To amend the Federal Credit Union Act provisions relating to any conversion of a credit union charter to a mutual savings bank or savings association charter, and for other purposes.

July 12, 2005

Mr. MCHENRY (for himself, Mr. TOWNS, Mr. GILLMOR, Mr. KING of New York, and Mr. SAM JOHNSON of Texas) introduced the following bill; which was referred to the Committee on Financial Services

To amend the Federal Credit Union Act provisions relating to any conversion of a credit union charter to a mutual savings bank or savings association charter, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Credit Union Charter Choice Act'.

SEC. 2. CONVERSIONS OF CREDIT UNIONS TO SAVINGS ASSOCIATIONS OR MUTUAL SAVINGS BANKS.

(a) In General- Section 205(b)(2) of the Federal Credit Union Act ( 12 U.S.C. 1785(b)) is amended--

(1) in subparagraph (G)--

(A) by striking `CONSISTENT RULES' in the heading of such subparagraph and all that follows through `, the Administration shall promulgate' (where such term appears in clause (i) of such subparagraph) and inserting `CONSISTENT RULES- The Board shall prescribe'; and

(B) by striking clause (ii);

(2) by redesignating subparagraphs (E), (F), and (G) (as amended by paragraph (1)) as subparagraphs (K), (L), and (M), respectively; and

(3) by striking subparagraph (D) and inserting the following new subparagraphs:

`(D) NOTICE OF PROPOSAL TO BOARD- An insured credit union that proposes to convert to a mutual savings bank or savings association under subparagraph (A) shall submit to the Board, or a designee of the Board, for review and approval by the Board or such designee a copy of the written notice, ballot and such other materials to be mailed to members pursuant to subparagraph (C).

`(E) CONTENTS OF NOTICE TO BOARD- In addition to the requirements of subparagraph (D), a notice submitted under such subparagraph shall include the following:

`(i) The date that the membership vote will be taken and the date by which ballots must be received by the inspector of elections to be counted.

`(ii) A brief statement of why the directors of the converting credit union are considering the conversion and the board's recommendation to the members of the credit union.

`(iii) A brief statement of the material effects of the conversion on the credit union, as converted, and the members of the credit union, including any differences in powers between a credit union and a mutual savings bank or savings association that the converting credit union deems to be material to such members.

`(F) RESTRICTIONS ON REGULATION OF CONTENT OF PROPOSED CONVERSION NOTICE TO MEMBERS- A converting credit union may not be required to include in the notice provided under subparagraph (C) any information or statements that--

`(i) are speculative with respect to the future operations, governance, or form of organization of the financial institution that will result from the conversion, or may occur after the completion of the conversion;

`(ii) are inaccurate with respect to a proposed conversion of the converting credit union or the application for a mutual savings bank or savings association charter filed in connection with the conversion;

`(iii) conflict with regulations of other financial regulators, including the Director of the Office of Thrift Supervision, related to the subsequent conversion of the resulting financial institution from mutual to stock form;

`(iv) distort the impact of conversion on the members of the credit union; or

`(v) are attributable to the Board or state the Board's position on conversions.

`(G) BOARD APPROVAL PROCESS-

`(i) IN GENERAL- The Board shall approve the materials submitted by the converting credit union pursuant to subparagraph (D) if such materials comply with the requirements of subparagraph (E), unless the Board determines that the conversion is being made to circumvent a pending supervisory action that is about to be or has been initiated by the Board or by the State board, commission, or authority having jurisdiction over the credit union, in the case of converting State-chartered credit union, because of a concern over the safety and soundness of the converting credit union.

`(ii) NOTICE WITHIN 30 DAYS- The Board, or the designee of the Board, shall provide the converting credit union with written approval of the materials submitted by a converting credit union pursuant to subparagraph (D) or comments thereto within 30 days of the initial receipt by the Board or such designee of such materials.

`(iii) REVISIONS TO NOTICE- Any revised materials filed with the Board by a converting credit union shall be acted upon by the later of the end of the 30-day period referred to in clause (ii) or the end of the 10-day period beginning when such revised materials are filed.

`(H) OTHER RESTRICTIONS ON THE BOARD-

`(i) PROHIBITION ON SUBMISSION AND REVIEW OF OTHER COMMUNICATIONS WITH MEMBERS- Other than the written materials being mailed to the converting credit union's members pursuant to subparagraph (C), the converting credit union shall not be required to submit any other communications involving the conversion to the Board for approval and the Board shall have no authority to regulate the content of any such communications.

`(ii) EXCEPTION FOR INCONSISTENT, MISLEADING, OR FALSE COMMUNICATIONS- Clause (i) shall not apply so as to to restrict the Board's authority to prevent or correct communications under subparagraph (C) that are inconsistent with the material facts contained in the notice of proposed conversion or are knowingly false or misleading.

`(iii) LIMITATION ON AUTHORITY TO REQUIRE NEW MEMBERSHIP VOTE- The Board shall not have the authority to require a new vote on the basis of the contents of the notice required under subparagraph (C) or any other communication from the converting insured credit union to the members of the credit union, unless the notice or communication contains a knowingly false statement that affects the outcome of a conversion vote.

`(I) CONDUCT AND SUPERVISION OF ELECTION-

`(i) SECRET BALLOT- The vote on the conversion shall be conducted by secret ballot.

`(ii) INDEPENDENT INSPECTOR OF ELECTION-

`(I) IN GENERAL- The converting credit union shall appoint an independent inspector of elections to receive and tally the votes cast on the conversion proposal.

`(II) INELIGIBLE PERSONS- The inspector shall not be an employee, officer, or director of the converting credit union or have a family relationship with any employee, officer or director of the credit union.

`(III) FAMILY RELATIONSHIP DEFINED- For purposes of subclause (II), the term `family relationship' means any relationship by blood, marriage or adoption, that is not more remote than first cousin.

`(iii) CERTIFICATION- The board of directors of the converting credit union shall certify to the Board (or the designee of the Board) and the Federal banking agency or the appropriate State bank supervisor (as such terms are defined in section 3 of the Federal Deposit Insurance Act) that will have jurisdiction over the institution after the conversion--

`(I) the results of the membership vote, based on the report of the inspector of elections, within 10 calendar days after the vote is taken or as promptly thereafter as possible; and

`(II) at the same time, that the notice, ballot and other written materials provided to members were identical in all material respects to those submitted to the Board (or the designee of the Board) pursuant to subparagraph (D) and approved by the Board or such designee.

`(J) RESTRICTION ON POST-ELECTION REVIEW OR APPROVAL- Absent fraud or reckless disregard for fairness during the voting process that affects the outcome of the vote, the Board shall have no further review or approval authority over the conversion process following the submission and review of the certification under subparagraph (I)(iii).'.

(b) Effective Date- The amendments made by this Act shall apply to all credit union conversions described in section 205(b)(2) of the Federal Credit Union Act that are pending on the date of the enactment of this Act and any conversion commenced on or after such date of enactment pursuant to a notice provided to the National Credit Union Administration Board in accordance with section 205(b)(2)(D) of the Federal Credit Union Act (as amended by subsection (a) of this section).

(c) Regulations- Before the end of the 60-day period beginning on the date of the enactment of this Act, the National Credit Union Administration Board shall publish proposed amendments to existing regulations of the Board governing conversions of insured credit unions to mutual savings banks or savings associations that are necessary to conform such regulations with the requirements of the amendments made by this Act.

END