12 U.S.C. § 1781 — Insurance of member accounts

Page 884 TITLE 12—BANKS AND BANKING § 1774 pursuant to section 3 of Pub. L. 91–206 and section 501 of Pub. L. 95–630 [12 U.S.C. 1752a] which transferred functions of Bureau of Federal Credit Unions, and Di- rector thereof, to National Credit Union Administra- tion and vested authority for management of Adminis- tration in National Credit Union Administration Board. REPEALS; REVOCATION OF ORGANIZATION CERTIFICATES ISSUED UNDER DISTRICT OF COLUMBIA CREDIT UNIONS ACT Pub. L. 88–395, § 4, Aug. 1, 1964, 78 Stat. 377, provided that: ‘‘Effective thirty days after enactment of this Act [Aug. 1, 1964], the District of Columbia Credit Unions Act (47 Stat. 326), as amended, is repealed and all orga- nization certificates issued thereunder and still in force are revoked.’’ § 1774. Approval of certificate; assets and obliga- tions of applicant credit union The Board shall approve any such organization certificate meeting such requirements. Upon such approval, the applicant credit union shall become a Federal credit union, and shall be vested with all of the assets and shall continue responsible for all of the obligations of such ap- plicant credit union to the same extent as though the conversion had not taken place. (Pub. L. 88–395, § 2, Aug. 1, 1964, 78 Stat. 377; Pub. L. 91–206, § 3, Mar. 10, 1970, 84 Stat. 49; Pub. L. 95–630, title V, § 501, Nov. 10, 1978, 92 Stat. 3680.) Editorial Notes CODIFICATION Section was not enacted as part of the Federal Credit Union Act which comprises this chapter. Statutory Notes and Related Subsidiaries TRANSFER OF FUNCTIONS ‘‘Board’’, meaning the National Credit Union Admin- istration Board, substituted in text for ‘‘Director’’, meaning Director of Bureau of Federal Credit Unions, pursuant to section 3 of Pub. L. 91–206 and section 501 of Pub. L. 95–630 [12 U.S.C. 1752a] which transferred functions of Bureau of Federal Credit Unions, and Di- rector thereof, to National Credit Union Administra- tion and vested authority for management of Adminis- tration in National Credit Union Administration Board. § 1775. Conditions upon conversion to Federal status Any District of Columbia credit union con- verting into a Federal credit union in accord- ance with sections 1773 to 1775 of this title shall thereupon be subject to the limitations, vested with the powers, and charged with the liabilities conferred and imposed by the Federal Credit Union Act [12 U.S.C. 1751 et seq.] upon credit unions organized thereunder, except that— (1) no fee shall be imposed upon a credit union converting pursuant to sections 1773 to 1775 of this title as an incident to its conver- sion; (2) any loan or investment made by a credit union converting pursuant to sections 1773 to 1775 of this title in conformity with the Dis- trict of Columbia Credit Unions Act prior to its conversion, which does not conform to the requirements of the Federal Credit Union Act and is still outstanding at the time of conver- sion, shall be liquidated at or before its matu- rity or, if it has no maturity date, in a prudent manner and within a reasonable period of time; (3) a credit union converting pursuant to sections 1773 to 1775 of this title shall submit proposed bylaws to the Board for the Board’s approval after its conversion, but not later than thirty days following its next annual meeting or six months after August 1, 1964, whichever is later: Provided, That any existing bylaw inconsistent with any other require- ments of the Federal Credit Union Act shall be deemed null and void. (Pub. L. 88–395, § 3, Aug. 1, 1964, 78 Stat. 377; Pub. L. 91–206, § 3, Mar. 10, 1970, 84 Stat. 49; Pub. L. 95–630, title V, § 501, Nov. 10, 1978, 92 Stat. 3680.) Editorial Notes REFERENCES IN TEXT The Federal Credit Union Act, referred to in text, is act June 26, 1934, ch. 750, 48 Stat. 1216, which is classi- fied generally to this chapter. For complete classifica- tion of this Act to the Code, see section 1751 of this title and Tables. The District of Columbia Credit Unions Act, referred to in par. (2), was act June 23, 1932, ch. 272, 47 Stat. 326, and was repealed by Pub. L. 88–395, § 4, Aug. 1, 1964, 78 Stat. 377. CODIFICATION Section was not enacted as part of the Federal Credit Union Act which comprises this chapter. Statutory Notes and Related Subsidiaries TRANSFER OF FUNCTIONS ‘‘Board’’ and ‘‘the Board’s’’, meaning the National Credit Union Administration Board, substituted in par. (3) for ‘‘Director’’ and ‘‘his’’, respectively, meaning Di- rector of Bureau of Federal Credit Unions, pursuant to section 3 of Pub. L. 91–206 and section 501 of Pub. L. 95–630 [12 U.S.C. 1752a] which transferred functions of Bureau of Federal Credit Unions, and Director thereof, to National Credit Union Administration and vested authority for management of Administration in Na- tional Credit Union Administration Board. SUBCHAPTER II—SHARE INSURANCE § 1781. Insurance of member accounts (a) Eligibility The Board, as hereinafter provided, shall in- sure the member accounts of all Federal credit unions and it may insure the member accounts of (1) credit unions organized and operated ac- cording to the laws of any State, the District of Columbia, the several territories, including the trust territories, and possessions of the United States, the Panama Canal Zone, or the Com- monwealth of Puerto Rico, and (2) credit unions organized and operating under the jurisdiction of the Department of Defense if such credit unions are operating in compliance with the re- quirements of subchapter I of this chapter and regulations issued thereunder. (b) Application; agreement Application for insurance of member accounts shall be made immediately by each Federal credit union and may be made at any time by a State credit union or a credit union operating Page 885 TITLE 12—BANKS AND BANKING § 1781 under the jurisdiction of the Department of De- fense. Applications for such insurance shall be in such form as the Board shall provide and shall contain an agreement by the applicant— (1) to pay the reasonable cost of such exami- nations as the Board may deem necessary in connection with determining the eligibility of the applicant for insurance: Provided, That ex- aminations required under subchapter I of this chapter shall be so conducted that the infor- mation derived therefrom may be utilized for share insurance purposes, and examinations conducted by State regulatory agencies shall be utilized by the Board for such purposes to the maximum extent feasible; (2) to permit and pay the reasonable cost of such examinations as in the judgment of the Board may from time to time be necessary for the protection of the fund and of other insured credit unions; (3) to permit the Board to have access to any information or report with respect to any ex- amination made by or for any public regu- latory authority, including any commission, board, or authority having supervision of a State-chartered credit union, and furnish such additional information with respect thereto as the Board may require; (4) to provide protection and indemnity against burglary, defalcation, and other simi- lar insurable losses, of the type, in the form, and in an amount at least equal to that re- quired by the laws under which the credit union is organized and operates; (5) to maintain such regular reserves as may be required by the laws of the State, district, territory, or other jurisdiction pursuant to which it is organized and operated, in the case of a State-chartered credit union, or as may be required by this chapter, in the case of a Fed- eral credit union; (6) to maintain such special reserves as the Board, by regulation or in special cases, may require for protecting the interest of members or to assure that all insured credit unions maintain regular reserves which are not less than those required under subchapter I of this chapter; (7) not to issue or have outstanding any ac- count or security the form of which, by regula- tion or in special cases, has not been approved by the Board except for accounts authorized by State law for State credit unions; (8) to pay and maintain its deposit and to pay the premium charges for insurance im- posed by this subchapter; and (9) to comply with the requirements of this subchapter and of regulations prescribed by the Board pursuant thereto. (c) Approval of application (1) Before approving the application of any credit union for insurance of its member ac- counts, the Board shall consider— (A) the history, financial condition, and management policies of the applicant; (B) the economic advisability of insuring the applicant without undue risk of the fund; (C) the general character and fitness of the applicant’s management; (D) the convenience and needs of the mem- bers to be served by the applicant; and (E) whether the applicant is a cooperative association organized for the purpose of pro- moting thrift among its members and creating a source of credit for provident or productive purposes. (2) The Board shall disapprove the application of any credit union for insurance of its member accounts if it finds that its reserves are inad- equate, that its financial condition and policies are unsafe or unsound, that its management is unfit, that insurance of its member accounts would otherwise involve undue risk to the fund, or that its powers and purposes are inconsistent with the promotion of thrift among its members and the creation of a source of credit for provi- dent or productive purposes. (3) Repealed. Pub. L. 95–22, title III, § 301, Apr. 19, 1977, 91 Stat. 49. (d) Certificate of insurance Upon the approval of any application for in- surance, the Board shall notify the applicant and shall issue to it a certificate evidencing the fact that it is, as of the date of issuance of the certificate, an insured credit union under the provisions of this subchapter. (e) Prohibition on certain associations (1) In general No insured credit union may be sponsored by or accept financial support, directly or indi- rectly, from any Government-sponsored enter- prise, if the credit union includes the cus- tomers of the Government-sponsored enter- prise in the field of membership of the credit union. (2) Routine business financing Paragraph (1) shall not apply with respect to advances or other forms of financial assistance generally provided by a Government-sponsored enterprise in the ordinary course of business of the enterprise. (3) ‘‘Government-sponsored enterprise’’ defined For purposes of this subsection, the term ‘‘Government-sponsored enterprise’’ has the meaning given to such term in section 1404(e)(1)(A) of the Financial Institutions Re- form, Recovery, and Enforcement Act of 1989. (4) Employee credit union No provision of this subsection shall be con- strued as prohibiting any employee of a Gov- ernment-sponsored enterprise from becoming a member of a credit union whose field of membership is the employees of such enter- prise. (June 26, 1934, ch. 750, title II, § 201, as added Pub. L. 91–468, § 1(3), Oct. 19, 1970, 84 Stat. 994; amended Pub. L. 92–221, §§ 1, 2, Dec. 23, 1971, 85 Stat. 796, 797; Pub. L. 95–22, title III, § 301, Apr. 19, 1977, 91 Stat. 49; Pub. L. 95–630, title V, §§ 502(b), 504, Nov. 10, 1978, 92 Stat. 3681, 3682; Pub. L. 98–369, div. B, title VIII, § 2801, July 18, 1984, 98 Stat. 1203; Pub. L. 104–208, div. A, title II, § 2615(a), Sept. 30, 1996, 110 Stat. 3009–478; Pub. L. 109–351, title VII, § 726(11), Oct. 13, 2006, 120 Stat. 2002.) Page 886 TITLE 12—BANKS AND BANKING § 1782 Editorial Notes REFERENCES IN TEXT For definition of Canal Zone, referred to in text, see section 3602(b) of Title 22, Foreign Relations and Inter- course. Section 1404(e)(1)(A) of the Financial Institutions Re- form, Recovery, and Enforcement Act of 1989, referred to in subsec. (e)(3), is section 1404(e)(1)(A) of Pub. L. 101–73, which is set out as a note under section 1811 of this title. AMENDMENTS 2006—Subsec. (b)(5). Pub. L. 109–351 substituted ‘‘this chapter’’ for ‘‘section 1762 of this title’’. 1996—Subsec. (e). Pub. L. 104–208 added subsec. (e). 1984—Subsec. (b)(8). Pub. L. 98–369 inserted provisions relating to payment and maintenance of the deposit. 1978—Subsec. (a). Pub. L. 95–630, §§ 502(b), 504(a), sub- stituted ‘‘Board’’ for ‘‘Administrator’’ and ‘‘it’’ for ‘‘he’’, and inserted ‘‘, including the trust territories,’’ after ‘‘the several territories’’. Subsec. (b). Pub. L. 95–630, §§ 502(b), 504(b), substituted ‘‘Board’’ for ‘‘Administrator’’ wherever appearing and inserted in par. (7) ‘‘except for accounts authorized by State law for State credit unions’’ after ‘‘by the Board’’. Subsec. (c). Pub. L. 95–630, § 502(b), substituted ‘‘Board’’ for ‘‘Administrator’’ wherever appearing, and in par. (2) substituted ‘‘it’’ for ‘‘he’’ before ‘‘finds’’. Subsecs. (d), (e). Pub. L. 95–630, §§ 502(b), 504(c), struck out subsec. (d), redesignated subsec. (e) as (d) and sub- stituted ‘‘Board’’ for ‘‘Administrator’’. 1977—Subsec. (c)(3). Pub. L. 95–22 struck out par. (3) which provided for approval by Administrator of appli- cations of State credit unions for insurance of its mem- ber accounts where credit union meets requirements of this chapter and where in the event of liquidation of the credit union, the claims with respect to demand de- posit accounts shall be subordinate to the claims with respect to member accounts. 1971—Subsec. (c)(2). Pub. L. 92–221, § 1(a), substituted ‘‘disapproved’’ for ‘‘reject’’. Subsec. (c)(3). Pub. L. 92–221, § 2, added par. (3). Subsec. (d). Pub. L. 92–221, § 1(b), substituted provi- sions allowing, in certain cases, a two–year period to meet the requirements for insurance following the dis- approval of an application for insurance by a Federal credit union, for provisions mandating the suspension or revocation of the charter of a Federal credit union unless the credit union met the requirements for insur- ance and became an insured credit union within one year of the rejection of its application for insurance. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1996 AMENDMENT Pub. L. 104–208, div. A, title II, § 2615(c), Sept. 30, 1996, 110 Stat. 3009–479, provided that: ‘‘The amendments made by this section [amending this section and sec- tion 1828 of this title] shall apply on and after January 1, 1996.’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–630 effective on expiration of 120 days after Nov. 10, 1978, and transitional provi- sions, see section 509 of Pub. L. 95–630, set out as a note under section 1752 of this title. § 1782. Administration of insurance fund (a) Reports of condition (1) Each insured credit union shall make re- ports of condition to the Board upon dates which shall be selected by it. Such reports of condition shall be in such form and shall contain such in- formation as the Board may require. The report- ing dates selected for reports of condition shall be the same for all insured credit unions except that when any of said reporting dates is a non- business day for any credit union the preceding business day shall be its reporting date. The total amount of the member accounts of each insured credit union as of each reporting date shall be reported in such reports of condition in accordance with regulations prescribed by the Board. Each report of condition shall contain a declaration by the president, by a vice presi- dent, by the treasurer, or by any other officer designated by the board of directors of the re- porting credit union to make such declaration, that the report is true and correct to the best of such officer’s knowledge and belief. Unless such requirement is waived by the Board, the correct- ness of each report of condition shall be attested by the signatures of three of the officers of the reporting credit union with the declaration that the report has been examined by them and to the best of their knowledge and belief is true and correct. (2) The Board may call for such other reports as it may from time to time require. (3) The Board may require reports of condition to be published in such manner, not inconsistent with any applicable law, as it may direct. Any insured credit union which maintains proce- dures reasonably adapted to avoid any inad- vertent error and, unintentionally and as a re- sult of such an error, fails to submit or publish any report required under this subsection or sec- tion 1756 of this title, within the period of time specified by the Board, or submits or publishes any false or misleading report or information, or inadvertently transmits or publishes any report which is minimally late, shall be subject to a penalty of not more than $2,000 for each day dur- ing which such failure continues or such false or misleading information is not corrected. The in- sured credit union shall have the burden of prov- ing that an error was inadvertent and that a re- port was inadvertently transmitted or published late. Any insured credit union which fails to submit or publish any report required under this subsection or section 1756 of this title, within the period of time specified by the Board, or sub- mits or publishes any false or misleading report or information, in a manner not described in the 2nd preceding sentence shall be subject to a pen- alty of not more than $20,000 for each day during which such failure continues or such false or misleading information is not corrected. Not- withstanding the preceding sentence, if any in- sured credit union knowingly or with reckless disregard for the accuracy of any information or report described in such sentence submits or publishes any false or misleading report or in- formation, the Board may assess a penalty of not more than $1,000,000 or 1 percent of total as- sets of such credit union, whichever is less, per day for each day during which such failure con- tinues or such false or misleading information is not corrected. Any penalty imposed under any of the 4 preceding sentences shall be assessed and collected by the Board in the manner provided in section 1786(k)(2) of this title (for penalties imposed under such section) and any such as- sessment (including the determination of the amount of the penalty) shall be subject to the provisions of such section. Any insured credit