;
113	113	86 (2) a commitment by the converting credit union that it will not convert to a stock form
114	114	87before the expiration of 1 year of the effective date of the conversion to a mutual savings bank or
115	115	88co-operative bank charter;
116	116	89 (3) an estimated budget for conversion expenses;
117	117	90 (4) financial statements for the most recently completed quarter;
118	118	91 (5) if applicable, the procedures and timing for termination of excess deposit insurance
119	119	92from the Massachusetts Credit Union Share Insurance Corporation or the Depositors Insurance
120	120	93Fund; and
121	121	94 (6) other relevant information that the commissioner may reasonably require.
122	122	95 (d) Included with the plan shall be an information statement to be sent to corporators,
123	123	96shareholders or members which shall fully and fairly disclose all significant terms and steps to be
124	124	97taken for the conversion and shall include but not be limited to:
125	125	98 (1) a statement as to why the board is considering the conversion; 6 of 11
126	126	99 (2) a statement of the major positive and negative business effects of the proposed
127	127	100conversion;
128	128	101 (3) the impact on the member’s financial and other interests in the credit union;
129	129	102 (4) in the case of a credit union converting to a mutual savings bank or co-operative bank,
130	130	103(a) a disclosure that the conversion from a credit union to a mutual savings bank or co-operative
131	131	104bank could lead to a member losing ownership interest in the credit union if the mutual savings
132	132	105bank or co-operative bank subsequently converts to a stock institution and the member does not
133	133	106become a stockholder; and (b) a disclosure of any conversion related economic benefit a director
134	134	107or senior management official may receive including receipt of or an increase in compensation
135	135	108and an explanation of any foreseeable stock related benefits associated with a subsequent
136	136	109conversion to a stock institution. The explanation of stock related benefits shall include a
137	137	110comparison of the opportunities to acquire stock that are available to officials and employees,
138	138	111with those opportunities available to the general membership.
139	139	112 (e) A converting credit union shall file with the commissioner a plan of conversion and
140	140	113an information statement at least 120 days before the date of the proposed special meeting of the
141	141	114members. The commissioner may require reasonable changes to the plan of conversion and
142	142	115information statement. The commissioner may also require any equitable disclosure he
143	143	116determines applicable to the proposed conversion. The commissioner may specify the form, type
144	144	117and other material aspects of the plan of conversion and information statement to be sent to
145	145	118members except to the extent that it does not conflict with federal law or regulation.
146	146	119 (f) The commissioner shall review the contents of the plan before the board of directors
147	147	120of the credit union presents the conversion plan to the members for a vote. The commissioner 7 of 11
148	148	121shall authorize the distribution of the conversion plan and information statement only if the
149	149	122commissioner is satisfied of all of the following:
150	150	123 (1) the plan discloses to the members information concerning the advantages and
151	151	124disadvantages of the proposed conversion;
152	152	125 (2) the information statement discloses the impact on the member’s financial and other
153	153	126interests in the credit union; and
154	154	127 (3) the conversion would not be made to circumvent a pending supervisory action that is
155	155	128initiated by the commissioner or other regulatory agency because of a concern over the safety
156	156	129and soundness of the credit union.
157	157	130 (g) The commissioner shall render a decision within 30 days from the date of the filing of
158	158	131the plan or any amendment thereof. Upon authorization by the commissioner of the distribution
159	159	132of the contents of the conversion plan and information statement, the converting credit union
160	160	133shall call a special meeting of the members to vote on the conversion plan. At least 30 days
161	161	134before the special meeting, the converting credit union shall mail to each member a notice of the
162	162	135special meeting, the conversion plan and information statement.
163	163	136 (h) The plan of conversion of a credit union shall be approved by a majority vote of those
164	164	137members voting. A member may vote on the proposal to convert in person or by electronic
165	165	138means at the special meeting held on the date set for the vote or by written ballot filed by the
166	166	139qualified voter. The vote on the conversion proposal shall be by secret ballot and conducted by
167	167	140an independent entity. The independent entity shall be a company with experience in conducting
168	168	141corporate elections. A director or officer of the converting credit union, or an immediate family 8 of 11
169	169	142member of a director or officer, shall not have an ownership interest in, or be employed by, the
170	170	143entity.
171	171	144 (i) A converting credit union or an officer or director thereof shall not directly or
172	172	145indirectly give or offer or provide a chance to win a lottery or anything of substantial value, as
173	173	146determined by the commissioner, to the membership or a member of the credit union, for an
174	174	147action related to the conversion to a mutual bank or as an inducement to vote on the plan of
175	175	148conversion.
176	176	149 (j) The provisions on notice to members and voting procedures in this section shall
177	177	150govern the process for converting to a mutual bank notwithstanding other provisions of this
178	178	151chapter or a by-law of the converting credit union to the contrary.
179	179	152 (k) Certified copies of the results of the board of the converting mutual savings bank, co-
180	180	153operative bank or credit union meetings and votes of the membership meetings of the credit
181	181	154union shall be filed with the commissioner. The credit union shall also certify that the
182	182	155information statement, plan, and other written materials provided to members were identical to
183	183	156those materials considered satisfactory by the commissioner.
184	184	157 (l) If the commissioner disapproves of the methods by which the membership votes were
185	185	158taken or the procedures applicable to the votes, the commissioner may direct that a new vote be
186	186	159taken. If the commissioner does not disapprove of the methods by which the membership vote
187	187	160was taken within 10 days after the notification is given, the vote shall be considered approved.
188	188	161 (m) If the conversion to a mutual savings bank or co-operative bank is approved by the
189	189	162credit union members or if the conversion to a credit union is approved by the boards of a mutual
190	190	163savings or co-operative bank and the commissioner receives notification from the converting 9 of 11
191	191	164mutual savings bank, co-operative bank or credit union that approvals required under state and
192	192	165federal law and regulations, including approvals needed for deposit insurance by the Federal
193	193	166Deposit Insurance Corporation or the National Credit Union Administration have been obtained,
194	194	167and that any waiting period prescribed by federal law has expired, and in the case of conversion
195	195	168to a mutual savings or co-operative bank, it will become a member of the Depositors Insurance
196	196	169Fund and of the deposit insurance fund thereof, and further, in the case of conversion to a credit
197	197	170union, it will become a member of the Massachusetts Credit Union Share Insurance Corporation
198	198	171and of the share insurance fund thereof and has made all applicable payments thereto as
199	199	172determined by the commissioner, a certificate to transact business shall be issued by the
200	200	173commissioner as applicable. A conversion to a mutual savings, co-operative bank or a credit
201	201	174union under this section shall not be consummated until arrangements satisfactory to the
202	202	175Depositors Insurance Fund or to Massachusetts Credit Union Share Insurance Corporation, as
203	203	176applicable, have been made and notice thereof has been received by the commissioner. After
204	204	177receipt of the certificate to transact business, the converting mutual savings bank, co-operative
205	205	178bank or credit union shall promptly file the certificate and its articles of organization with the
206	206	179secretary of state. Upon the filing, the charter of the converting mutual savings bank, co-
207	207	180operative bank or credit union shall automatically cease and the converting mutual savings bank,
208	208	181co-operative bank or credit union shall become a mutual savings bank, co-operative bank or
209	209	182credit union. Upon the conversion, the converted mutual savings bank, co-operative bank or
210	210	183credit union shall possess all of the rights, privileges and powers granted to it by its articles of
211	211	184organization and by the laws applicable to the type of mutual savings bank, co-operative bank or
212	212	185credit union charter into which it converted, and all of the assets and business of the converting
213	213	186mutual savings bank, co-operative bank or credit union shall be transferred to and vested in it 10 of 11
214	214	187without any deed or instrument of conveyance; but the converting mutual savings bank, co-
215	215	188operative bank or credit union may execute a deed or instrument of conveyance as is convenient
216	216	189to confirm the transfer. The converted mutual savings bank, co-operative bank or credit union
217	217	190shall be subject to all of the duties, relations, obligations and liabilities of the converting mutual
218	218	191savings bank, co-operative bank or credit union, whether as debtor, depository or otherwise, and
219	219	192shall be liable to pay and discharge the debts and liabilities, to perform all the duties in the same
220	220	193manner and to the same extent as if the converted mutual savings bank, co-operative bank or
221	221	194credit union had itself incurred the obligation or liability or assumed the duty or relation. Rights
222	222	195of creditors of the converting mutual savings bank, co-operative bank or credit union and liens
223	223	196upon the property of such mutual savings, co-operative bank or credit union shall be preserved
224	224	197unimpaired and the converted mutual savings bank, co-operative bank or credit union shall be
225	225	198entitled to receive, accept, collect, hold and enjoy all gifts, bequests, devises, conveyances and
226	226	199appointments in favor of or in the name of the converting mutual savings bank, co-operative
227	227	200bank or credit union and whether made or created to take effect before or after the conversion.
228	228	201 (n) If the conversion to a mutual federal savings bank or a mutual federal savings and
229	229	202loan association is approved by the members the converting credit union shall provide
230	230	203notification to the commissioner that all approvals under state and federal law and regulations
231	231	204including approvals needed for deposit insurance by the Federal Deposit Insurance Corporation
232	232	205have been obtained and that any waiting period prescribed by federal law has expired and shall
233	233	206provide a certified copy of the approval of the federal mutual charter by the Office of Thrift
234	234	207Supervision or any successor agency thereto. Upon acceptance of the federal charter, the
235	235	208converting credit union's charter from the commonwealth shall cease to exist. 11 of 11
236	236	209 (o) A person who willfully violates the disclosure provisions of this section knowing the
237	237	210disclosure made to be false or misleading in a material respect shall upon conviction be fined not
238	238	211more than $5,000 or imprisoned not more than 3 years, or both.