1. (a) Funds not used in loans to members may be invested, pursuant to subsection (7) of Section 30 of this Act, and subject to Departmental rules and regulations:

   1. (1) In securities, obligations or other instruments of or issued by or fully guaranteed as to principal and interest by the United States of America or any agency thereof or in any trust or trusts established for investing directly or collectively in the same;
   2. (2) In obligations of any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the several territories organized by Congress, or any political subdivision thereof; however, a credit union may not invest more than 10% of its unimpaired capital and surplus in the obligations of one issuer, exclusive of general obligations of the issuer, and investments in municipal securities must be limited to securities rated in one of the 4 highest rating investment grades by a nationally recognized statistical rating organization;
   3. (3) In certificates of deposit or passbook type accounts issued by a state or national bank, mutual savings bank or savings and loan association; provided that such institutions have their accounts insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation; but provided, further, that a credit union's investment in an account in any one institution may exceed the insured limit on accounts;
   4. (4) In shares, classes of shares or share certificates of other credit unions, including, but not limited to, corporate credit unions; provided that such credit unions have their members' accounts insured by the NCUA or other approved insurers, and that if the members' accounts are so insured, a credit union's investment may exceed the insured limit on accounts;
   5. (5) In shares of a cooperative society organized under the laws of this State or the laws of the United States in the total amount not exceeding 10% of the unimpaired capital and surplus of the credit union; provided that such investment shall first be approved by the Department;
   6. (6) In obligations of the State of Israel, or obligations fully guaranteed by the State of Israel as to payment of principal and interest;
   7. (7) In shares, stocks or obligations of other financial institutions in the total amount not exceeding 5% of the unimpaired capital and surplus of the credit union;
   8. (8) In federal funds and bankers' acceptances;
   9. (9) In shares or stocks of Credit Union Service Organizations in the total amount not exceeding the greater of 6% of the unimpaired capital and surplus of the credit union or the amount authorized for federal credit unions;

   10. (10) In corporate bonds identified as investment grade by at least one nationally recognized statistical rating organization, provided that:

       1. (i) the board of directors has established a written policy that addresses corporate bond investment procedures and how the credit union will manage credit risk, interest rate risk, liquidity risk, and concentration risk; and
       2. (ii) the credit union has documented in its records that a credit analysis of a particular investment and the issuing entity was conducted by the credit union, a third party on behalf of the credit union qualified by education or experience to assess the risk characteristics of corporate bonds, or a nationally recognized statistical rating agency before purchasing the investment and the analysis is updated at least annually for as long as it holds the investment;
   11. (11) To aid in the credit union's management of its assets, liabilities, and liquidity in the purchase of an investment interest in a pool of loans, in whole or in part and without regard to the membership of the borrowers, from other depository institutions and financial type institutions, including mortgage banks, finance companies, insurance companies, and other loan sellers, subject to such safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time;
   12. (12) To aid in the credit union's management of its assets, liabilities, and liquidity by receiving funds from another financial institution as evidenced by certificates of deposit, share certificates, or other classes of shares issued by the credit union to the financial institution;
   13. (13) In the purchase and assumption of assets held by other financial institutions, with approval of the Secretary and subject to any safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time;
   14. (14) In the shares, stocks, or obligations of community development financial institutions as defined in regulations issued by the U.S. Department of the Treasury and minority depository institutions as defined by the National Credit Union Administration; however the aggregate amount of all such investments shall not at any time exceed 5% of the paid-in and unimpaired capital and surplus of the credit union;

   15. (15)

       1. (A) In shares, stocks, or member units of financial technology companies in the total amount not exceeding 2.5% of the net worth of the credit union, so long as:

          1. (i) the credit union would remain well capitalized as defined by 12 CFR 702.102 if the credit union reduced its net worth by the full investment amount at the time the investment is made or at any point during the time the investment is held by the credit union;
          2. (ii) the credit union and the financial technology company are operated in a manner that demonstrates to the public the separate corporate existence of the credit union and financial technology company; and
          3. (iii) the credit union has received a composite rating of 1 or 2 under the CAMELS supervisory rating system.
       2. (B) The investment limit in subparagraph (A) of this paragraph (15) is increased to 5% of the net worth of the credit union if it has received a management rating of 1 under the CAMELS supervisory rating system at the time a specific investment is made and at all times during the term of the investment. A credit union that satisfies the criteria in subparagraph (A) of this paragraph (15) and this subparagraph may request approval from the Secretary for an exception to the 5% limit up to a limit of 10% of the net worth of the credit union, subject to such safety and soundness standards, limitations, and qualifications as the Department may establish by rule or guidance from time to time. The request shall be in writing and substantiate the need for the higher limit, describe the credit union's record of investment activity, and include financial statements reflecting a sound fiscal history.

       3. (C) Before investing in a financial technology company, the credit union shall obtain a written legal opinion as to whether the financial technology company is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in the financial technology company and the legal opinion shall:

          1. (i) address factors that have led courts to "pierce the corporate veil", such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records; and
          2. (ii) be provided by independent legal counsel of the credit union.

       4. (D) Before investing in the financial technology company, the credit union shall enter into a written investment agreement with the financial technology company and the agreement shall contain the following clauses:

          1. (i) the financial technology company will:

             1. (I) provide the Department with access to the books and records of the financial technology company relating to the investment made by the credit union, with the costs of examining those records borne by the credit union in accordance with the per diem rate established by the Department by rule;
             2. (II) follow generally accepted accounting principles; and
             3. (III) provide the credit union with its financial statements on at least a quarterly basis and certified public accountant audited financial statements on an annual basis; and

          2. (ii) the financial technology company and credit union agree to terminate their contractual relationship:

             1. (I) upon 90 days' written notice to the parties by the Secretary that the safety and soundness of the credit union is threatened pursuant to the Department's cease and desist and suspension authority in Sections 8 and 61;
             2. (II) upon 30 days' written notice to the parties if the credit union's net worth ratio falls below the level that classifies it as well capitalized as defined by 12 CFR 702.102; and
             3. (III) immediately upon the parties' receipt of written notice from the Secretary when the Secretary reasonably concludes, based upon specific facts set forth in the notice to the parties, that the credit union will suffer immediate, substantial, and irreparable injury or loss if it remains a party to the investment agreement.
       5. (E) The termination of the investment agreement between the financial technology company and credit union shall in no way operate to relieve the financial technology company from repaying the investment or other obligation due and owing the credit union at the time of termination.
       6. (F) Any financial technology company in which a credit union invests pursuant to this paragraph (15) that directly or indirectly originates, purchases, facilitates, brokers, or services loans to consumers in Illinois shall not charge an interest rate that exceeds the applicable maximum rate established by the Board of the National Credit Union Administration pursuant to 12 CFR 701.21(c)(7)(iii)-(iv). The maximum interest rate described in this subparagraph that may be charged by a financial technology company applies to all consumer loans and consumer credit products; and
   16. (16) In derivatives transactions, to aid in the credit union's management of interest rate risk. Before entering into a derivatives transaction, and at all times during its management of a derivatives transactions program, a credit union shall satisfy and comply with all the requirements set forth in 12 CFR 703.101 et seq. All definitional terms and operational standards shall have the meanings given to them in 12 CFR 703.101 et seq., except references to federal credit unions shall be construed to mean Illinois-chartered credit unions, and references to the National Credit Union Administration and Regional Director shall be respectfully construed to mean the Department and the Secretary. A credit union with assets of at least $500 million and a CAMELS management component rating of 1 or 2 need not obtain prior approval from the Department before engaging in derivative transactions but shall notify the Secretary in writing or by electronic mail within 5 business days after entering into its first derivatives transaction.

2. (b) As used in this Section:

   "Political subdivision" includes, but is not limited to, counties, townships, cities, villages, incorporated towns, school districts, educational service regions, special road districts, public water supply districts, fire protection districts, drainage districts, levee districts, sewer districts, housing authorities, park districts, and any agency, corporation, or instrumentality of a state or its political subdivisions, whether now or hereafter created and whether herein specifically mentioned or not.

   "Financial institution" includes any bank, savings bank, savings and loan association, or credit union established under the laws of the United States, this State, or any other state.

   "Financial technology company" includes any corporation, partnership, limited liability company, or other entity organized under the laws of Illinois, another state, or the United States of America:

   1. (1) that the principal business of which is the provision of financial products or financial services, or both, that:

      1. (i) currently relate or may prospectively relate to the daily operations of credit unions;
      2. (ii) are of current or prospective benefit to the members of credit unions; or
      3. (iii) are of current or prospective benefit to consumers eligible for membership in credit unions; and
   2. (2) that applies technological interventions, including, without limitation, specialized software or algorithm processes, products, or solutions, to improve and automate the delivery and use of those financial products or financial services.
3. (c) A credit union investing to fund an employee benefit plan obligation is not subject to the investment limitations of this Act and this Section and may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit union's obligation under the employee benefit plan and the credit union holds the investment only for so long as it has an actual or potential obligation under the employee benefit plan.
4. (d) If a credit union acquires loans from another financial institution or financial-type institution pursuant to this Section, the credit union shall be authorized to provide loan servicing and collection services in connection with those loans.

(from Ch. 17, par. 4460)

(Source: P.A. 102-496, eff. 8-20-21; 102-774, eff. 5-13-22; 102-858, eff. 5-13-22; 103-154, eff. 6-30-23; 103-1034, eff. 8-9-24.)