N.Y. Banking Law § 456: Limitations upon powers

§ 456. Limitations upon powers. No credit union shall:

1. Pay any commission or compensation for securing members or for the

sale of its shares; except that such restrictions shall not prohibit a

credit union from issuing or selling shares to other state or federal

credit unions through deposit brokers, subject to any regulations

prescribed by the superintendent, nor pay any compensation to directors

or committee members except that directors and committee members may be

reimbursed for reasonable and proper costs incurred while carrying out

the responsibilities of their positions. Such reimbursement shall be

determined by the board of directors to be appropriate in carrying out

the official business of the credit union and shall be in accordance

with written policies and procedures, including documentation

requirements, established by the board of directors.

2. Make any loan to any member, if, upon the making of that loan, the

member would be indebted to the credit union upon loans made to, or

guaranteed or endorsed by, such member in an aggregate amount which

would exceed ten per centum of the capital and undivided profits of the

credit union.

3. Impose a fine, in case of failure of a member to make payments on

shares, exceeding two per centum per month or fraction of a month on

amounts due.

4. Permit any director, officer, employee, member of the credit

committee or supervisory committee to borrow directly or indirectly or

become surety for any loan or advance made by such credit union where

such loan or advance or aggregate loans or advances exceed twenty

thousand dollars, unless the loan or advance is fully secured in

accordance with criteria established by the board of directors or unless

the loan or advance is approved by a majority of the entire board of

directors. Such approval must be given in writing. Complete minutes of

such meeting shall be kept which shall include the names of all

directors present. The rate of interest or discount charged on any such

loan to a director, officer or member of the credit committee or

supervisory committee shall not be less than the rate of interest or

discount charged for loans of like character in the ordinary course of

business.

5. Issue any shares except as provided in subdivision one of section

four hundred fifty-four of this article, and unless there is printed

upon the certificate or other evidence of such shares the words

"Transferable only to qualified members."

6. Retain physical possession of a passbook or other evidence of

membership of any member except that the supervisory committee may

retain such passbook or other evidence of membership for a period not to

exceed ten days for the purpose of auditing the records of the credit

union.

7. Except in the case of a state or federal corporate credit union,

make any loan or other extension of credit to, or investment in the

shares of, any other credit union other than a state or federal

corporate credit union in an amount the aggregate of which shall exceed

twenty-five per centum of its assets or twenty-five per centum of the

assets of such other credit union; provided, however, that the

superintendent may approve a credit union's request to invest a higher

per centum of its assets in any other credit union; nor shall a credit

union issue or sell one or more shares to another credit union if, by

such issuance or sale, the aggregate of its shares held by other credit

unions will thereby exceed thirty per centum of its own assets;

provided, however, that the superintendent may approve a credit union's

request to issue or sell shares which aggregate a higher per centum of

its assets to other credit unions. Extension of credit to or investment

in the shares of another credit union or the issuance or sale of shares

to another credit union, under this subdivision, shall include credit

unions chartered by the federal government or federally insured credit

unions chartered by a state.

In the case of a corporate credit union, no loan shall be made to a

member credit union in an amount in excess of twenty percent of the

share capital of the corporate credit union.

8. Permit any member to withdraw any shares pledged as security for

any loan on which such member is liable as maker, endorser, guarantor or

surety except upon the prior written approval of a majority of the

credit committee or the loan officer. In any case, the amount of shares

in excess of the liability of such member as maker, endorser, guarantor

or surety, may be withdrawn without the approval of the credit committee

or the loan officer.

9. Make a loan to a member upon the security of a mortgage which is

not a first lien, unless such loan is in compliance with the regulations

of the superintendent of financial services. Such regulations may

include such restrictions as the superintendent of financial services

finds necessary and proper, including without limitation, a restriction

as to the percentage of total assets which may be invested in such

loans, a restriction on the loan-to-appraisal value of property securing

such loan, a restriction on the maximum amount to be loaned to each

member, and a limitation on such loans based upon share capital, as

determined by the superintendent of financial services.