Modernization bills for state charters continue to provide credit unions with a more competitive operating and regulatory climate--thanks in large part to the advocacy efforts of credit union leagues throughout the country.

With a vote of 37-0, the Michigan State Senate passed a six-bill package that will modernize the Michigan Credit Union Act (MCUA) for the first time since 2003.

“The bills will have a positive impact on Michigan credit unions’ daily operations by removing regulatory hurdles that will better allow them to serve the state’s 4.8 million credit union members,” Michigan Credit Union League Executive Vice President/Chief Operating Officer Ken Ross said. “Michigan credit unions should be applauded for their vigorous, grassroots advocacy which resulted in real results for the industry.”

The package of bills amends the state charter in dozens of ways, including:

• Authorizing credit unions to offer trust services through credit union service organizations;
• Eliminating the cap on fixed assets for strongly capitalized credit unions;
• Protecting against enforcement of examiner “best practices;”
• Creating the Credit Union Regulatory Fund, which protects state exam fees;
• Allowing credit unions to offer loan promotions and provide prize incentives for refinancing loans;
• Reducing the number of required board meetings to six times a year;
• Allowing anyone to serve as a co-signer, co-borrower or guarantor of a loan; and
• Permitting pre-payment penalties for commercial loans.

The bills will now move back to the State House for concurrence. The original MCUA package was easily approved by the House.

Gov. Rick Snyder is expected to sign the bills into law by mid-June. The amendments will go into effect 90 days later.       

Also, in Arizona, a modernization bill signed by Gov. Doug Ducey would allow for credit union board members to be compensated. The bill would also allow for boards to vote electronically, reduce the required number of board meetings from once a month to 10 in 10 separate months, clarify the ability for credit unions to offer prize-linked savings accounts and grant parity with federally chartered credit unions by removing the 5% fixed-asset cap.  

In Colorado, after months of lobbying policymakers, the Mountain West Credit Union Association was successful in enacting legislation S 125, which modernizes the Colorado Credit Union Act to reflect the current financial services environment and reduce governance redundancy. The bill permits state-chartered credit unions to compensate directors and to substitute an audit committee for a supervisory committee.

The measure requires compensation be “reasonable” and be determined by state regulators. According to the league, compensating directors should be an option because board members face greater responsibilities under the current regulatory environment.

The bill also authorizes the board to replace a supervisory committee with an audit committee. Supervisory committees are unique to credit unions and have voluntary members that are separate from credit union boards. The key role of supervisory committees is to perform the audit function of credit unions. Because boards have the fiduciary duty to credit unions, many appoint audit committees of the board to perform the audit function as well. This change would reduce the redundancy having two committees perform the same function.

Both of these powers are completely voluntary, and their adoption is subject to the credit union boards and ultimately credit unions’ membership.

In Louisiana, Gov. John Bel Edwards’ signing of H 724  permits credit union members to name their beneficiaries in credit unions’ records.  Previous to the law, if a credit union member died, that member had to have a signed affidavit on file naming their beneficiaries in order for the credit union to disburse the member’s funds to them. The Louisiana Credit Union League- lobbied in support of the measure.

CUNA supports the modernization of state charters, which provide maximum flexibility for credit unions to serve their members.