Indiana § 28-7-1-39 - Limits on loans to members; exceptions; prohibition against accepting compensation for procuring loan; exception for bona fide employment or compensation agreements; deadline for compliance

§ 28-7-1-39. Limits on loans to members; exceptions; prohibition against accepting compensation for procuring loan; exception for bona fide employment or compensation agreements; deadline for compliance

Sec. 39. (a) As used in this section, "loans and extensions of credit" includes all direct or indirect advances of funds made to a member on the basis of:

(1) an obligation of the member to repay the funds; or

(2) a pledge of specific property by or on behalf of the member and from which the funds advanced are repayable.

The term includes any contractual liability of a credit union to advance funds to or on behalf of a member, to the extent specified by the department. The term also includes any credit exposure to a person arising from a derivative transaction (as defined in 12 U.S.C. 84(b)(3)) between the credit union and the person.

(b) As used in this section, "member" includes an individual, a sole proprietorship, a partnership, a joint venture, an association, a trust, an estate, a business trust, a limited liability company, a corporation, a sovereign government, or an agency, instrumentality, or political subdivision of a sovereign government, or any similar entity or organization.

(c) Except as provided in subsection (e), the total loans and extensions of credit by a credit union to a member outstanding at any given time and not fully secured, as determined in a manner consistent with subsection (d), by collateral with a market value at least equal to the amount of the loan or extension of credit may not exceed fifteen percent (15%) of the capital and surplus of the credit union.

(d) Except as provided in subsection (e), the total loans and extensions of credit by a credit union to a member outstanding at any given time and fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations, at least equal to the amount of funds outstanding may not exceed ten percent (10%) of the capital and surplus of the credit union. The limitation in this subsection is separate from and in addition to the limitation set forth in subsection (c).

(e) The limitations set forth in subsections (c) and (d) are subject to the following exceptions:

(1) Loans or extensions of credit arising from the discount of commercial or business paper evidencing an obligation to the member negotiating it with recourse are not subject to any limitation based on capital and surplus.

(2) The purchase of bankers' acceptances of the kind described in 12 U.S.C. 372 and issued by a financial institution organized or reorganized under the laws of Indiana or any other state or the United States are not subject to any limitation based on capital and surplus.

(3) Loans or extensions of credit secured by bills of lading, warehouse receipts, or similar documents transferring or securing title to readily marketable staples are subject to a limitation of thirty-five percent (35%) of capital and surplus in addition to the general limitations if the market value of the staples securing each additional loan or extension of credit at all times equals or exceeds one hundred fifteen percent (115%) of the outstanding amount of the loan or extension of credit. The staples shall be fully covered by insurance whenever it is customary to insure such staples.

(4) Loans or extensions of credit secured by bonds, notes, certificates of indebtedness, or Treasury bills of the United States or by any other obligation fully guaranteed as to principal and interest by the United States are not subject to any limitation based on capital and surplus.

(5) Loans or extensions of credit to or secured by unconditional takeout commitment or guarantees of any department, agency, bureau, board, commission, or establishment of the United States or any corporation wholly owned directly or indirectly by the United States are not subject to any limitation based on capital and surplus.

(6) Loans or extensions of credit secured by a segregated deposit account in the lending credit union are not subject to any limitation based on capital and surplus.

(7) Loans or extensions of credit to any credit union, when the loans or extensions of credit are approved by the director of the department, are not subject to any limitation based on capital and surplus.

(f) Loans or extensions of credit arising from the discount of negotiable or nonnegotiable installment consumer paper that carries a full recourse endorsement or unconditional guarantee by the member transferring the paper are subject under this section to a maximum limitation equal to twenty-five percent (25%) of the capital and surplus, notwithstanding the collateral requirements set forth in subsection (d).

(g) If the credit union's files or the knowledge of the credit union's officers of the financial condition of each maker of consumer paper described in subsection (f) is reasonably adequate, and an officer of the credit union designated for that purpose by the board of directors of the credit union certifies in writing that the credit union is relying primarily upon the responsibility of each maker for payment of the loans or extensions of credit and not upon any full or partial recourse endorsement or guarantee by the transferor, the limitations of this section as to the loans or extensions of credit of each maker shall be the sole applicable loan limitations.

(h) Loans or extensions of credit secured by shipping documents or instruments transferring or securing title covering livestock or giving a lien on livestock when the market value of the livestock securing the obligation is not at any time less than one hundred fifteen percent (115%) of the face amount of the note covered are subject under this section, notwithstanding the collateral requirements set forth in subsection (d), to a maximum limitation equal to twenty-five percent (25%) of the capital and surplus.

(i) Loans or extensions of credit that arise from the discount by dealers in dairy cattle of paper given in payment for dairy cattle, which paper carries a full recourse endorsement or unconditional guarantee of the seller and that are secured by the cattle being sold, are subject under this section, notwithstanding the collateral requirements set forth in subsection (d), to a limitation of twenty-five percent (25%) of the capital and surplus.

(j) Except as otherwise provided, an officer, director, employee, or attorney of a credit union who stipulates for, receives, or consents or agrees to receive, any fee, commission, gift, or thing of value, from any person, for the purpose of procuring or endeavoring to procure for any member any loan from or the purchase or discount of any paper, note, draft, check, or bill of exchange by the credit union, commits a Class A misdemeanor. However, the prohibitions set forth in this subsection do not apply to a credit union's:

(1) bona fide employment agreements, including benefit or compensation plans; or

(2) compensation agreements with third party independent contractors.

(k) Except as otherwise provided in this chapter, any credit union that holds obligations of indebtedness in violation of the limitations prescribed in this section shall, not later than July 1, 2006, cause the amount of the obligations to conform to the limitations prescribed by this chapter and by the provisions of this section. The department may, in its discretion, extend the time for effecting this conformity, in individual instances, if the interests of the depositors will be protected and served by an extension. Upon the failure of a credit union to comply with the limitations, in accordance with this section or in accordance with any order of the department concerning the limitations, the department may declare that the credit union is conducting its business in an unauthorized or unsafe manner and proceed in accordance with IC 28-1-3.1-2.

(l) The department may apply the provisions of 12 CFR 32 in the application and administration of this chapter.

As added by P.L.141-2005, SEC.18. Amended by P.L.1-2006, SEC.493; P.L.90-2008, SEC.46; P.L.27-2012, SEC.94; P.L.159-2017, SEC.37.

IC 28-7-2Chapter 2. RepealedRepealed by Acts 1971, P.L.366, SEC.10.

IC 28-7-2.1Chapter 2.1. RepealedRepealed by P.L.258-1989, SEC.6.

IC 28-7-2.5Chapter 2.5. Conservatorship of Credit Unions

28-7-2.5-1Application of chapter 28-7-2.5-2Application of definitions 28-7-2.5-3Appointment of conservator; bond or security; eligible conservators 28-7-2.5-4Reimbursement of department; administrative expenses 28-7-2.5-5Possession of books, records, and assets; conservation of assets; powers and obligations of conservator; rights of parties 28-7-2.5-6Amounts available to members, depositors, and creditors; new shares, deposits, and assets; return of control to board 28-7-2.5-7Loans in aid of operation or reorganization; security 28-7-2.5-8Termination of conservatorship; appointment of receiver; liquidation 28-7-2.5-9Adoption of rules

IC 28-7-2.5-1Application of chapter Sec. 1. This chapter applies to a credit union (as defined in IC 28-7-1-0.5(3)).

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-2Application of definitions Sec. 2. Except as otherwise provided, the definitions in IC 28-7-1 apply throughout this chapter.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-3Appointment of conservator; bond or security; eligible conservators Sec. 3. (a) The department may appoint a conservator for a credit union if the department determines that:

(1) one (1) or more grounds for the appointment of a receiver under IC 28-1-3.1-2(a) exist with respect to the credit union; or

(2) the appointment of a conservator is necessary to conserve the assets of the credit union for the benefit of the members, depositors, and other creditors of the credit union.

(b) A conservator appointed under this section shall give any bond or security that the department considers appropriate.

(c) The department may appoint any of the following as a conservator under this section:

(1) A private insurance company authorized to insure deposits or share accounts in Indiana.

(2) The National Credit Union Administration or its successor.

(3) Any competent and disinterested person.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-4Reimbursement of department; administrative expenses Sec. 4. (a) A conservator appointed by the department under this chapter shall reimburse the department for all amounts expended by the department in connection with the conservatorship. Amounts reimbursed to the department under this subsection shall be paid from the assets of the credit union as administrative expenses. Upon approval of the department, the conservator shall pay all other administrative expenses of the conservatorship from the assets of the credit union.

(b) Administrative expenses described in this section constitute a first charge against the assets of the credit union. The conservator shall pay the administrative expenses in full before any:

(1) final distribution of the credit union's assets; or

(2) payment of dividends to members, depositors, and other creditors of the credit union.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-5Possession of books, records, and assets; conservation of assets; powers and obligations of conservator; rights of parties Sec. 5. (a) Under the direction of the department, a conservator appointed under this chapter shall:

(1) take possession of the books, records, and assets of the credit union; and

(2) take any action necessary to conserve the assets of the credit union pending:

(A) a liquidation under IC 28-1-3.1; or

(B) other disposition of the credit union's business as provided by law.

(b) A conservator appointed under this chapter:

(1) has all the rights, powers, and privileges of a receiver appointed under IC 28-1-3.1, except the power to liquidate a credit union; and

(2) is subject to those obligations and liabilities to which a receiver is subject, to the extent the obligations and liabilities are consistent with this chapter.

(c) Throughout the time a conservator is in possession of a credit union under this chapter, the rights of all parties with respect to the credit union are the same as if a receiver had been appointed under IC 28-1-3.1.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-6Amounts available to members, depositors, and creditors; new shares, deposits, and assets; return of control to board Sec. 6. (a) While a credit union is in conservatorship under this chapter, the department may require the conservator to set aside and make available for:

(1) withdrawal by members and depositors; or

(2) payment to other creditors;

on a pro rata basis, any amounts that, in the opinion of the department, may be safely and prudently used for the purposes described in subdivisions (1) through (2).

(b) The department may permit a conservator appointed under this chapter to receive new shares and deposits after the credit union is placed in conservatorship. Shares and deposits received by a conservator while a credit union is in conservatorship are not subject to any limitation with respect to payment or withdrawal. The conservator shall segregate any:

(1) shares or deposits; or

(2) new assets acquired on account of shares and deposits;

received after the credit union is placed in conservatorship from the shares, deposits, and assets held by the credit union at the time the credit union is placed in conservatorship.

(c) A conservator shall not use any shares, deposits, or assets received after the credit union is placed in conservatorship to:

(1) liquidate any indebtedness of the credit union existing at the time the credit union is placed in conservatorship; or

(2) pay any subsequent indebtedness incurred to liquidate any indebtedness of the credit union existing at the time the credit union is placed in conservatorship.

(d) Any shares or deposits received after a credit union is placed in conservatorship shall be:

(1) kept in cash;

(2) invested in direct obligations of the United States; or

(3) deposited in depository institutions designated by the department.

(e) If a credit union placed in conservatorship under this chapter is returned to the control of the credit union's board of directors, the protections provided under subsections (b), (c), and (d) (with respect to shares and deposits received while the credit union is in conservatorship) do not apply after fifteen (15) days after the date control of the credit union is returned to the board. Before returning control of the credit union to the credit union's board, the conservator shall publish a notice, in a form approved by the department, stating:

(1) the date on which the affairs of the credit union will be returned to the control of the credit union's board; and

(2) that the protections provided under subsections (b), (c), and (d) (with respect to shares and deposits received while the credit union is in conservatorship) do not apply after fifteen (15) days after the date identified under subdivision (1).

The conservator shall send, by United States mail, a copy of the notice to every person that purchased shares or deposited money in the credit union after the credit union is placed in conservatorship and before control of the credit union is returned to the credit union's board.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-7Loans in aid of operation or reorganization; security Sec. 7. With the prior approval of the department, a conservator appointed under this chapter may borrow money as necessary or expedient to aid in the operation or reorganization of the credit union. Any loan obtained by the conservator under this section may be secured by the pledge or mortgage of, or through a lien upon or security interest in, the assets of the credit union.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-8Termination of conservatorship; appointment of receiver; liquidation Sec. 8. (a) The department may:

(1) terminate a conservatorship ordered under this chapter; and

(2) permit the credit union subject to the conservatorship to resume the transaction of the credit union's business, subject to any terms, conditions, restrictions, and limitations that the department may prescribe;

if the department is satisfied that a termination of the conservatorship may be done safely and is in the public interest.

(b) Subject to subsection (c), the department may:

(1) terminate a conservatorship ordered under this chapter; and

(2) apply for the appointment of a receiver for the credit union under IC 28-1-3.1;

if the department determines that the appointment of a receiver for the credit union is in the public interest.

(c) If the department determines that the liquidation of a credit union placed in conservatorship under this chapter is in the public interest, the department shall:

(1) terminate the conservatorship ordered under this chapter; and

(2) apply for the appointment of a receiver for the credit union under IC 28-1-3.1.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-2.5-9Adoption of rules Sec. 9. The department may adopt rules under IC 4-22-2 to implement this chapter.

As added by P.L.10-2006, SEC.37 and P.L.57-2006, SEC.37.

IC 28-7-3Chapter 3. RepealedRepealed by Acts 1971, P.L.394, SEC.31.

IC 28-7-4Chapter 4. RepealedRepealed by Acts 1971, P.L.366, SEC.10.

IC 28-7-5Chapter 5. Pawnbrokers

28-7-5-1Citation 28-7-5-2Definitions 28-7-5-3Necessity of license; misleading representations; territorial application 28-7-5-4Application for license; business locations; criminal history; evidence of compliance; criminal background checks and credit histories 28-7-5-5Initial and renewal applications; fees; financial statement; proof of bond and insurance; standards; tax warrant list 28-7-5-5.5Surety bond; requirements; amount; termination; liability; notices 28-7-5-6Repealed 28-7-5-7Repealed 28-7-5-8Issuance and duration of license; evidence of compliance; denial of application; person not qualifying for license; replacement of manager 28-7-5-9License not transferrable or assignable; branch locations 28-7-5-9.1Change in control of licensee; application to department; time frame for department's decision; conditions for approval; duty of licensee to report transfer of securities; director's discretion to require new license 28-7-5-10Closing, opening, or relocating a branch; changes and events concerning licensees or applicants; notice to department required 28-7-5-10.1Ceasing business as a pawnbroker; requirements; appointment of liquidating agent; two month redemption period; partial payments by pledgers 28-7-5-10.4Carrying on other business 28-7-5-10.5Repealed 28-7-5-10.6Felony convictions or pleas; notice to department 28-7-5-11License renewal; application; fees 28-7-5-12Repealed 28-7-5-13Suspension or revocation of license; order to show cause; order of suspension or revocation; surrender of license; existing obligations; emergency order for revocation 28-7-5-13.1Failure to file renewal form or pay renewal fee; revocation or suspension of license 28-7-5-14Repealed 28-7-5-15Investigatory and enforcement authority; costs of investigation; voided loans 28-7-5-15.1Applicability of law governing administrative orders and procedures; venue 28-7-5-16Books, accounts, and records; examination and costs; bills of sale; purchase of precious metal; record of control; examination of vendors 28-7-5-17Report; late fee 28-7-5-18Repealed 28-7-5-19Loan record requisites; data recording methods 28-7-5-20Signature and thumbprint of pledger; electronic record 28-7-5-21Pawn ticket; duty of reasonable care in safekeeping of articles 28-7-5-21.5Required disclosure of information 28-7-5-22Presumptive right of ticket holder to redeem; compliance with local ordinance or law concerning pledge retention 28-7-5-23Redemption by mail; compliance with local ordinance or law concerning pledge retention 28-7-5-24Partial payment before maturity 28-7-5-25Loss, destruction, or theft of pawn ticket 28-7-5-26Alteration of pawn ticket; effect 28-7-5-27Repealed 28-7-5-28Rate of interest; calculation for partial month; minimum term; reduction in advance; penalty for excessive or unauthorized interest or charges 28-7-5-28.5Additional charge; servicing fee 28-7-5-29Liability for loss to pledger; due care 28-7-5-29.5Waiver of rights not permitted 28-7-5-30Two month redemption period; public access prohibited; unredeemed property subject to sale 28-7-5-31Repealed 28-7-5-32Repealed 28-7-5-33Lien 28-7-5-34Delivery of pledge; necessity of surrender of pawn ticket 28-7-5-35Conflicting claims; sale of pledge subject to adjudication 28-7-5-36Unlawful transactions 28-7-5-37Violations 28-7-5-37.5Compliance with money laundering laws; investigation and enforcement by the department 28-7-5-38Violations; civil action; injunctive relief; civil penalties 28-7-5-38.1Violations; civil penalty 28-7-5-39Confidentiality of records; exceptions; safeguarding of personal records; release of information to supervisory agencies