Section 59: Personal loans; limitations and restrictions
Section 59. A credit union may make personal loans as hereinafter provided.
Each unsecured personal loan shall be payable within forty-eight months from the date of the note. A loan secured by shares or by satisfactory collateral of the type set forth under the provisions of subparagraph (2) of the third paragraph, may be payable within one hundred and twenty months from the date of the note. A loan secured by satisfactory collateral as set forth in subparagraph (3) of the third paragraph shall be payable within sixty months from the date of the note. All such loans shall be paid or renewed on or before the due date.
The maximum amount of a loan or loans made to a member in excess of his shares and deposits and in excess of the shares and deposits of the co-maker, if any, pledged to secure the same, shall be limited as follows except that where satisfactory collateral is pledged, additional loans may be made under the provisions of subparagraphs (1), (2) and (3) as set forth hereunder:
(1) A credit union may make loans to an amount not exceeding twelve thousand five hundred dollars and, if the assets of such credit union are four million dollars or more, to an amount not exceeding fifteen thousand dollars if evidenced by the unendorsed and unsecured note of the borrower.
(2) A credit union may make loans to an amount not exceeding five thousand dollars if evidenced by the note of the borrower and with sufficient collateral pledged to secure the same made up of bonds or notes of the United States, or of any state or subdivision thereof, which are legal investments for credit unions or on the list prepared under section fifteen of chapter one hundred and sixty-seven, valued at not more than eighty percent of their market value or by the assignment of the passbook of a depositor in a savings bank doing business in any of the New England states or in a trust company or national banking association doing business in this commonwealth or the savings share account book of a cooperative bank incorporated in this commonwealth or the unpledged shares thereof represented by passbooks or certificates or the passbook of a shareholder in a federal savings and loan association doing business in this commonwealth or policies issued by life insurance companies authorized to transact business in this commonwealth valued at not more than their cash surrender value. In addition to the authority given herein, a credit union having assets of five hundred thousand dollars or more may lend an amount not in excess of two percent of its assets or fifty thousand dollars, whichever is lesser, upon said collateral and may also secure such notes by taking as collateral therefor the readily marketable common or preferred stocks of corporations listed on a stock exchange which is subject to regulation by the securities and exchange commission, valued at not more than eighty percent of their market value.
(3) A credit union having assets of less than one hundred thousand dollars may make loans evidenced by the note of the borrower and secured by a pledge or security interest in satisfactory collateral valued at not more than eighty-five percent of its market value, in amounts not exceeding five thousand dollars; a credit union having assets of more than one hundred thousand dollars may make loans evidenced by a pledge or security interest in satisfactory collateral valued at not more than ninety-five percent of its market value, in amounts not exceeding twenty thousand dollars or one percent of assets, whichever is greater; provided, however, that a loan based on one percent of assets shall not exceed forty thousand dollars. Each such loan made under this paragraph shall be payable within sixty months from the date of the note.
(4) A credit union shall, upon application by a depositor or shareholder or by either of two joint depositors or shareholders therein, make a loan to him, secured by his passbook in an amount not exceeding said deposit or share account for a time not extending beyond the end of the dividend period in which the loan was made. Said credit union may charge the depositor or shareholder interest for, or may collect discount in advance upon, the loan at a rate not exceeding one percent more than the rate of the next preceding ordinary dividend of said credit union and, if an extra dividend shall have been paid therewith, not exceeding one percent more than the combined rates of such ordinary and extra dividends; provided, however, that a minimum of one dollar may be charged or collected as such interest or discount in the case of any such loan. The credit union shall keep posted in a conspicuous place in its banking quarters a notice containing the substance of this subparagraph in such form as the commissioner may prescribe.
(5) A credit union may, upon application by a shareholder or depositor or by either of two joint shareholders or depositors in a special notice account, make a loan to him, secured by his share or deposit passbook, in an amount not exceeding said share or deposit balance, for a time not extending beyond the end of the dividend period in which the loan was made or one year from the day on which the loan was made, whichever is longer. Said credit union shall charge the shareholder or depositor interest for, or collect discount in advance upon, such loan at a rate of not less than two percent per annum more than the combined rates of the next preceding ordinary dividend of such credit union and the additional dividend then paid therewith on special notice accounts.
(6) A credit union may make a personal loan of the several classes specified in this section and subject to the conditions contained therein evidenced by a note which provides for variation in the rate of interest over the term of the note; provided, however that such a loan shall be subject to, but not limited to, the following conditions and restrictions imposed by the commissioner: (a) the method by which the rate of interest may be adjusted; (b) the frequency with which the rate of interest may be adjusted, provided, however, that successive rate adjustments shall be no less than six months apart; (c) the maximum increase in the rate of interest allowed for any such adjustment; (d) provisions for decreases in the rate of interest as may be warranted by market conditions; (e) requirements for advance notification and explanation of adjustments in the rate of interest; provided, however, that such notification and explanation shall occur no less than thirty days prior to such adjustments; and (f), methods of disclosure to the borrower of the terms and conditions of the loan as required under the provisions of chapter one hundred and forty D. Notwithstanding any provision of law to the contrary, the commissioner may, by further conditions and restrictions, provide that the rate of amortization may be varied, including utilizing a period of negative amortization, in order to adjust the rate of interest.
(7) An assignment of wages or a payroll deduction order may be received as satisfactory collateral for any loan not in excess of one thousand dollars.