The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 222: Powers

• Subchapter 001: General Powers

• § 32101. Applicability of chapter

  The provisions of this chapter set forth the powers granted to all credit unions organized pursuant to this part and offices of any state-chartered credit union authorized to do business in Vermont under this title. The powers, privileges, duties, and restrictions conferred and imposed in the articles of association of any credit union organized under the prior laws of this State are abridged, enlarged, or modified to conform the articles of association to this title. Notwithstanding anything in the articles of association of such a credit union, every such credit union possesses the powers, rights, and privileges and is subject to the duties, restrictions, and liabilities conferred and imposed by this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32102. General powers

  (a) Subject to applicable law, a Vermont credit union may exercise the following powers:

  (1) make contracts;

  (2) sue and be sued;

  (3) adopt and use a common seal and alter such seal at pleasure;

  (4) purchase, hold, and dispose of property necessary or incidental to its operations;

  (5) establish, acquire, invest or participate in, or utilize a credit union service organization;

  (6) subject to the approval of the Commissioner, contract with another credit union or credit unions for office or agency services or to provide those services to the customers of that credit union;

  (7) subject to the approval of the Commissioner, purchase the assets of another credit union or sell all or substantially all of its assets to another credit union;

  (8) offer related financial services to its members, including electronic financial services, safe deposit boxes, negotiable instruments, leasing, and correspondent arrangements with other financial institutions, and charge a reasonable fee for such services;

  (9) hold membership in other credit unions organized under the laws of this State, the laws of the United States, or the laws of another state or territory of the United States and in associations and organizations;

  (10) make reasonable contributions to any nonprofit civic, charitable, or service organization;

  (11) require the payment of an entrance fee or annual membership fee, or both, of any person admitted to membership, pursuant to resolution of the governing body;

  (12) receive savings from its members in the form of shares and honor requests for withdrawals or transfers of all or any part of member share accounts, in any manner approved by the governing body;

  (13) lend funds to its members;

  (14) subject to rules adopted by the Commissioner, sell at a discount any obligations owed to the credit union;

  (15) invest surplus funds, subject to the provisions of section 32104 of this title;

  (16) invest in shares of other credit unions and make deposits in other financial institutions, provided such credit union or financial institution is federally insured;

  (17) assess fees and charges to members subject to applicable law, for failure to meet promptly their obligations to the credit union;

  (18) declare and pay dividends on various types of share accounts, pay interest on deposit accounts held by a community development credit union, and pay interest refunds to borrowers;

  (19) subject to applicable State and federal law, including applicable insurance laws, act as the agent for any fire, life, accident, health, credit life, disability, or other insurance company, other than a title insurance company, authorized by the State of Vermont, by soliciting and selling insurance and collecting premiums on policies issued by such company and receive for services so rendered such fees or commissions as may be agreed upon by the credit union and the insurance company for which it may act as agent; provided, however, that no such credit union shall in any case assume or guaranty the payment of any premium on insurance policies issued through its agency by its principal and provided further that the credit union shall not guaranty the truth of any statement made by an insured in filing his or her application for insurance;

  (20) purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the credit union, or who is or was serving at the request of the credit union as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such, whether the credit union would have the power to indemnify such person against such liability;

  (21) enter into lease agreements, lease contracts, and lease-purchase agreements with members;

  (22) indemnify and limit the personal liability of volunteers;

  (23) enter into marketing arrangements and joint ventures to facilitate its members’ voluntary purchase of goods, insurance, and other services from third parties. A credit union may be compensated for services so provided;

  (24) borrow an aggregate amount not exceeding 20 percent of its assets, and borrow amounts in excess of 20 percent, but not in excess of 50 percent of its assets, if prior written approval has been given by the Commissioner;

  (25) with the approval of the Commissioner, maintain one or more offices other than the principal place of business as may be necessary to conduct the affairs of the credit union;

  (26) accept payment for any electric, electric distribution, gas, water, or telephone company or other utility company operating within this State in receiving money due such company for utility services furnished by it;

  (27) provide loan processing, loan servicing, member check and money order cashing services, disbursement of share withdrawals and loan proceeds, money orders, internal audits, automated teller machine services, and other similar services to other Vermont credit unions, federal credit unions, and out-of-state credit unions; and

  (28) exercise other powers and actions as authorized under this part of this title or as authorized by regulation of the Commissioner.

  (b) The expressed powers for a credit union authorized under this section do not preclude the exercise of additional powers deemed to be incidental to the transaction of a general credit union business pursuant to this part.

  (c) Subject to the limitations of this part and other applicable law, a Vermont credit union may exercise the powers granted nonprofit corporations under Title 11B. In the event of any conflict between the provisions of Title 11B and this title, the provisions of this title govern. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 333, eff. July 1, 2022.)

• § 32103. Expanded powers of Vermont credit unions

  (a) Subject to the requirements of this section, in addition to all other powers permitted under these statutes, a credit union may exercise any of the powers or engage in any activity conferred upon a federal credit union chartered under the laws of the United States of America.

  (b) Prior to engaging in such power or activity, the credit union shall notify the Commissioner of its intent to engage in the activity or power conferred upon a federal credit union. The notification shall identify the power or activity, shall identify the specific federal law or regulation that permits such power or activity, shall identify any Vermont law or regulation that may prohibit or restrict such power or activity, and shall provide such additional information as the Commissioner may request.

  (c) If the Commissioner determines that such power or activity is permitted by federal law or regulation, that such power or activity would not adversely affect the safety or soundness of such credit union, and that such power or activity is not prohibited or restricted by any other applicable Vermont law or regulation, the Commissioner shall issue a written letter of nonobjection to the credit union’s engaging in such power or activity. A credit union shall not engage in such power or activity without first obtaining a written letter of nonobjection from the Commissioner.

  (d) The Commissioner shall respond to the credit union’s notification within the time frame set forth in section 30804 of this title.

  (e) In the event the Commissioner objects to the credit union’s proposed power or activity, the credit union shall have the reconsideration and appeal rights set forth in section 30805 of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32104. Investments

  (a) A Vermont credit union may invest its assets prudently in accordance with the best judgment of its governing body, subject to the limitations set forth in this section and in the credit union’s adopted investment policy.

  (b) A Vermont credit union’s governing body shall establish a written investment policy, which it shall review and ratify at least annually, that addresses, at a minimum, the following:

  (1) investment quality parameters;

  (2) investment mix and diversification;

  (3) investment maturities; and

  (4) delegation of authority to officers and committees responsible for administering the portfolio.

  (c) Funds not used in loans to members may be invested:

  (1) in loans to or in shares or deposits of other credit unions and central credit unions, corporate credit unions, or a central liquidity facility established under state or federal law;

  (2) in the capital shares, obligations, or preferred stock issues of any agency or an association organized either as a stock company, mutual association, or membership corporation, provided the membership or stockholdings, as the case may be, of such agency or association are primarily confined or restricted to credit unions or organizations of credit unions and provided the purposes for which the agency or association is organized are designed primarily to service or otherwise assist credit union operations;

  (3) in shares of a cooperative society organized under the laws of this State or of the laws of the United States in the total amount not exceeding 10 percent of the shares, deposits, and surplus of the credit union;

  (4) in loans to any credit union association or corporation, national or state, of which the credit union is a member, except that the investments shall be limited to two percent of the assets of the credit union;

  (5) in any investment legal for financial institutions as they are defined in subdivision 11101(32) of this title, but in no event common stock. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 002: Deposits in General

• § 32201. Deposit powers

  (a) Applicability. The provisions of subsection 14201(b) of this title governing deposit accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

  (b) Insurance. A Vermont credit union that accepts deposits or an office of a state-chartered credit union authorized to do business in this State shall not accept deposits in this State unless the credit union has insurance with the National Credit Union Administration or the successor to that federal agency.

  (c) Cash reserve on deposits and accounts. A credit union shall maintain reserves on deposits or accounts as required from time to time by the Federal Reserve Act, as amended, and any regulations adopted pursuant to the Act. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 334, eff. July 1, 2022.)

• § 32202. Payment of deposits to administrators from another state or country

  The provisions of section 14202 of this title governing the payment of deposits to administrators from another state or country shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32203. Trust deposits; payment on death of trustee

  (a) When a deposit is made in a credit union by one or more persons in trust for another, the name and residence of the person for whom the deposit is made shall be disclosed, and the deposit shall be credited to the depositor or depositors as trustee for such person.

  (b)(1) The credit union may accept deposits:

  (A) in the name of a member in trust for a member beneficiary;

  (B) in the name of a member in trust for a nonmember beneficiary; or

  (C) in the name of a nonmember trustee for a beneficiary who is a member.

  (2) No beneficiary or trustee, unless a member in his or her own right, shall be permitted to vote, obtain loans, or hold office, or be required to pay an entrance or membership fee.

  (c) When other notice of the existence and terms of a legal trust is not given in writing to the credit union, at the death of the trustee, or if there is more than one trustee, at the death of the surviving trustee, the deposit or any part thereof, with the interest thereon, may be paid to the person for whom the deposit was made or to his or her estate. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32204. Joint deposits

  (a) The provisions of section 14204 of this title governing joint deposits shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

  (b) A single joint share account may hold more than one membership share, supporting membership for more than one member of the credit union. If more than one joint owner seeks credit union membership through the joint account, the joint account must contain a membership share for each member. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32205. Payable on death accounts

  The provisions of section 14205 of this title governing payable on death accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32206. Deposits of minors; exemption from trustee process

  The provisions of section 14206 of this title governing deposits of minors and exemption from trustee process shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32207. Provisions when title to deposit is litigated

  The provisions of section 14207 of this title relating to when title to a deposit is litigated shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32208. Real estate trust and escrow

  The provisions of section 14210 of this title governing pooled real estate trust and escrow accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32209. Claims not clearly consistent

  The provisions of section 14211 of this title governing claims not clearly consistent with the terms of any applicable authority on file with the credit union shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32210. Lien; setoff

  The credit union shall have a lien on the shares, share certificates, deposits, deposit certificates, and accumulated dividends or interest of a member in an individual or joint account for any sum past due the credit union from said member or for any loan endorsed by such member. The credit union shall also have a right of immediate setoff with respect to every such account. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32211. Applicability of other laws

  The provisions of subsection 11501(c) (examination) and section 14212 (joint fiduciary accounts) of this title shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 003: Loans

• § 32301. Loan authority

  (a) Unless otherwise restricted by applicable law, rule, or regulation, a credit union may lend to its members for such purposes as prescribed by the governing body. The governing body shall establish a written loan policy in accordance with the requirements of this section.

  (b) Every loan application shall be in writing upon a form approved by the governing body, which application shall state the purpose for which the loan is desired and the security, if any, offered for such loan.

  (c) Written loan policy. A credit union’s governing body and credit committee shall establish a written loan policy.

  (1) The written loan policy shall address, at a minimum, the following:

  (A) loan portfolio mix and diversification standards;

  (B) prudent underwriting standards, including loan-to-value limits that are clear and measurable;

  (C) loan administration procedures, including delegation and individual lending officer authority; and

  (D) documentation and approval requirements to monitor compliance with lending policies.

  (2) The lending policies adopted pursuant to this section shall be consistent with safe and sound practices and appropriate to the size of the credit union and nature and scope of its operations.

  (d) Interest and charges on loans. Credit unions may demand and receive interest and charges on their loans in accordance with 9 V.S.A. chapter 4 or as otherwise provided by law.

  (e) Limitations. The total direct or indirect liabilities of any one member, however incurred, to a credit union shall not exceed, at the time incurred, the greater of $200.00 or 10 percent of the credit union’s total assets.

  (1) Loans or extensions of credit to one person will be attributed to another person, and each person shall be deemed a borrower as follows:

  (A) In the case of obligations of one person, the proceeds of a loan or extension of credit to a person will be deemed to be used for the direct benefit of another person and will be attributed to the other person when the proceeds or assets purchased with the proceeds are transferred to another person, other than a bona fide arm’s length transaction in which the proceeds are used to acquire property, goods, or services.

  (B) In the case of obligations of a partnership or association, the obligations of each general partner and of each member of the association.

  (C) In the case of obligations of a general partner or a member of an association, the obligations of the partnership or association.

  (D) In the case of obligations of a corporation, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest.

  (E) In the case of obligations of a limited liability company, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest.

  (F) In the case of obligations of a corporation or limited liability company, the amount of a loan made to any other person to the extent that the proceeds of the loan directly or indirectly are to be:

  (i) lent to the corporation or limited liability company;

  (ii) used for the acquisition from the corporation or limited liability company of any equity interest in the corporation or company; and

  (iii) transferred to the corporation or limited liability company without fair and adequate consideration; provided, however, that the discharge of an equivalent amount of debt previously incurred in good faith for value shall be deemed fair and adequate consideration.

  (2) The following shall not be counted as indebtedness subject to the limitation of this subsection:

  (A) indebtedness evidenced by bills of exchange or drafts drawn against existing values and secured by a lien upon goods in transit with a shipper’s order, bills of lading, or comparable instruments attached;

  (B) indebtedness evidenced by notes or other paper secured by readily marketable corporate stock having a fair market value of not less than 125 percent of the indebtedness;

  (C) indebtedness evidenced by notes or other paper secured by an assignment of accounts receivable or of amounts due or to become due on open account or on a contract to the extent of not less than 125 percent of the indebtedness;

  (D) indebtedness evidenced by notes or other paper secured by liens upon agricultural products, manufactured goods, or other chattels in storage in warehouses or elevators with warehouse or elevator receipts attached, or goods released on trust receipts, when the value of the security is not less than 125 percent of the indebtedness, and the financial institution’s interest is insured against loss by insurance policies or certificates of insurance attached;

  (E) indebtedness arising out of the daily transaction of the business of any clearinghouse association;

  (F) indebtedness secured to the extent thereof by the cash surrender value of life insurance evidenced by policies of insurance validly issued and assigned;

  (G) indebtedness secured to the extent thereof by savings deposits or certificates of deposit of solvent financial institutions up to the amount federally insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, and duly assigned;

  (H) any portion of any indebtedness that the U.S. government, or an agency or instrumentality of the United States, unconditionally agreed to purchase or has unconditionally guaranteed as to payment of both principal and interest, including loans insured or guaranteed under the National Housing Act or the Servicemen’s Readjustment Act of 1944, as amended;

  (I) additional funds advanced for the benefit of a borrower by a credit union for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan;

  (J) amounts paid against uncollected funds in the normal process of collection; or

  (K) that portion of a loan or extension of credit sold as a participation by a credit union on a nonrecourse basis, provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 335, eff. July 1, 2022.)

• § 32302. Real estate loans

  (a) Clear title. All loans secured by mortgages on real estate shall be supported by written evidence satisfactory to the credit union that title to the security is marketable, and the lien is valid and enforceable. A mortgage on lands subject to lease under which rents are reserved to the owner, with all of the owner’s rights and options under the lease collaterally assigned to the credit union as security or a mortgage upon lands impressed with a public use, sometimes known as lease, society, or glebe lands, but held under a durable lease, shall not be deemed to be subordinate to such lease or public use.

  (b) Appraised value. The appraisal of real estate securing a real-estate-related transaction entered into by a credit union shall comply with Part 722 of the National Credit Union Administration regulations, as amended from time to time.

  (c) Servicing of loans. A credit union may contract with another credit union, corporation, or association whose transactions are in whole or in part the handling and servicing of mortgage loans to handle and service loans in its behalf. Whenever such a contract is made, the credit union shall not lose or suffer any impairment of any right of deduction or offset it might have against anyone liable for the mortgage debt.

  (d) Home loan escrow accounts. Any credit union that requires a home loan escrow account to be established and maintained by a borrower shall follow the provisions of section 10404 of this title.

  (e) Loans insured or guaranteed by federal law. Any mortgage on real estate given to secure a loan insured or guaranteed by the federal housing commissioner, the administrator of veterans’ affairs, or the administrator of the Small Business Administration under the National Housing Act, the Servicemen’s Readjustment Act of 1944, or the Small Business Act, respectively, as amended, shall not be subject to the provisions of any law of this State prescribing the nature, amount, or form of security, or manner of repayment, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount of which loans may be made, or prescribing or limiting the interest that may be charged or other charges that may be made or taken upon any loan or advance of credit. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 336, eff. July 1, 2022.)

• § 32303. Credit cards

  The provisions of section 14303 of this title governing credit cards shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 004: Member Business Loans

• § 32401. Authority

  No credit union shall make member business loans unless it has complied with the provisions of this subchapter and such rules adopted by the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32402. Commissioner approval

  A credit union shall obtain the written approval of the Commissioner prior to engaging in the business of making member business loans. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 005: Loan Participation

• § 32501. Participation loans

  (a) Subject to the provisions of this section, a credit union may participate in loans to credit union members jointly with other state or federally chartered credit unions, credit union organizations, or other federally insured financial institutions pursuant to written policies established by the credit union’s governing body. As used in this section, “credit union organization” means any organization established primarily to serve the daily operational needs of its member credit unions. The term does not include trade associations, membership organizations principally composed of credit unions, or corporations or other businesses that principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions.

  (b) No credit union shall obtain an interest in a participation loan if the sum of that interest and any other indebtedness owing to the credit union by the borrower exceeds the limitations set forth in this title and in rules adopted by the Commissioner.

  (c) The credit union shall execute a written master participation agreement and shall retain the written master agreement in the credit union’s office. The master agreement shall include provisions for identifying, either through a document that is incorporated by reference into the master agreement or directly in the master agreement, the participation loan or loans prior to their sale.

  (d) A credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest.

  (e) The credit union originating the loan shall:

  (1) Originate loans only to its members.

  (2) Retain an interest of at least ten percent in the face amount of the loan.

  (3) Retain the original or copies of the loan documents.

  (4) Require the credit committee or loan officer to use the same underwriting standards for participation loans as are used for loans that are not being sold in a participation agreement, unless there is a participation agreement in place prior to the disbursement of the loan. Where a participation agreement is in place prior to disbursement, either the credit union’s loan policies or the participation agreement shall address any variance from nonparticipation loan underwriting standards.

  (f) A participant credit union that is not the originating lender shall:

  (1) participate only in loans it is empowered to grant and shall have a participation policy in place that sets forth the loan underwriting standards prior to entering into a participation agreement;

  (2) participate in participation loans only if made to its own members or members of another participating credit union; however, this subdivision shall not apply if the originating lender is a federally insured financial institution that is not a credit union;

  (3) retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement; and

  (4) obtain the approval of the governing body, such person or persons or such committee authorized by the governing body to act on participation loans, or the investment committee for the disbursement of proceeds to the originating lender in accordance with the credit union’s loan participation policy. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 006: Safe Deposit Boxes

• § 32601. Failure to pay rent; removal of contents

  The provisions of section 14501 of this title governing safe deposit boxes shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• Subchapter 007: Credit Union Service Organizations (Cuso)

• § 32701. Organization of a credit union service organization

  (a) With the approval of the Commissioner, a credit union may establish a credit union service organization (CUSO) by itself or jointly with one or more other Vermont credit unions, federal credit unions, state-chartered credit unions, or other federally insured depository institutions within or outside this State. The establishing credit union shall file an application with the Commissioner, which application shall include a description of the services to be engaged in by the CUSO, an explanation of how the proposed services are related to credit union services, the application fee, and any other information that the Commissioner may require.

  (b) A CUSO shall be organized as a corporation or as a limited liability company and the potential exposure of each credit union shall be no more than the amount of funds invested in or lent to the CUSO by such credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32702. Expansion of services

  A CUSO shall not expand its services without the prior written approval of the Commissioner. A CUSO shall file a written notice with the Commissioner setting forth its intention to expand its services, a description of the proposed expanded services, an explanation of how the proposed expansion is related to credit union services, and any other information that the Commissioner may require. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32703. Records, reports, and examination

  (a) A CUSO shall:

  (1) account for all transactions in accordance with generally accepted accounting principles;

  (2) prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards;

  (3) preserve all of its books and records in accordance with rules adopted by the Commissioner applicable to credit unions;

  (4) provide the Commissioner with complete access to its books, records, and internal controls for review, evaluation, and examination;

  (5) provide such additional audits and reports as requested by the Commissioner; and

  (6) pay the actual cost of any review, evaluation, or examination conducted by the Commissioner.

  (b) As frequently as the Commissioner deems appropriate or necessary, the Commissioner may conduct an examination of the records and books of a CUSO in which a credit union has invested or to which it has lent funds or that was organized by a credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 337, eff. July 1, 2022.)

• § 32704. Limitation on loans to and investments in a CUSO

  (a) A credit union may invest its funds in or make loans to a CUSO, provided the total of any such investment in or loan to any one CUSO does not exceed two percent of the total paid-in and unimpaired capital and surplus and share deposits as of its last calendar year-end financial report of the credit union without regard to the amount derived from the profitability of such CUSO.

  (b) As used in subsection (a) of this section:

  (1) paid-in and unimpaired capital and surplus means shares plus postclosing, undivided earnings (this does not include regular reserves or special reserves required by law, regulation, or special agreement between the credit union and its regulator or share insurer); and

  (2) total investments in and total loans to CUSO will be measured consistent with generally accepted accounting principles.

  (c) If the Commissioner determines that a credit union’s investments in or loans to any CUSO exceed the limitations of this section or are otherwise not prudent for the credit union to maintain, the Commissioner may require the credit union to divest such loans or investments. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32705. Investing in, lending to, or joining an existing CUSO

  (a) Subject to the limitations of section 32704 of this title, a credit union may invest its funds in, join, or lend to an existing CUSO. The credit union shall file with the Commissioner prior written notice of its intention to make such investment in or loan to an existing CUSO.

  (b) Prior to investing in or lending to an existing CUSO, a credit union shall:

  (1) obtain a written agreement that the CUSO will:

  (A) account for all transactions in accordance with generally accepted accounting principles;

  (B) prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards;

  (C) provide the Commissioner with complete access to all books and records of the CUSO and with the ability to review CUSO internal controls, as the Commissioner deems necessary; and

  (D) pay the actual cost of any examination conducted by the Commissioner; and

  (2) obtain a written legal opinion that the CUSO is established as a corporation or a limited liability company and that the potential exposure of the credit union is limited to no more than the loss of funds invested in or lent to the CUSO. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32706. Customer base

  A credit union may organize, invest in, or lend to a CUSO only if the credit union service organization primarily serves credit unions, its membership, or the membership of credit unions contracting with the CUSO. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32707. Bond

  Each credit union service organization and each of its directors, officers, managers, general partners, employees, and authorized agent of a CUSO who has charge or possession of the funds, securities, or other assets of such CUSO shall be bonded by a surety company authorized to do business in this State. Such bond shall be in favor of the CUSO and in such amount as is approved by the governing body of the CUSO. The Commissioner may require the amount of the bond to be increased. A copy of each bond and any renewal thereof shall be promptly filed with the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32708. Prohibited activities

  A CUSO shall not acquire control of, either directly or indirectly, another depository financial institution, nor invest in shares, stocks, or obligations of an insurance company, trade association, liquidity facility, or similar organization, corporation, or association. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32709. Separate entities

  (a) A credit union and a CUSO shall be operated in a manner that demonstrates to the public the separate existence of the credit union and the CUSO.

  (b) At the request of the Commissioner, the credit union shall provide to the Commissioner a written legal opinion of counsel as to whether the CUSO is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or lent to, the CUSO. The legal opinion shall address factors that have led courts to “pierce the corporate veil” such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records. Independent legal counsel of the investing credit union or the CUSO may provide the legal opinion. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32710. Suspension, liquidation, insolvency, conservation, involuntary merger, and appointment of directors and managing officers of a troubled CUSO

  A CUSO shall be subject to chapter 226 of this title governing suspension, liquidation, insolvency, conservation, involuntary merger, and appointment of directors and managing officers of a troubled CUSO. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 32711. Rules

  The Commissioner may adopt such additional rules governing CUSOs as the Commissioner deems appropriate. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 338, eff. July 1, 2022; 2023, No. 6, § 76, eff. July 1, 2023.)