Citations Affected: IC 24-4.5-1-102; IC 28-1-11-3.2; IC 28-7-1;
IC 28-8-4; IC 28-10-1-1; IC 28-11-3-6; IC 28-13; IC 28-15-2-2.
Synopsis: Financial institutions matters. Updates references in
financial institutions law to conform with federal law. Permits a state
chartered financial institution to engage in activities related to a
product, a service, or an investment that is available to or offered by
national banks domiciled in Indiana. Removes limitations on the
amount of public funds that may be deposited in a credit union.
(Currently, deposits of public funds are limited to 10% of total credit
union assets.) Increases the minimum amount of the bond required for
a money transmitter from $100,000 to $200,000 and the maximum
amount from $200,000 to $300,000. Increases the insurance coverage
required for a money transmitter for criminal or dishonest acts from
50% to 100% of the amount of the money transmitter's security bond
or deposit. Provides that state law applies to a state chartered bank,
trust company, savings association, savings bank, credit union,
corporate fiduciary, or industrial loan and investment company to the
same extent it applies to a federally chartered institution of the same
type. Establishes administrative procedures governing requests for an
exemption from state law due to the preemption of state law as it is
applied to federally chartered institutions. Authorizes the director of the
department of financial institutions to appoint a person to fill a vacancy
on the board of directors of a financial institution under certain
circumstances.
Effective: January 1, 2004 (retroactive); July 1, 2004.
January 20, 2004, read first time and referred to Committee on Financial Institutions.
A BILL FOR AN ACT to amend the Indiana Code concerning
financial institutions.
regard for the interests of legitimate and scrupulous creditors;
(e) to permit and encourage the development of fair and
economically sound consumer credit practices;
(f) to conform the regulation of consumer credit transactions to
the policies of the Federal Consumer Credit Protection Act; and
(g) to make uniform the law including administrative rules among
the various jurisdictions.
(3) A reference to a requirement imposed by this article includes
reference to a related rule of the department adopted pursuant to this
article.
(4) A reference to a federal law in IC 24-4.5 is a reference to the law
in effect December 31, 2002. 2003.
would adversely affect the safety and soundness of the bank.
(e) The sixty (60) day period referred to in subsection (c) may be
extended by the department based on a determination that the bank's
letter raised issues requiring additional information or additional time
for analysis. If the sixty (60) day period is extended under this
subsection, the bank may exercise the requested rights and privileges
only if the bank receives prior written approval from the department.
However:
(1) the members must:
(A) approve or deny the requested rights and privileges; or
(B) convene a hearing;
not later than sixty (60) days after the department receives the
bank's letter; and
(2) if a hearing is convened, the members must approve or deny
the requested rights and privileges not later than sixty (60) days
after the hearing is concluded.
(f) The exercise of rights and privileges by a bank in compliance
with and in the manner authorized by this section is not a violation of
any provision of the Indiana Code or rules adopted under IC 4-22-2.
(g) Whenever, in compliance with this section, a bank exercises
rights and privileges granted to national banks domiciled in Indiana, all
banks may exercise the same rights and privileges if the department by
order determines that the exercise of the rights and privileges by all
banks would not adversely affect their safety and soundness.
(h) If the department denies the request of a bank under this section
to exercise any rights and privileges that are granted to national banks,
the bank may appeal the decision of the department to the circuit court
with jurisdiction in the county in which the principal office of the bank
is located. In an appeal under this section, the court shall determine the
matter de novo.
with respect to loans to other borrowers and is not on terms
more favorable than those extended to other borrowers;
(B) upon the making of the loan, the aggregate amount of
loans outstanding under this subdivision will not exceed
twenty percent (20%) of the unimpaired capital and surplus of
the credit union;
(C) the loan is approved by the credit committee or loan
officer; and
(D) the borrower takes no part in the consideration of or vote
on the application.
(4) To invest in any of the following:
(A) Bonds, notes, or certificates that are the direct or indirect
obligations of the United States, or of the state, or the direct
obligations of a county, township, city, town, or other taxing
district or municipality or instrumentality of Indiana and that
are not in default.
(B) Bonds or debentures issued by the Federal Home Loan
Bank Act (12 U.S.C. 1421 through 1449) or the Home Owners'
Loan Act (12 U.S.C. 1461 through 1468).
(C) Interest-bearing obligations of the FSLIC Resolution Fund
and obligations of national mortgage associations issued under
the authority of the National Housing Act.
(D) Mortgages on real estate situated in Indiana which are
fully insured under Title 2 of the National Housing Act (12
U.S.C. 1707 through 1715z).
(E) Obligations issued by farm credit banks and banks for
cooperatives under the Farm Credit Act of 1971 (12 U.S.C.
2001 through 2279aa-14).
(F) In savings and loan associations, other credit unions that
are insured under IC 28-7-1-31.5 and certificates of
indebtedness or investment of an industrial loan and
investment company if the association or company is federally
insured. Not more than twenty percent (20%) of the assets of
a credit union may be invested in the shares or certificates of
an association or company; nor more than forty percent (40%)
in all such associations and companies.
(G) Corporate credit unions.
(H) Federal funds or similar types of daily funds transactions
with other financial institutions.
(I) Mutual funds created and controlled by credit unions, credit
union associations, or their subsidiaries. Mutual funds referred
to in this clause may invest only in instruments that are
approved for credit union purchase under this chapter.
(J) Shares, stocks, or obligations of any credit union service
organization (as defined in Section 712 of the Rules and
Regulations of the National Credit Union Administration) with
the approval of the department. Not more than five percent
(5%) of the total paid in and unimpaired capital of the credit
union may be invested under this clause.
(5) To deposit its funds into:
(A) depository institutions that are federally insured; or
(B) state chartered credit unions that are privately insured by
an insurer approved by the department.
(6) To purchase, hold, own, or convey real estate as may be
conveyed to the credit union in satisfaction of debts previously
contracted or in exchange for real estate conveyed to the credit
union.
(7) To own, hold, or convey real estate as may be purchased by
the credit union upon judgment in its favor or decrees of
foreclosure upon mortgages.
(8) To issue shares of stock and upon the terms, conditions,
limitations, and restrictions and with the relative rights as may be
stated in the bylaws of the credit union, but no stock may have
preference or priority over the other to share in the assets of the
credit union upon liquidation or dissolution or for the payment of
dividends except as to the amount of the dividends and the time
for the payment of the dividends as provided in the bylaws.
(9) To charge the member's share account for the actual cost of
necessary locator service when the member has failed to keep the
credit union informed about the member's current address. The
charge shall be made only for amounts paid to a person or concern
normally engaged in providing such service, and shall be made
against the account or accounts of any one (1) member not more
than once in any twelve (12) month period.
(10) To transfer to an accounts payable, a dormant account, or a
special account share accounts which have been inactive, except
for dividend credits, for a period of two (2) years. The credit
union shall not consider the payment of dividends on the
transferred account.
(11) To invest in fixed assets with the funds of the credit union.
An investment in fixed assets in excess of five percent (5%) of its
assets is subject to the approval of the department.
(12) To establish branch offices, upon approval of the department,
provided that all books of account shall be maintained at the
principal office.
(13) To pay an interest refund on loans proportionate to the
interest paid during the dividend period by borrowers who are
members at the end of the dividend period.
(14) To purchase life savings and loan protection insurance for
the benefit of the credit union and its members, if:
(A) the coverage is placed with an insurance company licensed
to do business in Indiana; and
(B) no officer, director, or employee of the credit union
personally benefits, directly or indirectly, from the sale or
purchase of the coverage.
(15) To sell and cash negotiable checks, travelers checks, and
money orders for members.
(16) To purchase members' notes from any liquidating credit
union, with written approval from the department, at prices agreed
upon by the boards of directors of both the liquidating and the
purchasing credit unions. However, the aggregate of the unpaid
balances of all notes of liquidating credit unions purchased by any
one (1) credit union shall not exceed ten percent (10%) of its
unimpaired capital and surplus unless special written
authorization has been granted by the department.
(17) To exercise such incidental powers necessary or requisite to
enable it to carry on effectively the business for which it is
incorporated.
(18) To act as a custodian or trustee of any trust created or
organized in the United States and forming part of a stock bonus,
pension, or profit sharing plan which qualifies or qualified for
specific tax treatment under Section 408(a) or Section 401(d) of
the Internal Revenue Code, if the funds of the trust are invested
only in share accounts or insured certificates of the credit union.
(19) To issue shares of its capital stock or insured certificates to
a trustee or custodian of a pension plan, profit sharing plan, or
stock bonus plan which qualifies for specific tax treatment under
Sections 401(d) or 408(a) of the Internal Revenue Code.
(20) A credit union may exercise any rights and privileges that
are:
(A) granted to federal credit unions; but
(B) not authorized for credit unions under the Indiana Code
(except for this section) or any rule adopted under the Indiana
Code;
if the credit union complies with section 9.2 of this chapter.
(21) To sell, pledge, or discount any of its assets. However, a
credit union may not pledge any of its assets as security for the
safekeeping and prompt payment of any money deposited, except
that a credit union may, for the safekeeping and prompt payment
of money deposited, give security as authorized by federal law.
(22) To purchase assets of another credit union and to assume the
liabilities of the selling credit union.
(23) To act as a fiscal agent of the United States and to receive
deposits from nonmember units of the federal, state, or county
governments, from political subdivisions, and from other credit
unions upon which the credit union may pay varying interest rates
at varying maturities subject to terms, rates, and conditions that
are established by the board of directors. However, the total
amount of public funds received from units of state and county
governments and political subdivisions that a credit union may
have on deposit may not exceed ten percent (10%) of the total
assets of that credit union, excluding those public funds.
(24) To join the National Credit Union Administration Central
Liquidity Facility.
(25) To participate in community investment initiatives under the
administration of organizations:
(A) exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code; and
(B) located or conducting activities in communities in which
the credit union does business.
Participation may be in the form of either charitable contributions
or participation loans. In either case, disbursement of funds
through the administering organization is not required to be
limited to members of the credit union. Total contributions or
participation loans may not exceed one tenth of one percent
(0.001) of total assets of the credit union. A recipient of a
contribution or loan is not considered qualified for credit union
membership. A contribution or participation loan made under this
subdivision must be approved by the board of directors.
(26) To establish and operate an automated teller machine
(ATM):
(A) at any location within Indiana; or
(B) as permitted by the laws of the state in which the
automated teller machine is to be located.
(27) To demand and receive, for the faithful performance and
discharge of services performed under the powers vested in the
credit union by this article:
(A) reasonable compensation, or compensation as fixed by
agreement of the parties;
(B) all advances necessarily paid out and expended in the
discharge and performance of its duties; and
(C) unless otherwise agreed upon, interest at the legal rate on
the advances referred to in clause (B).
(28) Subject to any restrictions the department may impose, to
become the owner or lessor of personal property acquired upon
the request and for the use of a member and to incur additional
obligations as may be incident to becoming an owner or lessor of
such property.
(29) Subject to any restrictions that the department may
impose, to engage in other activities related to the powers
granted by this section.
union from exercising the requested rights and privileges only if the
members find that:
(1) federal credit unions domiciled in Indiana do not possess the
requested rights and privileges; or
(2) the exercise of the requested rights and privileges by the credit
union would adversely affect the safety and soundness of the
credit union.
(e) The sixty (60) day period referred to in subsection (c) may be
extended by the department based on a determination that the credit
union's letter raised issues requiring additional information or
additional time for analysis. If the sixty (60) day period is extended
under this subsection, the credit union may exercise the requested
rights and privileges only if the credit union receives prior written
approval from the department. However:
(1) the members must:
(A) approve or deny the requested rights and privileges; or
(B) convene a hearing;
not later than sixty (60) days after the department receives the
credit union's letter; and
(2) if a hearing is convened, the members must approve or deny
the requested rights and privileges not later than sixty (60) days
after the hearing is concluded.
(f) The exercise of rights and privileges by a credit union in
compliance with and in the manner authorized by this section is not a
violation of any provision of the Indiana Code or rules adopted under
IC 4-22-2.
(g) Whenever, in compliance with this section, a credit union
exercises rights and privileges granted to federal credit unions
domiciled in Indiana, all credit unions may exercise the same rights and
privileges if the department by order determines that the exercise of the
rights and privileges by all credit unions would not adversely affect
their safety and soundness.
(h) If the department denies the request of a credit union under this
section to exercise any rights and privileges that are granted to federal
credit unions, the credit union may appeal the decision of the
department to the circuit court with jurisdiction in the county in which
the principal office of the credit union is located. In an appeal under
this section, the court shall determine the matter de novo.
of the obligations of the licensee to receive, handle, transmit, and pay
money in connection with the:
(1) sale and issuance of payment instruments; or
(2) transmission of money.
(b) The security device required under subsection (a) must:
(1) be in an amount as provided under subsection (c);
(2) run to the state; and
(3) be in a form acceptable to the director.
(c) The security device must be in an amount calculated as follows:
STEP ONE: Subtract one (1) from the number of locations where
the applicant proposes to engage in business under the license.
STEP TWO: Multiply the difference determined under STEP
ONE by ten thousand dollars ($10,000).
STEP THREE: Add one two hundred thousand dollars ($100,000)
($200,000) to the product determined under STEP TWO.
STEP FOUR: Pay the amount that is the lesser of:
(1) the sum determined in STEP THREE; or
(2) two three hundred thousand dollars ($200,000). ($300,000).
(d) If the security device filed is a bond, the aggregate liability of the
surety shall not exceed the principal sum of the bond.
this chapter; or
(2) the deposit made by the licensee under section 29 of this
chapter.
(e) A licensee that is a corporation must at all times be in good
standing with the secretary of state of the state in which the licensee
was incorporated.
notified by the department. This period may be extended if the
department determines that the requesting entity's letter raises
issues requiring additional information or additional time for
analysis. If the department extends the period, the requesting
entity may operate as if the requesting entity is exempt from a
provision of IC 24, IC 26, IC 28, IC 29, or IC 30 only if the
requesting entity receives prior written approval from the
department. However:
(1) the department must:
(A) approve or deny the requested exemption; or
(B) convene a hearing;
not later than ninety (90) days after the department receives
the requesting entity's letter; and
(2) if a hearing is convened, the department must approve or
deny the requested exemption not later than ninety (90) days
after the hearing is concluded.
(e) The department may refuse to exempt a requesting entity
from a provision of IC 24, IC 26, IC 28, IC 29, or IC 30 if the
department finds that any of the following conditions apply:
(1) The department determines that a described provision of
IC 24, IC 26, IC 28, IC 29, or IC 30 is not preempted for a
federally chartered entity of the:
(A) same; or
(B) functionally equivalent;
type.
(2) The extension of the federal preemption in the form of an
exemption from a provisions of IC 24, IC 26, IC 28, IC 29, or
IC 30 to the requesting entity would:
(A) adversely affect the safety and soundness of the
requesting entity; or
(B) result in an unacceptable curtailment of consumer
protection provisions.
(3) The failure of the department to provide for the exemption
from a provision of IC 24, IC 26, IC 28, IC 29, or IC 30 will
not result in a competitive disadvantage to the requesting
entity.
(f) The operation of a financial institution in a manner
consistent with exemption from a provision of IC 24, IC 26, IC 28,
IC 29, or IC 30 under this section is not a violation of any provision
of the Indiana Code or rules adopted under IC 4-22-2.
(g) If a financial institution is exempted from the provisions of
IC 24, IC 26, IC 28, IC 29, or IC 30 in compliance with this section,
all financial institutions determined by the department as having
the same or a functionally equivalent charter may also be
exempted, if the department determines by an order published in
the Indiana Register that the exemption will not:
(1) adversely affect the safety and soundness of the financial
institutions; or
(2) unduly constrain Indiana consumer protection provisions.
(h) If the department denies the request of a financial institution
under this section for exemption from Indiana Code provisions
that are preempted for federally chartered institutions, the
requesting institution may appeal the decision of the department
to the circuit court of the county in which the principal office of the
requesting institution is located.