California AB 2862: Credit unions: investments and exemptions.

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 |Add To My Favorites | Version: 09/05/18 - Chaptered
 08/24/18 - Enrolled
 08/06/18 - Amended Senate
 06/11/18 - Amended Senate
 03/12/18 - Amended Assembly
 02/16/18 - Introduced

 AB-2862 Credit unions: investments and exemptions.(2017-2018)

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 Date Published: 09/05/2018 09:00 PM

AB2862:v94#DOCUMENTBill Start

 Assembly Bill

 No. 2862

 CHAPTER 267

 An act to amend Sections 14400, 14456, 14807, 14900, 14959, and 17006 of, to add Sections 14657 and 14659 to, and to repeal Section 14862 of, the Financial Code, relating to credit unions.

 [
 Approved by

 Governor
 September 05, 2018.

 Filed with

 Secretary of State
 September 05, 2018.
 ]

LEGISLATIVE COUNSEL'S DIGEST

AB 2862, Limón.
 Credit unions: investments and exemptions.

(1) The California Credit Union Law provides for the regulation of credit unions by the Commissioner of Business Oversight. This law permits a credit union to make certain investments, including, among others, investing in securities and other specified assets and investments authorized by the commissioner. Under existing law, except as otherwise provided, a willful or knowing violation of this law is a crime.

This bill would authorize a credit union to invest in charitable donation accounts or CDAs, which would be a hybrid charitable and investment vehicle satisfying specified conditions. The bill would specify that if a credit union invests in a CDA that satisfies these conditions, then it is not restricted by other investment limitations on credit unions. The bill, among other conditions, would limit the book value of a
 credit union’s investments in all CDAs to no more than 5% of the credit union’s net worth, would require the assets of a CDA to be held in a segregated custodial account or special purpose entity, and would require the credit union to distribute a minimum of 51% of the account’s total return on assets over a 5-year period to qualified charities, as specified.

The bill would also authorize a credit union that is investing to fund an employee benefit plan obligation to purchase an investment that otherwise would be impermissible if the investment is directly related to the credit union’s obligation or potential obligations under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan.

Existing law authorizes a credit union to participate in loans made to its members jointly with other credit unions, corporations, or
 financial organizations. Existing law also permits a credit union to participate in a loan originated by another credit union, which is made to a member of the originating credit union even though the member is not also a member of the credit union participating in the loan.

This bill would instead authorize a credit union to purchase and sell loans made to its members from any source. The bill would also authorize a credit union to purchase a loan originated by another credit union, made to a member of the originating credit union, even though the member is not a member of the credit union purchasing the loan. The bill would also permit a credit union to purchase a loan from any source if the purchase will facilitate the purchasing credit union’s packaging of a pool of loans to be sold or pledged on the secondary market.

Existing law requires the board of directors of a credit union to establish a written savings capital
 structure policy that sets out the various terms and conditions upon which credit union shares may be issued, paid for, transferred, and withdrawn. Existing law authorizes the board of directors to declare dividends according to the intervals, formula, and periods provided in the policy. Existing law also requires that the savings capital of a credit union consist of the payments made by members on shares as set forth in the savings capital structure policy.

This bill would eliminate those provisions and make related conforming changes.

To the extent that the bill would expand the scope of a crime under the California Credit Union Law, the bill would impose a state-mandated local program.

(2) The Escrow Law provides for the licensure and regulation of escrow agents by the Commissioner of Business Oversight. This law exempts from its provisions any person doing
 business under any