On Aug. 16, Illinois Gov. Pat Quinn signed into law H.B. 1572,which amends the state's Credit Union Act to establish a fair andconsistent civil penalty assessment process. Both chambers of theIllinois General Assembly had previously passed the bill, with theSenate voting unanimously in favor of it on May 22, after the Housealso produced a unanimous vote April 11. After it gained Quinn'ssignature, the new rule went into effect immediately.

The Illinois' Department of Financial and ProfessionalRegulation already had the authority to impose civil penalties oncredit unions. The new law adds the requirement that the DFPRsecretary may only do so after he reasonably determines throughobjective facts and an accurate assessment of accurate legalstandards that a credit union has violated the Credit Union Act orDFPR orders. Penalties may also be assessed if a credit unionparticipates in any unsafe or unsound practices that have led tofinancial loss or created a reasonable probability that asubstantial financial loss will result.

Credit union directors, officers and committee members also willbe held responsible if the DFPR secretary determines through thenewly established civil penalty assessment process that a violationwas caused by their willful misconduct or material breach offiduciary duty, according to the new amendment.

 “In the short time since the civil penalty process hasbeen in place, interpretive issues have arisen regarding keyoperative terms,” the Illinois Credit Union League said in aprepared statement. “HB 1572 addresses those issues by addingsubstantive due process criteria to provide objective standards ofmateriality and quality assurance and a cure opportunity before anyassessment of a civil penalty.”

The new amendment also authorizes the DFPR secretary to assesscivil penalties if the financial loss or probable financial loss isequal to or greater than either 1% of the credit union's totalassets or 1% of the credit union's total gross income.

The DFPR may also post its civil penalty orders on its website,but only after the final administrative decision is made andadjudicated to finality.

The Illinois league said it worked with state Rep. Lou Lang(D-Skokie), who sponsored the bill in the Illinois House, DFPRActing Secretary Manny Flores and Division of FinancialInstitutions Credit Union Supervisor Francisco Menchaca to addresscredit union concerns.  “We are very pleased the IllinoisGeneral Assembly concurred with the sentiment expressed by ActingSecretary Manny Flores that the issuance of civil penalties shouldbe handled on a consistent and fair basis by all divisions withinthe Department,” said Stephen Olson, ICUL generalcounsel.