Modernizing the Credit Unions and Caisses Populaires Act

PART VIII
BUSINESS POWERS

Permitted Business Activities

Permitted activities

      173. Subject to this Act, a credit union shall not engage in or carry on a business or business activity other than the following businesses, business activities and such others as may be authorized by this Act or prescribed:

           1.    Provide financial services primarily to its members, depositors, subsidiaries and affiliates.

           2.    Hold and deal with real property.

           3.    Act as a custodian of property on behalf of its members, depositors, subsidiaries and affiliates.

           4.    Provide administrative, educational, promotional, technical, research and consultative services to its members, depositors, subsidiaries and affiliates.

           5.    Make loans to officers and employees of the credit union.

           6.    Repeal

           7.    Repeal

Restrictions on Powers

Ancillary businesses

      174. (1) A credit union shall not deal in goods or engage in any trade or business except as authorized by this Act or the regulations as prescribed.  1994, c. 11, s. 174 (1).

Same

      (2) Despite subsection (1), a credit union may, with the Superintendent's written approval, deal in goods or engage in any trade or business that is reasonably ancillary to the provision of financial services.  1994, c. 11, s. 174 (2); 1997, c. 28, s. 53.

Prohibition re financial services

      (3) A credit union shall not provide financial services that are prohibited by the regulations prescribed as prohibited.

Networking

      (4) Subject to this Act, a credit union may act as an agent for a subsidiary or other prescribed persons or entities in respect of the provision of services to the credit union's members, depositors, affiliates and other subsidiaries and refer members, depositors, affiliates or subsidiaries to one of its subsidiaries or other prescribed persons or entities.  1994, c. 11, s. 174 (3, 4).

Restriction re partnerships

      175. (1) A credit union shall not be a general partner in a limited partnership or a partner in any other partnership.  1994, c. 11, s. 175 (1).

Exception

      (2) Despite subsection (1), the Superintendent may authorize a credit union to become a general partner in a limited partnership or a partner in another partnership. 1994, c. 11, s. 175 (2); 1997, c. 28, s. 53.

Restrictions on insurance

      176. (1) A credit union may undertake the business of insurance or act as an agent for any person in placing insurance only to the extent permitted by the regulations.

Savings

      (2) Nothing in this section precludes a credit union from,

         (a)    requiring insurance to be placed by a member for the security of the credit union; or

         (b)    obtaining group insurance for its employees, its members or the employees of a subsidiary.

Same

      (3) Nothing in this section precludes a league from obtaining group insurance for its employees, its members or the employees of its members or of a subsidiary.

No pressure

      (4) A credit union shall not exercise pressure on a member to place insurance for the security of the credit union with any particular insurance company.

Insurance requirement

      (5) A credit union may require that any insurance chosen by a member meet with its approval.

Same

      (6) The approval required under subsection (5) shall not be unreasonably withheld.

Interpretation

      (7) For the purpose of this section, the business of insurance includes the issuing of an annuity where the liability thereon is contingent on the death of a person. 1994, c. 11, s. 176.

Restrictions on fiduciary activities

      177. A credit union may undertake fiduciary activities only to the extent permitted by the regulations.  1994, c. 11, s. 177.

Guarantees

      178. (1) A credit union may not guarantee the payment of money on behalf of another person unless,

         (a)    it is a fixed sum of money, with or without interest thereon; and

         (b)    the person has an unqualified obligation to reimburse the credit union for the full amount being guaranteed.  1994, c. 11, s. 178 (1).

Authorization by the Corporation

      (2) Despite subsection (1), the Corporation may authorize a credit union to guarantee a payment in circumstances other than those described in that subsection.

Conditions

      (3) A guarantee is subject to such conditions and restrictions as may be prescribed.

Limit on amount

      (4) The aggregate value of a credit union's guarantees together with those of its subsidiaries must not exceed a prescribed per cent of the regulatory capital and deposits of the credit union.  1994, c. 11, s. 178 (3, 4).

Exemption

      (5) The Superintendent may exempt The Corporation may exempt a credit union from the limit under subsection (4) on the aggregate value of guarantees.  1994, c. 11, s. 178 (5); 1997, c. 28, s. 53.

Non-application

      (6) Subsection (1) does not apply in the case of an indemnity under section 157.

Non-application of cl. (1) (a)

      (7) Clause (1) (a) does not apply with respect to a guarantee given by a credit union on behalf of a league or a financial institution that is a member of the Canadian Payments Association if the payment guaranteed represents the obligation of the league or financial institution to settle for payment items in accordance with the by-laws and rules of the Canadian Payments Association or such other guarantees as may be prescribed.

Appointment of receiver, etc

      179. A credit union shall not give a person the right to appoint a receiver or a receiver and manager of the property or business of the credit union.

Deposits

Deposits accepted from members, etc.

      180.(1) A credit union may accept deposits only from,

         (a)    its members;

         (b)    the Corporation;

         (c)    Her Majesty in right of Canada or of a province;

         (d)    an agency of Her Majesty in right of either Canada or of a province;

         (e)    the government of a foreign country;

          (f)    a political subdivision or an agency of a government of a foreign country;

         (g)    municipalities;

         (h)    crown agencies;

          (i)    entities directly funded by the federal government, a provincial government or a municipality;

          (j)    leagues;

          (j.1)    subject to any restrictions in the by-laws of the credit union, persons who have not become members of the credit union but whose deposit accounts were acquired by the credit union as a result of the purchase of all or part of the business of another financial institution that is not a credit union;

         (k)    other persons or entities approved by the Superintendent.  1994, c. 11, s. 180; 1997, c. 28, s. 53.

Authority to accept deposits

      (2) credit union may, without the intervention of another person,

      (a) accept a deposit from a person referred to in subsection (1) whether or not the person is qualified by law to enter into contracts; and

      (b) pay all or part of the principal of the deposit and all or part of the interest earned on the deposit to or to the order of that person.

Exception

      (3) Clause (2) (b) does not apply if, before the payment is made, the money deposited with the credit union is claimed by another person,

      (a) in an action or proceeding to which the credit union is a party and in respect of which service of a claim or other process originating that action or proceeding has been made on the credit union; or

      (b) in an action or proceeding pursuant to which an injunction or order made by the court requiring the credit union not to make payment of that money or to make payment of it to some person other than the depositor has been served on the credit union.

Same

      (4) In the case of a claim referred to in subsection (3), the money may be paid to the depositor only with the consent of the claimant or to the claimant only with the consent of the depositor.

RRSPs for employees of a member

      (5) Despite subsection (1), a credit union may accept deposits for RRSPs for employees of a member if the member was involved in the establishment of the RRSPs at the credit union and the member makes payments into the RRSPs on behalf of the employees.

Application of other provisions

      (6) Subsections (2), (3) and (4) apply, with necessary modifications, with respect to employees referred to in subsection (5).

Definition

      (7) In subsection (5),

     "RRSPs" means registered retirement savings plans within the meaning of subsection 146 (1) of the Income Tax Act (Canada).

Not bound by trust

      181. (1) A credit union is not bound to see to the execution of any trust to which any deposit is subject.

Application, payment when credit union has notice of trust

      (2) Subsection (1) applies whether the trust is express, implied or constructive and applies even when the credit union has notice of the trust if the credit union acts on the order of or under the authority of the holder or holders of the account into which the deposit is made.

Unclaimed deposits

      182. (1) If ten years have elapsed since the day on which the last transaction by a depositor took place on the depositor's account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall pay the amount on deposit to the Minister.

Obligation discharged

      (2) Payment to the Minister discharges the credit union from all liability in respect of the amounts held.       

Payment by Minister

      (3) The Minister shall pay the amount received under subsection (1) to a person claiming to be entitled to it upon being furnished with satisfactory evidence of the person's entitlement.

Two-year notice

      (4) If two years have elapsed since the day on which the last transaction by a depositor took place on the depositor's account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall mail a notice to the depositor, at the depositor's last known address, notifying the depositor that the deposit remains unpaid.

Five-year notice

      (5)  If five years have elapsed since the day on which the last transaction by a depositor took place on the depositor's account or a statement of account was last requested or acknowledged by the depositor, whichever is latest, the credit union shall mail a notice to the depositor, at the depositor's last known address, notifying the depositor that the deposit remains unpaid.

Application despite other Act

      (6) This section applies despite the provisions of any other Act that would apply with respect to the disposition of an unclaimed and unpaid amount on deposit and the provisions of any such other Act shall not apply with respect to such an amount.

Debt Obligations

Borrowing

      183. (1) A credit union may borrow only if authorized to do so by its by-laws.

Scope of authority

      (2) The by-laws may authorize the credit union to borrow money at such rates of interest and on such conditions as the board may determine.

Limit on amount

      (3) A credit union shall not borrow an aggregate amount exceeding 50 per cent of its regulatory capital and deposits or such lesser amount as may be established by its by-laws.

Approval of by-law

      (4) Repeal

Limit on amount

      (5) Repeal

Same

      (6) Repeal

Security interests in credit union property

      184.(1) A credit union may create a security interest in property of the credit union only as allowed under subsection (3), (4), (6), (7) or (8).

No security interests to restricted parties

      (2) Despite subsections (3), (4), (6), (7) and (8), a credit union shall not grant a security interest to a restricted party of the credit union.

General authority, approval by the Corporation

      (3) A credit union may grant a security interest in property of the credit union to secure an obligation of the credit union if the obligation and the security interest are authorized by the credit union's by-laws and approved, in writing, by the Corporation.

Grant for short term needs

      (4) Subject to subsection (5), a credit union may grant a security interest in property of the credit union in a prescribed class of property if,

      (a) the security interest is security for money borrowed, or a debt obligation issued, to enable the credit union to meet a short term need for liquid funds arising from its operations; and

      (b) the money is owed to, or the debt obligation is to, a financial institution, the Corporation or a prescribed person or entity.

Aggregate limit on certain grants

      (5) The aggregate value of the property in which security interests are granted under subsection (4) shall not exceed the prescribed amount.

Grant if credit union under administration

      (6) A credit union under administration may grant a security interest in property of the credit union as security for money owed to, or a debt obligation to, the Corporation.

Grant relating to government savings bonds

      (7) A credit union may grant a security interest in the property of the credit union to the Government of Canada with respect to the sale of Canada Savings Bonds or the Government of Ontario with respect to the sale of Ontario Savings Bonds

Grant - other prescribed cases

      (8) A credit union may grant a security interest in the property of the credit union in such circumstances, or in relation to such transactions, as may be prescribed

Definition of terms

      (9) In this section,

      "restricted party" and "short term" have the meanings given to those expressions in the regulations.

Notice re acquisitions subject to security interests

     185. (1) A credit union shall notify the Corporation in writing if it acquires, other than by way of realization on the security for a loan, a beneficial interest in property that is subject to a security interest.

      Subject to section 184, a credit union may pledge any of its assets as security for money owed by, or a debt obligation of, the credit union if,

         (a)    the money was borrowed or the debt obligation was issued to enable it to meet a short term need for liquid funds arising from its operations;

         (b)    the total amount borrowed in relation to which the assets are pledged does not exceed 50 per cent of its capital and deposits; and

         (c)    the money is owed to a league, a bank listed in Schedule I or II to the Bank Act (Canada), a loan corporation or trust corporation registered under the Loan and Trust Corporations Act, the deposit insurer or a prescribed person or entity.

Saving

      (2) Section 184 does not apply to prevent a pledge of assets to the Government of Canada with respect to the sale of Canada Savings Bonds or in the context of such other transactions as may be prescribed.

Restriction

      (3) A credit union shall not pledge any of its assets to a restricted party of the credit union.  1994, c. 11, s. 185 (1-3).

Notice re acquisitions

      (4) A credit union shall notify the Superintendent in writing of any beneficial interest in property acquired by the credit union, other than by way of realization, that is subject to a security interest. 1994, c. 11, s. 185 (4); 1997, c. 28, s. 53.

Exceptions

      (5) Subsections (1) and (4) and section 184 do not apply with respect to the pledging of such classes of personal property as are prescribed or with respect to property with an aggregate value less than a prescribed amount.

Definition

      (6) For the purposes of this section,

"restricted party" has the meaning given to that expression by the regulations.  1994, c. 11, s. 185 (5, 6).

Restrictions on subordinated indebtedness

      186. (1) A credit union shall not issue subordinated indebtedness unless it is fully paid for in money or, with the approval of the Superintendent, in property.  1994, c. 11, s. 186 (1); 1997, c. 28, s. 53.

References to subordinated indebtedness

      (2) No person shall, in any prospectus, offering statement, advertisement, correspondence or literature relating to any subordinated indebtedness issued or to be issued by a credit union, refer to the subordinated indebtedness other than as subordinated indebtedness.

Not a deposit

      (3) Subordinated indebtedness issued by a credit union is not considered to be a deposit.

Other currencies

      (4) When issuing subordinated indebtedness, a credit union shall provide that any aspect of the subordinated indebtedness relating to money or involving the payment of or the liability to pay money in relation to the subordinated indebtedness be in Canadian currency.  1994, c. 11, s. 186 (2-4).

Limit on borrowing

      187. (1) The Corporation may inquire into the borrowing of a credit union and may, by order, limit the credit union's authority to borrow money.

Reasons to be given

      (2) The Corporation shall set out the reasons for its decision in the order.

Effect

      (3) The credit union shall not exercise its borrowing power in excess of any limit set out in the order of the Corporation.

Procedural rules

      (4) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (5) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

 

Restriction on borrowing from another credit union

      188. No credit union shall borrow money from another credit union without the written approval of the Corporation.

Monitoring by board

      189. Repeal

Investment and Lending Policies and Procedures

Investment and lending policies

      190.  (1) A credit union shall establish investment and lending policies for the credit union and the credit union shall adhere to those policies.

Policies to be prudent

      (2) The investment and lending policies of a credit union shall consist of policies, standards and procedures that a reasonable and prudent person would apply in respect of a portfolio of investments and loans in order to avoid undue risk of loss and obtain a reasonable return.

Approval and review by board

      (2.1) The investment and lending policies of a credit union are subject to the approval of the board and the board shall review the policies at least once each year.

Order if policies inadequate, etc.

      (3) If the Corporation considers the investment and lending policies of the credit union to be inadequate or imprudent, the Corporation may order the credit union to cease investing or lending as specified in the order until the policies are amended in accordance with the order.

Procedural rules

      (4) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (5) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

Investment and lending policy

      191. Repeal

Changes required by Superintendent

      192. Repeal

Loans

Restrictions re loans

      193. Repeal

Loans to members only

      194. (1) A credit union shall loan money only,

      (a) A credit union shall loan money only,

      (b) by participating in a loan syndication in which the borrower is a member of a credit union that is one of the lenders in the loan syndicate.

Exception - loans acquired by purchase

      (2) If a credit union acquires a loan as a result of a purchase of all or part of the business of another financial institution, the credit union may continue that loan, despite subsection (1), for one year after the loan is acquired or, if the loan is for a specified term, until the end of that term.

Exception

      (3) Subsection (2) does not apply to a loan less than a given amount if,

         (a)    the by-laws provide that loans under the given amount need not be subject to the board's approval; and

         (b)    the Superintendent has approved that provision in the by-laws.  1994, c. 11, s. 194 (3); 1997, c. 28, s. 53.

Prescribed lending limits

      195. (1) A credit union shall not make loans in excess of such lending limits as may be prescribed or as may be ordered under subsection (2) or (5).  1994, c. 11, s. 195 (1).

Lowering lending limits

      (2) On application by a credit union, the Superintendent may, on terms specified by the Superintendent, grant a variation from a prescribed lending limit and may impose a higher or lower limit if satisfied that there are reasonable grounds for the variation.  1994, c. 11, s. 195 (2); 1997, c. 28, s. 53.

Lowering lending limits

      (2) The Corporation may, by order, lower a credit union's lending limits if the Corporation believes on reasonable grounds that the credit union's current lending limits may adversely affect the interests of the credit union's members, depositors or shareholders.

Procedural rules

      (3) Section 240.1 applies with respect to an order under subsection (2).

Appeal to Tribunal

      (4) The credit union that is subject to an order under subsection (2) may appeal the order to the Tribunal in accordance with section 240.4.

Raising lending limits

      (5) On application by a credit union, the Corporation may, by order on terms specified in the order, raise the credit union's lending limits if the Corporation is satisfied there are reasonable grounds for doing so.

Lending licence

      196. Repeal

Loan workouts

      197. (1) Despite anything in this Part, if a credit union has made a loan and a default has occurred, the credit union may, subject to the agreement between the credit union and entity governing the loan, acquire,

         (a)    if the entity is a body corporate, all or any of the shares of the body corporate;

         (b)    if the entity is an unincorporated entity, all or any of the ownership interests in the entity;

         (c)    all or any of the shares or all or any of the ownership interests in any entity that is an affiliate of the entity; or

         (d)    all or any of the shares of a body corporate that is primarily engaged in holding shares of, ownership interests in, or assets acquired from, the entity or any of its affiliates. 1994, c. 11, s. 197 (1).

Divestment if not in compliance with investment and lending policies

      197.0.1 (1) If the securities acquired by a credit union because of a default on a loan are not an investment permitted by the credit union's investment and lending policies, the credit union shall divest itself of the securities within two years after their acquisition or within such further time as the Corporation may authorize.

Order for call of unauthorized loans

      (2) The Corporation may order a credit union to call any loan it has made that is not authorized by this Act, the regulations or its by-laws.

Time to comply

      (3) Despite section 240.3, an order under this section shall allow the credit union at least 60 days to comply with the order.

Procedural rules

      (4) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (5) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Cost of Borrowing

Definition of "cost of borrowing"

      197.1 In sections 197.2 to 197.10,

"cost of borrowing", for a loan made by a credit union, means,

         (a)    the interest or discount applicable to the loan,

         (b)    any amount charged in connection with the loan that is payable by the borrower to the credit union,

         (c)    any amount charged in connection with the loan that is payable by the borrower to a person other than the credit union, where the amount is chargeable, directly or indirectly, by the person to the credit union, and

         (d)    any charge prescribed by the regulations as included in the cost of borrowing,

but does not include any charge prescribed by the regulations as excluded from the cost of borrowing.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Rebate of borrowing costs

      197.2 (1) This section applies where,

         (a)    a credit union makes a loan to a natural person;

         (b)    the loan is not secured by a mortgage on real property;

         (c)    the loan is required to be repaid either on a fixed future date or by instalments; and

         (d)    the loan is prepaid in full.

Same

      (2) In the circumstances described in subsection (1), the credit union shall, in accordance with the regulations, rebate to the borrower a portion of the cost of borrowing for the loan.

Limitation

      (3) For the purposes of subsection (2) and the regulations made under clause 197.10 (1) (b), the cost of borrowing for a loan does not include the interest or discount applicable to the loan.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure of cost of borrowing

      197.3 (1) A credit union shall not make a loan to a natural person unless the cost of borrowing and any other information prescribed for the purposes of this section by the regulations have been disclosed by the credit union to the person.

Same

      (2) For the purposes of disclosure required by subsection (1), the cost of borrowing,

         (a)    shall be calculated on the basis that all obligations of the borrower are duly fulfilled;

         (b)    shall be calculated in accordance with the regulations;

         (c)    shall be expressed as a rate per annum; and

         (d)    where required by the regulations, shall be expressed as an amount in dollars and cents.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Additional disclosure - term loans

      197.4 Where a credit union makes a loan to a natural person and the loan is required to be repaid either on a fixed future date or by instalments, the credit union shall disclose the following to the borrower:

           1.    Whether the borrower has the right to repay the amount borrowed before the maturity of the loan.

           2.    Any terms and conditions relating to a right described in paragraph 1, including particulars of the circumstances in which the borrower may exercise the right.

           3.    Whether any portion of the cost of borrowing for the loan is to be rebated to the borrower or any charge or penalty is to be imposed on the borrower, if the borrower exercises a right described in paragraph 1.

           4.    The manner in which any rebate, charge or penalty referred to in paragraph 3 is to be calculated.

           5.    Particulars of any charges or penalties to be imposed on the borrower if the borrower fails to repay the amount of the loan at maturity or fails to pay an instalment on the day the instalment is due to be paid.

           6.    Particulars of any prescribed change relating to the loan agreement or the cost of borrowing for the loan.

           7.    Particulars of any rights or obligations of the borrower prescribed by the regulations for the purposes of this section.

           8.    Any other information prescribed by the regulations for the purposes of this section.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure in applications for credit cards, etc.

      197.5 A form or other document used by a credit union for the purposes of an application for a credit card, payment card or charge card shall contain the information prescribed by the regulations for the purposes of this section or be accompanied by a document that contains that information.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure where credit cards, etc., issued

      197.6 Where a credit union issues a credit card, payment card or charge card to a natural person, the credit union shall disclose the following to the person:

           1.    Particulars of any charges or penalties to be imposed on the person if he or she fails to pay an amount in accordance with the agreement governing the card.

           2.    Particulars of any charges for which the person becomes responsible by accepting or using the card.

           3.    Particulars of any prescribed change relating to the loan agreement or the cost of borrowing for any loan obtained through the use of the card.

           4.    Particulars of any rights or obligations of the person prescribed by the regulations for the purposes of this section.

           5.    Any other information prescribed by the regulations for the purposes of this section.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Additional disclosure: loans to which ss. 197.4 and 197.6 do not apply

      197.7 (1) Where a credit union enters into an arrangement for the making of a loan to a natural person and neither section 197.4 nor section 197.6 apply in respect of the arrangement, the credit union shall disclose the following to the person:

           1.    Particulars of any charges or penalties to be imposed on the person if he or she fails to pay an amount in accordance with the arrangement.

           2.    Particulars of any charges for which the person becomes responsible by entering the arrangement.

           3.    Particulars of any prescribed change relating to the arrangement or the cost of borrowing under the arrangement.

           4.    Particulars of any rights or obligations of the person prescribed by the regulations for the purposes of this section.

           5.    Any other information prescribed by the regulations for the purposes of this section.

Interpretation

      (2) For the purposes of subsection (1), an arrangement for the making of a loan includes an arrangement for a line of credit.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Statement re mortgage renewal

      197.8 Where a credit union makes a loan to a natural person and the loan is secured by a mortgage on real property, the credit union shall disclose to the person such information respecting renewal of the loan as is prescribed by the regulations.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Disclosure in advertising

      197.9 (1) This section applies to an advertisement that,

         (a)    relates to loans, credit cards, payment cards or charge cards that are offered by a credit union to a natural person or to arrangements to which section 197.7 applies that are offered by a credit union to a natural person; and

         (b)    purports to contain information relating to the cost of borrowing or any other prescribed matter.

Same

      (2) No person shall authorize any advertisement described in subsection (1) unless the advertisement contains the information that may be required by the regulations and is in the form and manner that may be prescribed.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the Act is amended by the Statutes of Ontario, 1999, chapter 12, Schedule I, subsection 2 (6) by adding the following section:

Regulations re disclosure

      197.10 (1) The Lieutenant Governor in Council may make regulations,

         (a)    prescribing, for the purposes of section 197.1, charges that are included in the cost of borrowing and charges that are excluded from the cost of borrowing;

         (b)    governing rebates to be made under section 197.2;

         (c)    prescribing information other than the cost of borrowing that must be disclosed under section 197.3;

         (d)    prescribing the manner of calculating the cost of borrowing for the purposes of section 197.3;

         (e)    prescribing the circumstances in which the cost of borrowing must be expressed as an amount in dollars and cents for the purposes of section 197.3;

          (f)    prescribing the manner of calculating any rebate referred to in paragraph 4 of section 197.4;

         (g)    prescribing changes for the purposes of paragraph 6 of section 197.4, paragraph 3 of section 197.6 and paragraph 3 of subsection 197.7 (1);

         (h)    prescribing rights and obligations of borrowers for the purposes of paragraph 7 of section 197.4, paragraph 4 of section 197.6 and paragraph 4 of subsection 197.7 (1);

          (i)    prescribing information that must be disclosed under paragraph 8 of section 197.4, paragraph 5 of section 197.6 and paragraph 5 of subsection 197.7 (1);

          (j)    prescribing information for the purposes of section 197.5;

         (k)    prescribing information for the purposes of section 197.8;

          (l)    prescribing matters for the purposes of clause 197.9 (1) (b) and respecting the form, manner and content of advertisements for the purposes of subsection 197.9 (2);

        (m)    prescribing the time, manner and form of any disclosure required under sections 197.3 to 197.9;

         (n)    prescribing classes of loans in respect of which some or all of the requirements of sections 197.2 to 197.9 do not apply;

         (o)    prohibiting the imposition of any charge or penalty referred to in section 197.4, 197.6 or 197.7;

         (p)    governing the nature and amount of any charge or penalty referred to in section 197.4, 197.6 or 197.7 that may be imposed by a credit union, including but not limited to,

                        (i)    regulations providing that such a charge or penalty shall not exceed an amount prescribed in the regulation, and

                       (ii)    regulations respecting the costs of the credit union that may be included or must be excluded in the determination of the charge or penalty;

         (q)    respecting any other matter or thing that is necessary to carry out the purposes of sections 197.2 to 197.9.

Same

      (2) A regulation made under clause (1) (a) may exclude charges described in clause (a), (b) or (c) of the definition of "cost of borrowing" in section 197.1.

Same

      (3) A regulation made under subsection (1) may be general or particular in its application and may be restricted in its application to the class or classes of loans set out in the regulation.

See: 1999, c. 12, Sched. I, ss. 2 (6), 8 (2).

Investments

Eligible investments

      198. A credit union shall invest only in such types of securities or property and on such conditions as are prescribed for its class.

Exception to restriction re single investment

      199. (1) A credit union may directly or indirectly invest, by way of purchase from or loans to a single person or to two or more connected persons, more than the amount prescribed for its class only if,

      (a) the investment is in the form of deposits with or loans to,

          (i) a financial institution that is not a credit union or a securities dealer,

          (ii) the Corporation, or

          (iii) a prescribed person or entity; or

      (b) the investment is in securities issued or guaranteed by the Government of Canada, including mortgages insured under the National Housing Act (Canada), by the government of any province of Canada or by any municipality in Canada.

Connected persons

      (2) For the purposes of this section, two or more persons are connected persons if they satisfy the prescribed conditions.

Connected persons

      (2) For the purposes of this section, two or more persons are connected persons if they satisfy the prescribed conditions.

Establishing or acquiring subsidiary

      200. (1) A credit union may establish or acquire a subsidiary only if the subsidiary is prescribed and only with the approval of the Corporation and the establishment or acquisition of a subsidiary is subject to such restrictions as may be prescribed and to such additional conditions as the Corporation may, by order, impose.

Deemed prescribed subsidiary

      (2) ) On written application by a credit union, the Corporation may, by order and on such conditions as are specified in the order, deem a body corporate named in the order to be, for all purposes of this Act, a prescribed subsidiary if its activities are substantially similar to those of a body corporate identified as a prescribed subsidiary.

Refusal of approval to be by order

      (3) If the Corporation refuses to approve the establishment or acquisition of a subsidiary, the Corporation shall do so by order.

Anti-avoidance

      (4) The Corporation shall issue an order refusing to approve the establishment or acquisition of a subsidiary if it considers that the establishment or acquisition is primarily for the purpose of allowing the credit union to avoid the limits under this Act or the regulations on its investments.

Revocation of approval

      (5) The Corporation may, by order, revoke its approval if,

         (a)    the credit union has failed to comply with the conditions and restrictions applicable to the investment; or

         (b)    the body corporate is no longer a prescribed subsidiary.

Effect of revocation

      (6) Upon a revocation of an approval, the credit union shall divest itself of the investment in accordance with the order effecting the revocation.

Restriction on investments in subsidiaries

      (7) A credit union shall ensure that the total book value of investments held by the credit union in subsidiaries of the credit union and of guarantees by the credit union of the obligations of such subsidiaries does not exceed the prescribed percentage of the regulatory capital and deposits of the credit union.

Procedural rules

      (8) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (9) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

Investment in another credit union

      201.(1) A credit union shall not invest in another credit union without the approval of the SuperintendentCorporation.  1994, c. 11, s. 201; 1997, c. 28, s. 53.

Refusal of approval to be by order

      (2) If the Corporation refuses to approve an investment in another credit union, the Corporation shall do so by order.

Procedural rules

      (3) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (4) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

Status of investments upon amalgamation, etc.

      202. (1) The Superintendent Corporation may authorize the acceptance by a credit union of securities or other assets not fulfilling the requirements of this Act,

         (a)    obtained under an arrangement made in good faith for the reorganization of a body corporate whose securities were previously owned by the credit union;

         (b)    obtained under an amalgamation with another body corporate of the body corporate whose securities were previously owned by the credit union;

         (c)    obtained in good faith for the purpose of protecting investments of the credit union;

         (d)    obtained by virtue of the purchase by the credit union of the assets of another credit union;

         (e)    obtained by virtue of realizing on the security for a loan where the security is shares in a body corporate; or

          (f)    obtained in payment or part payment for securities sold by the credit union.  1994, c. 11, s. 202 (1); 1997, c. 28, s. 53.

Divestment

      (2) The credit union shall divest itself of the securities or other assets within two years after their acquisition or within such further time as the Superintendent Corporation may authorize.  1994, c. 11, s. 202 (2); 1997, c. 28, s. 53.

Exception

      (3) The Superintendent Corporation may relieve the credit union of the obligation to divest itself of the securities or other assets if the Superintendent is satisfied that they are not inferior in status or value to the securities for which they have been substituted.  1994, c. 11, s. 202 (3); 1997, c. 28, s. 53.

      202.1 (1) The Corporation may order a credit union to dispose of any investment that was not made or is not held in accordance with this Act, the regulations, the Corporation's by-laws or the credit union's investment and lending policies.

Time to comply

      (2) Despite section 240.3, an order under this section shall allow the credit union at least 60 days to comply with the order.

Procedural rules

      (3) Section 240.1 applies with respect to an order under this section.

Appeal to Tribunal

      (4) The credit union that is subject to an order under this section may appeal the order to the Tribunal in accordance with section 240.4.

Directors' liability

      (5) Subject to subsection (8), if the amount realized from the disposal of the investment is less than the amount paid by the credit union for it, the directors of the credit union are jointly and severally liable for the payment to the credit union of the amount of the difference.

Objection to investment

      (6) A director who is present at a directors' meeting at which an investment to which the director objects is authorized may,

      (a) immediately deliver or send to the credit union by registered mail a protest against the investment; and

      (b) within 30 days after delivering or sending the protest referred to in clause (a), send a copy of the protest by registered mail to the Corporation.

Same

      (7) A director who is absent from a meeting at which an investment to which the director objects is authorized may,

      (a) within 14 days after he or she becomes aware of the investment and is able to do so, deliver or send to the credit union by registered mail a protest against the investment; and

      (b) within 30 days after delivering or sending the protest referred to in clause (a), send a copy of the protest by registered mail to the Corporation.

Exoneration

      (8) A director who takes the steps set out in subsection (6) or (7) has no liability with respect to an investment to which he or she objected.

Transfer of Assets


PURCHASE AND SALE OF ASSETS

Interpretation

      203. For the purposes of section 204, a sale of property includes a sale, lease, exchange or other disposition of property and a purchase of property includes a lease, exchange of property or other acquisition of property.

Purchase or sale of substantial assets

      204.(1) A credit union shall not do any of the following unless authorized to do so by special resolution of the members of the credit union:

      1. Sell assets if the market value of the assets is 15 per cent or more of the value of the credit union's total assets.

      2. Purchase assets of a financial institution if the market value of the assets is 15 per cent or more of the value of the credit union's total assets.

Directed transfer

     (2) For the purposes of subsection (1), the value of the credit union's total assets shall be as set out in the audited financial statements placed before the members at the most recent annual meeting.

If more than one class of shares

     (3) If the credit union has more than one class of issued shares, the special resolution referred to in subsection (1) shall be in the form of a special resolution passed by the holders of each class of shares.

Agreement and Corporation approval required

     (4) A credit union shall not proceed with a sale or purchase described in subsection (1) unless there is an agreement for the sale or purchase and that agreement has been approved by the Corporation.

Corporation approval required before authorization of members, etc

     (5) A credit union shall not seek the authorization of the members and shareholders required under subsection (1) until the Corporation has approved the agreement under subsection (4).

Refusal of approval to be by order

     (6) If the Corporation refuses to approve an agreement under subsection (4), the Corporation shall do so by order.

Procedural rules

     (7) Section 240.1 applies with respect to an order under subsection (6).

Appeal to Tribunal

     (8) The credit union that is subject to an order under subsection (6) may appeal the order to the Tribunal in accordance with section 240.4.

Purchase price if transaction is between credit unions

     (9) In a purchase or sale described in subsection (1) in which both the purchaser and the seller are credit unions, the purchaser may pay the purchase price only in one or more of the following ways:

     1. By assuming liabilities of the seller.

     2. By paying cash.

     3. By issuing shares that are not membership shares or patronage shares.

     4. By issuing promissory notes.

Directed transfer

      205. Repeal

Interpretation

      206. Repeal

PART IX
RESTRICTED PARTY TRANSACTIONS

General prohibition

      207. Except to the extent permitted under this Act or the regulations, a credit union or a subsidiary shall not directly or indirectly enter into any transaction with a restricted party of the credit union.  1994, c. 11, s. 207.

Loans to officers, directors, etc

      208. A credit union may lend to an officer, a member of the audit committee or a director an amount in excess of the aggregate of deposits of the officer, member or director pledged as collateral for the loan only if the board approves the loan before it is made.

Delegation of authority to approve loan to committee

      (2) The board may delegate its authority to grant an approval under subsection (1) to a committee of the board on such terms and with such restrictions as may be specified by the board.

Committee to report

      (3) A committee referred to in subsection (2) shall report details of the loans approved by the committee to the board at the first meeting of the board after the approval is given.

Regulations

      209. The Lieutenant Governor in Council may make regulations governing transactions between a credit union or subsidiary and a restricted party.  1994, c. 11, s. 209.

Setting aside transactions

     209.(1) If a transaction with a restricted person that is prohibited or restricted by this Act or the regulations takes place, any interested person, including the Superintendent or Corporation, may apply to the court for an order,

           (a) setting aside the transaction and directing that the restricted party account to a credit union for any profit or gain realized; and

           (b) that each person who participated in or facilitated the transaction pay to the credit union on a joint and several basis the damages suffered, the face value of the transaction or the amount expended by the credit union in the transaction. 1994, c. 11, s. 328 (1); 1997, c. 28, s. 53.

Order

      (2) The court may make the order applied for or such other order as it thinks appropriate.

Same

      (3) An order under subsection (2) may order compensation for a loss or damage suffered by the credit union and punitive damages from the restricted party.

Exemption

      (4) A person who is not a director is not liable under clause (1) (b) unless the person knew or ought reasonably to have known that the transaction was made in contravention of a restricted party provision.

      210. In this Part,

"restricted party" and "transaction" have the meaning given to those expressions in the regulation.  1994, c. 11, s. 210.

Goto the top of this page.


Previous - Part VI Capital and Liquidity  |  Next - X - Meetings  |  Back to the table of contents