§ 28-7-1-9 — Powers; investments; maintenance of files; authority to purchase and hold life insurance

Indiana § 28-7-1-9

• Jurisdiction: Indiana
• Art. 7: SPECIALIZED FINANCIAL INSTITUTIONS
• Ch. 1: Credit Unions

Text

(a) A credit union has the following powers:
(1) To issue shares of its capital stock to its members. No
commission or compensation shall be paid for securing members
or for the sale of shares.
(2) To extend credit to officers, directors, or committee members
under section 17.2 of this chapter.
(3) 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) 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) Savings and loan associations, other credit unions that are
insured under section 31.5 of this chapter, 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) Shares or certificates of an open-end management
investment company registered with the Securities and
Exchange Commission under the Investment Company Act of
1940 (15 U.S.C. 80a-1 through 15 U.S.C. 80a-3 and 15 U.S.C.
80a-4 through 15 U.S.C. 80a-64), if all of the following
conditions are met:
(i) The fund's assets consist of and are limited to securities in
which a credit union may invest directly.
(ii) The credit union has an equitable and undivided interest
in the underlying assets of the fund.
(iii) The credit union is not liable for acts or obligations of the
fund.
(iv) The credit union's investment in any one (1) fund does
not exceed fifteen percent (15%) of the amount of the credit
union's net worth.
(J) For a credit union that is well capitalized (as defined in Part
702 of the Rules and Regulations of the National Credit Union
Administration, 12 CFR 702), investment securities, as may be
defined by a statute or a policy or rule of the department and
subject to the following:
(i) The department may prescribe, by policy or rule,
limitations or restrictions on a credit union's investment in
investment securities.
(ii) The total aggregate amount of investment securities
purchased or held by a credit union may never exceed at any
given time ten percent (10%) of the capital and surplus of the
credit union. However, the limitations imposed by this item
do not apply to investments in the direct or indirect
obligations of the United States or in the direct obligations of
a United States territory or insular possession, or in the direct
obligations of the state or any municipal corporation or taxing
district in Indiana.
(iii) A credit union may not purchase for its own account any
bond, note, or other evidence of indebtedness that is
commonly designated as a security that is speculative in
character or that has speculative characteristics. For the
purposes of this item, a security is speculative or has
speculative characteristics if at the time of purchase the
security is in default, is rated below the first four (4) rating
classes by a generally recognized security rating service, or
is otherwise considered speculative by the director.
(iv) A credit union may purchase for its own account a
security that is not rated by a generally recognized security
rating service if the credit union at the time of purchase
obtains financial information that is adequate to document the
investment quality of the security and if the security is not
otherwise considered speculative by the director.
(v) A credit union that purchases a security for its own
account shall maintain sufficient records of the security to
allow the security to be properly identified by the department
for examination purposes.
(vi) Except as otherwise authorized by this title, a credit
union may not acquire for its own account, whether by
purchase or otherwise, any share of stock of a corporation
that is not a subsidiary of that credit union unless the
acquisition is considered expedient to prevent loss from a
debt previously contracted in good faith. Any shares of stock
or other ownership interest in a corporation or another entity
thus acquired by a credit union and that would not have been
eligible for acquisition shall be sold and disposed of within
six (6) months from the date of acquisition unless the director
grants an extension of time for the sale and disposition.
(vii) Subject to items (i) through (iv), a credit union may
purchase yankee dollar deposits, eurodollar deposits, banker's
acceptances, deposit notes, bank notes with original weighted
average maturities of less than five (5) years, and investments
in obligations of, or issued by, any state or political
subdivision (including any agency, corporation, or
instrumentality of a state or political subdivision).
(K) Collateralized obligations that are eligible for purchase and
sale by federal credit unions. However, a credit union may
purchase for its own account and sell the obligations only to the
extent that a federal credit union can purchase and sell those
obligations.
(4) With the prior approval of the department, and subject to the
limitations of this subsection, a credit union may organize, invest
in, or loan money to a credit union service organization (as
defined in Part 712 of the regulations of the National Credit
Union Administration, 12 CFR 712). A credit union may not loan
or invest in a credit union service organization if the aggregate
amount of all such loans or investments in a particular credit
union service organization is greater than ten percent (10%) of the
capital, surplus, and unimpaired shares of the credit union without
the prior written approval of the department. A credit union may
organize, invest in, or loan money to a credit union service
organization described in this subdivision only if the following
requirements are met:
(A) The credit union service organization is adequately
capitalized or has a reasonable plan for adequate capitalization
if the credit union service organization is to be formed or is
newly formed.
(B) The credit union service organization is structured and
operated as a separate legal entity from the credit union.
(C) The credit union obtains a written legal opinion that the
credit union service organization is structured and operated in
a manner that limits the credit union's potential liability for the
debts and liabilities of the credit union service organization to
not more than the loss of money invested in or loaned to the
credit union service organization by the credit union.
(D) The credit union service organization agrees in writing to
prepare financial statements and provide the financial
statements to the credit union at least quarterly, and to the
department upon request.
(E) The credit union service organization agrees in writing to
obtain an audit of the credit union service organization from a
certified public accountant at least annually and provide a copy
of each audit report to the credit union, and to the department
upon request. A wholly owned credit union service organization
is not required to obtain a separate annual audit if the credit
union service organization is included in the annual
consolidated audit of the credit union that is the credit union
service organization's parent.
(F) The credit union service organization operates in
compliance with all applicable federal and state laws.
(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 a
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 account, a dormant
account, or a special account share accounts which have been
inactive, except for dividend credits, for a period of at least 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. A credit union
may rent excess space at the credit union's main office or branch
as a source of income.
(12) To establish branch offices upon:
(A) approval of the department; or
(B) meeting the department's established criteria to be exempt
from the department's approval;
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 the
purchasing credit union's 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 tax
advantaged savings plan which qualifies or qualified for specific
tax treatment under Section 223, 401(d), 408, 408A, or 530 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 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) To 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 a corporation (as defined in IC 28-1-8-0.5) and to assume the liabilities of the corporation, or to
sell, lease, exchange, or otherwise dispose of all or substantially
all of the credit union's property and assets to a corporation, if:
(A) the credit union complies with IC 28-1-8; and
(B) the transaction is authorized in accordance with IC 28-1-8-4.
(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 twenty percent (20%) 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
(0.1%) 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.
(b) A credit union shall maintain files containing credit and other
information adequate to demonstrate evidence of prudent business
judgment in exercising the investment powers granted under this
chapter or by rule, order, or declaratory ruling of the department.
(c) Subject to any limitations or restrictions that the department or
a federal regulator may impose by regulation, rule, policy, or guidance,
a credit union may purchase and hold life insurance as follows:
(1) Life insurance purchased or held in connection with employee
compensation or benefit plans approved by the credit union's
board of directors.
(2) Life insurance purchased or held to recover the cost of
providing preretirement or postretirement employee benefits
approved by the credit union's board of directors.
(3) Life insurance on the lives of borrowers.
(4) Life insurance held as security for a loan.
(5) Life insurance that a federal credit union may purchase or
hold under 12 CFR 701.19(c).
Formerly: Acts 1961, c.182, s.9; Acts 1969, c.133, s.2; Acts
1974, P.L.130, SEC.2; Acts 1975, P.L.44, SEC.6. As amended by Acts
1977, P.L.294, SEC.6; Acts 1979, P.L.267, SEC.1; Acts 1980, P.L.178,
SEC.1; Acts 1982, P.L.170, SEC.1; P.L.270-1983, SEC.3; P.L.52-1985,
SEC.9; P.L.2-1987, SEC.43; P.L.19-1987, SEC.45; P.L.8-1991,
SEC.30; P.L.14-1992, SEC.123; P.L.228-1993, SEC.2; P.L.263-1995,
SEC.7; P.L.188-1997, SEC.10; P.L.192-1997, SEC.17; P.L.11-1998,
SEC.16; P.L.62-1999, SEC.5; P.L.63-2001, SEC.15, P.L.81-2001,
SEC.4 and P.L.134-2001, SEC.17; P.L.258-2003, SEC.10;
P.L.73-2004, SEC.36; P.L.141-2005, SEC.13; P.L.213-2007, SEC.66;
P.L.217-2007, SEC.64; P.L.90-2008, SEC.41; P.L.35-2010, SEC.148;
P.L.89-2011, SEC.47; P.L.6-2012, SEC.196; P.L.27-2012, SEC.92;
P.L.137-2014, SEC.27; P.L.159-2017, SEC.35; P.L.69-2018, SEC.53;
P.L.129-2020, SEC.12.