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