Washington Senate Bill Report EHB 1165 (Feb. 10, 2022)

Summary

A Senate Bill Report on EHB 1165, an act relating to the Washington credit union act, prepared as of February 10, 2022 by staff of the Senate Committee on Business, Financial Services & Trade. The bill is sponsored by Representatives Ryu, Vick, Santos, Hoff and Harris-Talley and passed the House 84-13. The report gives background on state-chartered credit unions, their powers, service charges and real property investments. It summarizes the bill as clarifying the definition of small credit unions, letting credit unions charge non-members and cash checks for eligible persons, and permitting equity investments of up to 2.5 percent of net worth, rising to 5 percent beginning January 1, 2025. It also removes the requirement to partially occupy property acquired for future expansion; the report lists no appropriation.

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                             SENATE BILL REPORT
                                  EHB 1165

                                     As of February 10, 2022

Title: An act relating to the Washington credit union act.

Brief Description: Concerning the Washington credit union act.

Sponsors: Representatives Ryu, Vick, Santos, Hoff and Harris-Talley.

Brief History: Passed House: 1/26/22, 84-13.
     Committee Activity: Business, Financial Services & Trade: 3/16/21, 3/18/21 [DPA];
         2/17/22.


                                     Brief Summary of Bill
           • Allows credit unions to acquire real property without occupying the
             property within a designated period of time.
           • Authorizes credit unions to invest in the equity interest of corporations
             that are engaged in or planning activity that is incidental or
             complementary to the credit union's operations.
           • Modifies certain powers and authorities of state-chartered credit unions.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: Credit unions are cooperative, nonprofit organizations created for promoting
     thrift among their members and providing a source of credit to them. Credit unions may be
     chartered under state or federal law. The National Credit Union Administration regulates
     federally chartered credit unions.

     The Department of Financial Institutions (DFI) regulates state-chartered credit unions.
     State law provides for the organization, regulation, and examination of state-chartered credit




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                        EHB 1165
     unions. The director of the DFI (director) may, by rule, provide relief from certain state
     laws and rules to small credit unions, which are defined as credit unions with up to $10
     million in total assets. There are no credit unions with less than $10 million in total assets.

     Credit Union Authority. State-chartered credit unions have all of the powers and authorities
     held by federal credit unions on December 31, 1993, or a subsequent date not later than July
     28, 2019. State credit unions may have all of the powers and authorities held by federal
     credit unions after that date, if the director finds the exercise of the power and authority
     serves the convenience and advantage of credit union members and maintains the fairness
     of competition and parity between state credit unions and federal credit unions. State credit
     unions also have all powers and authorities of out-of-state credit unions, except
     membership, so long as insurance and other requirements are met.

     Credit Union Services and Charges. Credit unions may provide a variety of financial
     services to members, including accepting deposits, making loans, and paying interest or
     dividends. Credit unions may impose reasonable charges for services provided to members.

     Real Property Interests. With some limitations, credit unions may invest in real property or
     leasehold interests if used in conducting its business or the business of a credit union
     services organization. Credit unions must partially occupy real property acquired for future
     expansion within three years of the investment if property improvements are made at the
     time of acquisition, or within six years if no improvements are made.

     Summary of Bill: Definition of Small Credit Unions. The definition of small credit unions
     is clarified. For the purposes of defining these entities as they relate to generally accepted
     accounting principles, small credit unions will continue to be defined as having assets of
     $10 million or less. The director is provided the authority to determine the definition of a
     small credit union when making any rule to provide relief to small credit unions.

     Credit Union Authority. Credit unions may impose reasonable charges for the services it
     provides to both members and non-members. The list of services that a credit union can
     provide is expanded to include cashing checks, money orders, and other payment
     instruments for members and persons who are eligible for membership in the credit union.

     State-chartered credit unions may have all of the powers and authorities held by federal
     credit unions as of December 31, 1993, or a subsequent date not later than the effective date
     of this act.

     Equity Interest in Organizations. Subject to prior authorization from DFI, credit unions are
     permitted to invest equity interests in corporations or other entities regardless of whether the
     principle business of the entity is related to the credit union's business. The entity must be
     engaged in activity that is incidental to or complementary to the credit union's operations.
     Until January 1, 2025, the initial aggregate amount of funds invested in an entity is not to
     exceed 2.5 percent of the net worth of the credit union. Beginning January 1, 2025, the


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     percentage of a credit union's net worth is increased from 2.5 percent to 5 percent.

     Credit unions are not allowed to invest in depository institutions or holding companies.

     Real Property Interests. The requirement that credit unions partially occupy property
     acquired for future expansion within a designated amount of time from acquisition is
     removed.

     Appropriation: None.

     Fiscal Note: Not requested.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.




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