Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter A. GENERAL RULES
7 TAC §91.104
The Texas Credit Union Commission adopts an amendment to §91.104
concerning the public notice of certain requests for approval by the commissioner.
The amendment is adopted without change to the proposed text published in
the February 11, 2000 issue of the
Texas Register
(25 TexReg 999).
The amendment adds paragraph (5) to subsection (a), which requires notice
of a request by a foreign credit union to do business in Texas to be published
in the
Texas Register
and the department newsletter.
This requirement was previously stated in §91.211 which is being repealed.
Upon adoption of this amendment all application-related publication requirements
established by the Commission will be set forth in §91.104 for easy reference.
One comment was received on this rule from Brownsville Teachers' Credit
Union (BTCU). In its letter BTCU questions the need for the Credit Union Department
to publish notice of charter expansions and/or alternations in both the
The amendment is adopted under the provisions of §15.402
of the Texas Finance Code . The Credit Union Commission interprets this section
to authorize the Commission to adopt reasonable rules necessary for administering
Subtitle D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by this amendment are Texas Finance Code §122.005
and §122.013.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002880
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.105
The Texas Credit Union Commission adopts new §91.105
pertaining to applications for authorization from the commissioner. The new
rule is adopted without change to the proposed text published in the February
11, 2000 issue of the
Texas Register
(25 TexReg
1000).
The new rule allows the commissioner to accept applications and other forms
prescribed by federal or other state regulators in lieu of the commissioner's
forms. The commissioner, however, would have the authority to require additional
information if the Department prescribed form did not provide the information
needed to render a decision or to comply with governing statutes and rules.
No comments were received on the proposal.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code. The Credit Union Commission interprets the section
to allow it to adopt reasonable rules necessary for administering Subtitle
D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by this rule are Texas Finance Code §§
122.001, 122.011, 122.152, and 122.203.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002881
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.110
The Texas Credit Union Commission adopts new §91.110
pertaining to protest procedures for applications for authorization from the
commissioner. The amendment is adopted without change to the proposed text
published in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1000). The new rule replaces existing §91.204
whose repeal is published elsewhere in this issue of the
Texas Register
.
Section 91.110 is substantially the same as the existing §91.204 with
two exceptions. Language has been added to reference the statutory requirement
that notice of applications be published in the
Texas Register
. The new rule also states that the commissioner can
prescribe the form of the notice of protest.
One comment was received from Educational Employees Credit Union, which
opines that thirty days is not sufficient time for a credit union opposed
to a field of membership application to file a notice of protest. The commenter
suggests that a sixty-day comment period would be more appropriate. The Commission
does not agree with the commenter that a protesting credit union only has
thirty days to become aware of the application, determine its effects, and
prepare and file a comprehensive appeal. A credit union applying for a field
of membership application is required to identify any potential overlaps and
is expected to contact the overlapped credit union to arrive at a resolution.
This process almost always occurs before the actual application is filed with
the Department. Therefore, a protesting credit union has the ability at the
point of contact to begin gathering documentation necessary to support that
an overlap would pose a threat to its welfare and stability. The Commission
believes that extending the comment period to sixty days would only unnecessarily
prolong the process.
The new rule is adopted under the provisions of §§15.402,
122.007 and 122.011 of the Texas Finance Code. The Commission interprets §15.402
of the Texas Finance Code to authorize the Credit Union Commission to adopt
reasonable rules necessary for administering Subtitle D, Title 3, Texas Finance
Code (Texas Credit Union Act). The Commission interprets §122.007 to
require the Commission by rule to provide for the appeal of a commissioner's
order relating to an application to incorporate, The Commission interprets §122.011
to require the Commission by rule to provide for the appeal of a commissioner's
decision on an amendment to the articles of incorporation or bylaws.
The specific sections affected by this rule are Texas Finance Code §§122.007,
122.011, and 122.153.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002882
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.115
The Texas Credit Union Commission adopts new §91.115
pertaining to safety at unmanned teller machines. The amendment is adopted
without change to the proposed text published in the February 11, 2000 issue
of the
Texas Register
(25 TexReg 1001). The
new rule replaces subsection (b) of existing §91.204 whose repeal is
published elsewhere in this issue of the
Texas Register
.
The new rule incorporates the language currently contained in subsection
(b) of §91.401 and incorporates new language which makes the rule conform
more to the requirements of Texas Finance Code, Chapter 59, Subchapter D,
relating to safety at unmanned teller machines.
No comments were received on the proposal.
The new rule is adopted under the provisions of §59.310
of the Texas Finance Code. The Commission has interpreted this section to
authorize the Credit Union Commission to adopt rules to implement Subchapter
D of Chapter 589, Texas Finance Code.
The specific sections affected by this rule are Texas Finance Code §§59.301-59.310.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002883
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.120
The Texas Credit Union Commission adopts new §91.120
pertaining to the posting of notice regarding certain loan agreements. The
amendment is adopted without change to the proposed text published in the
February 11, 2000 issue of the
Texas Register
(25 TexReg 1002).
Texas Finance Code §26.02 requires all financial institutions, including
credit unions, to post notices informing members that certain loan agreements
must be in writing. By incorporating this requirement into the commission
rules, credit unions will be become more knowledgeable of the requirement,
thus ensuring compliance.
One credit union, USE Credit Union, filed a comment on the proposal on
the basis that posting such a notice is "...unlikely to have any effect other
than creating confusion." The commenter also states the belief that Texas
law does not require that agreements be in writing in order to be enforceable.
Responding to the first point, credit unions are already required by law to
post notices informing members that certain loan agreements must be in writing.
This rule simply makes it easier for credit unions to obtain the posting requirements.
In response to the second point, §26.02(b) specifically states that a
loan agreement in which the amount involved exceeds $50,000 in value is not
enforceable unless the agreement is in writing and signed by the party to
be bound or by that party's authorized representative.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code. The Commission interprets this section to authorize
adoption of reasonable rules necessary for administering Subtitle D, Title
3, Texas Finance Code (Texas Credit Union Act), as well as to enforce other
state statutes applicable to state-chartered credit unions.
The specific section affected by this rule is Texas Finance Code §26.02.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002884
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.201
The Texas Credit Union Commission adopts new §91.201
pertaining to incorporation procedures, without change to the proposed text
published in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1003). The new rule replaces existing §91.203,
whose repeal is published elsewhere in this edition of the
Texas Register
.
New §91.201 sets forth the procedures for processing an application
to incorporate a new credit union and is substantially the same as the existing §91.203
with one exception. Language has been added to reference the statutory requirement
that the commissioner consider the extent of a potential field of membership
overlap on the welfare and stability of the applicant and other affected credit
unions. Specifically, the new rule establishes four situations in which the
commissioner would not consider an overlap to be adverse to the overlapped
credit union. For situations in which a potential overlap would have an adverse
impact on another credit union and consequently exclusionary language is deemed
necessary, the rule would grant protection for only 24 months. The commissioner
is given the authority to extend the period for an additional 24 months for
good cause shown.
Comments on the proposal were received from USE Credit Union, Educational
Employees Credit Union, and Southwest Resource Credit Union. Southwest Resource
Credit Union sought clarification on certain wording. They also questioned,
as did USE Credit Union, how the Commission arrived at the threshold of groups
of 300 or less. The Commission believes that a precedent for groups under
300 has been established. Specifically, a credit union that has adopted Option
4 of the Standard Bylaws for Texas State-Chartered Credit Union has the ability
to add to its field of membership occupational groups with less than 300 employees
that are located within 10 miles of the credit union's office and not already
served by another credit union without having to file an application for approval
with the Commissioner.
Both Educational Employees Credit Union and USE Credit Union addressed
the potential burden placed upon the incorporators of new credit unions of
researching and attempting to resolve potential field of membership overlaps
with existing credit unions. The Commission does not consider this requirement
to be a burden. Economic advisability is a major factor in determining whether
a credit union will be chartered. An important consideration is the degree
of support from the proposed field of membership. The applicant must be able
to demonstrate that membership support is sufficient to ensure viability.
If the proposed credit union does not investigate the possibility of overlaps
with other state and federal credit unions, it will not be able to demonstrate
the new institution's beneficial effect in meeting the convenience and needs
of the proposed membership.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code. The Commission interprets this section as authorizing
the Credit Union Commission to adopt reasonable rules necessary for administering
Subtitle D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by this rule are Texas Finance Code §§
122.001 and 122.006.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002885
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.202
The Texas Credit Union Commission adopts new §91.202
pertaining to the form of bylaws and amendments to articles of incorporation
and bylaws, which is adopted without change to the proposed text published
in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1003). The new rule replaces existing §91.206 which
is being repealed elsewhere in this edition of the
Texas Register
.
The new §91.202 is substantially the same as the existing §91.206
with the following exceptions. To begin, language requiring notice of an application
has been deleted as that requirement is already set forth in §91.104
pertaining to notice of applications. Secondly, language stating that the
commissioner may approve an amendment to the standard bylaws if it is consistent
with the purposes of the Texas Credit Union Act and does not violate the Act
or rules adopted thereunder is already stated in the Act. Therefore, this
provision is redundant. Lastly, the subsection in existing §91.206 related
to the commissioner considering adoption of a standard bylaw amendment if
requested by 25 or more credit unions is considered unnecessary. All requests
for changes to the Standard Bylaws for State Chartered Credit Unions are submitted
to the Commission as part of the agenda packets for the Commission's public
meetings. The Commission then has the authority to act upon the request if
deemed appropriate.
One comment on the proposal was received from Dallas Teachers Credit Union
regarding subsection (d) that requires a written application for any amendment.
The commenter believes that there may be situations where a "standard bylaw
amendment" could be adopted by the department and made available to credit
unions for adoption without the necessity of a formal approval process. The
Commission currently has the ability to establish standard bylaw amendments,
and optional bylaw language pertaining to field of membership and late penalties
already exists. However, Texas Finance Code §122.011 requires a credit
union to submit amendments to its bylaws to the commissioner for approval
or disapproval. In addition to the statutory requirement, requiring a credit
union to submit an application to add a standard bylaw amendment allows the
Department to retain a current set of bylaws in its files for administrative
purposes, which is essential as a credit union's bylaws on file with the Department
are subject to open records requests.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code. The Commission interprets this section as authorizing
the Credit Union Commission to adopt reasonable rules necessary for administering
Subtitle D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by this rule are Texas Finance Code §§
122.002 and 122.011.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002886
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
The Texas Credit Union Commission adopts the repeal of §91.203
Incorporation Procedures; §91.204 Protest Procedures; §91.206 Form
of Bylaws; Amendments to Articles of Incorporation and Bylaws; §91.211
Application for a Certificate of Authority to do Business in the State of
Texas; §91.401 General Powers; §91.402 Records Retention; §91.503
Eligibility to Hold Office and Removal of Directors; and §91.507 Financial
Reporting; Audits and Verification of Accounts without changes to the proposal
published in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1004).
These rules are being repealed as a result of new rules being adopted in
conjunction with the Commission's four-year Rule Review. The new rules are
printed elsewhere in this issue of the
Texas Register
.
No comments were received on the proposal to repeal these sections.
Subchapter B. ORGANIZATION PROCEDURES
7 TAC §§91.203, 91.204, 91.206, 91.211
The repeals are adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the commission
to adopt reasonable rules. The specific sections affected by the repeal of
these rules are §§122.001, 122.006, 122.007, 122.011, and 122.013
of the Texas Finance Code.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002894
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.401, §91.402
The repeals are adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the commission
to adopt reasonable rules. The specific sections affected by these repeals
are §123.001 and §123.110 of the Texas Finance Code.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed
with the Office of the Secretary of State on April 21, 2000.
TRD-200002895
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.503, §91.507
The repeals are adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the commission
to adopt reasonable rules. The specific sections affected by the repeal of
these rules are §122.054 and §122.102 of the Texas Finance Code.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed
with the Office of the Secretary of State on April 21, 2000.
TRD-200002896
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
Subchapter B. ORGANIZATION PROCEDURES
7 TAC §91.205
The Texas Credit Union Commission adopts new §91.205
pertaining to use of "credit union" name. The rule is adopted with one non-substantive
change to the proposed text published in the February 11, 2000 issue of the
The new rule allows credit unions to do business under an assumed name
provided that the official name is used in all official or legal communications
or documents, the credit union has received authority from the commissioner
to use the name, and the credit union has registered with the Secretary of
State and appropriate county authority. The rule also requires the credit
union to ensure that its members are aware that the DBA is the same credit
union for share/deposit insurance coverage purposes.
Comments on the proposal were received from Dallas Teachers Credit Union,
Educational Employees Credit Union, and the Texas Credit Union League. Two
of the commenters felt that paragraphs (1) through (3) in subsection (e) are
unnecessarily burdensome. The Commission agrees that as long as a credit union
using an assumed name communicates to its members that the "DBA" is not a
separate credit union and that their shares are not separately insured, then
the method for communicating this to its membership should be left to the
board of directors. Therefore, proposed paragraphs (1) through (3) of subsection
(e) are not adopted. There was also concern expressed by one of the commenters
that enforcing this rule may become a major function of the department thereby
posing a financial hardship to the Department. The Commission does not believe
this will occur given that small number of credit unions to date that do business
under an assumed name.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code, which the Commission interprets as authorizing
the Credit Union Commission to adopt reasonable rules necessary for administering
Subtitle D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by the new rule are Texas Finance Code §§
15.4022 and 122.003.
§91.205.Use of Credit Union Name.
(a)
Unless changed by a bylaw amendment approved by the commissioner
in accordance with the Act and these rules, a credit union shall do business
under the name in which its charter was issued. In addition to the official
charter name, a credit union may do business under an assumed name. However,
the official name as it appears in the bylaws must be used in all official
or legal communications or documents.
(b)
A credit union shall not do business under any name other
than its official name until it has registered the designation with the Secretary
of State and the appropriate county clerk, and has received from the commissioner
a certificate of authority to use an assumed business name.
(c)
The commissioner shall not issue a certificate of authority
to use an assumed business name if the designation might mislead the public
or is not readily distinguishable from, or is deceptively similar to, a name
of another credit union lawfully doing business and that has established an
office in this state.
(d)
It is the responsibility of the credit union officials
to make every reasonable attempt to comply with state and federal law applicable
to corporate names.
(e)
A credit union that intends to use an assumed name shall
take reasonable steps to ensure that members will not become confused and
believe that its different facilities will be mistaken for separate credit
unions or that the shares and deposits in the different facilities are separately
insured.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002887
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.210
The Texas Credit Union Commission adopts new §91.210
pertaining to foreign credit unions receiving a certificate of authority to
do business in the state of Texas. The rule is adopted with non-substantive
changes to the proposed text published in the February 11, 2000 issue of the
The new §91.210 is substantially the same as the existing §91.211
with the following exceptions. Firstly, a definition of "foreign credit union"
has been added. Secondly, the requirement for publishing notice of an application
for a certificate of authority has been deleted; this requirement is being
added to §91.104 relating to notice of applications. Thirdly, language
has been added to require credit unions from other countries that are allowed
to operate branches within Texas by virtue of a federal treaty or agreement
between the U.S. and a foreign county to follow the Act and commission rules.
Lastly, language has been added to indicate that the commissioner can enter
into supervisory agreements with the foreign credit union and/or its regulator
to facilitate examination and supervision of the foreign credit union.
One comment was received from Dallas Teachers Credit Union pointing out
that the definition of a foreign credit union in the rule differs from that
contained in the enabling statute, thereby creating a loophole for foreign
credit unions to escape regulation with in Texas. To correct the oversight,
the clause " ...and has its main or principal office in another state or country"
has been deleted from subsection (a) and the phrase "or otherwise organized"
has been added. The commenter also pointed out that subsection (d) can be
construed to supersede Texas law with regard to the applicability and conflict
of laws. The Commission agrees and has removed paragraphs (1) through (3)
and added the language "...all applicable Texas laws, including those laws
regarding home equity lending, loan interest rates, and consumer protection,
to the same extent that those laws apply to a Texas credit union."
The new rule is adopted under the provisions of §§15.402
and 122.013 of the Texas Finance Code. The Commission interprets §15.402
as authorizing the Credit Union Commission to adopt reasonable rules necessary
for administering Subtitle D, Title 3, Texas Finance Code (Texas Credit Union
Act); and §122.013 as authorizing the Commission to promulgate rules
applicable to foreign credit unions doing business in the state of Texas.
The specific sections affected by this rule are Texas Finance Code §§
122.013 and 15.411.
§91.210.Certificate of Authority to Do Business in the State of Texas.
(a)
Definition. Foreign credit union, as used in this chapter,
means a credit union that is not chartered or otherwise organized under the
laws of this state or the United States.
(b)
Application. Prior to commencing business in this state,
a foreign credit union is required to file a written application supported
by such information and data as the commissioner may require to make the findings
necessary for the issuance of a certificate of authority pursuant to Finance
Code §122.013.
(c)
Approval. The application shall not be approved unless
the commissioner finds that the applicant:
(1)
is acting in good faith and the application does not contain
a material misrepresentation;
(2)
is financially sound and has no supervisory problems;
(3)
will conduct its operations in the State of Texas
in accordance with the intent and purpose of the Act and Commission rules;
(4)
has provided evidence of compliance with the Finance
Code, § 201.102 concerning registering with the secretary of state to
do business in Texas;
(5)
has share and deposit insurance equivalent to that
required for credit unions organized under the Act;
(6)
has paid a permit fee of $500 for each and every branch
office proposed to be established in the State of Texas;
(7)
has fidelity bond coverage satisfactory to the commissioner;
and
(8)
has provided all other information the commissioner
may require.
(d)
Compliance with Texas law. A credit union chartered by
another state shall comply with all applicable Texas laws, including those
laws regarding home equity lending, loan interest rates, and consumer protection,
to the same extent that those laws apply to a Texas credit union.
(e)
Federal treaties. If a treaty or agreement exists between
the United States and a foreign country which requires the commissioner to
permit a foreign credit union to operate a branch in this state and the commissioner
determines that the applicant has substantially the same characteristics as
a credit union organized under the Act, then the applicant must comply with
all provisions of the Act and commission rules, unless otherwise permitted
by this section.
(f)
Financial statements. Each foreign credit union that is
operating a branch office within the State of Texas shall furnish to the commissioner
a copy of its annual audited financial statements, if any, or other statements
of financial conditions as the commissioner may require.
(g)
Examinations. The commissioner is authorized to examine
the books and records of any branch office operated in the State of Texas
by a foreign credit union. The costs of examination, as prescribed in §
97.113(d) of this title (relating to Supplemental Examinations), must be fully
borne by the foreign credit union. The supplemental examination fee may be
waived or reduced at the discretion of the commissioner.
(h)
Agreements with other regulators. The commissioner shall
enter into supervisory agreements with the foreign credit union regulators
and, as necessary, the foreign credit unions, as authorized by Finance Code §
15.411, to resolve any conflict of laws and to specify the manner in which
the examination, supervision, and application processes will be coordinated
with the regulators. The agreement may also prescribe the applicable laws
governing the powers and authorities of the foreign branch and may address,
but are not limited to, corporate governance and operational matters. The
agreement, however, shall not limit the jurisdiction or authority of the commissioner
to examine, supervise and regulate a foreign credit union that is operating
or seeking to operate a branch in this state or to take any action or issue
any order with respect to that branch.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002915
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.401
The Texas Credit Union Commission adopts new §91.401
pertaining to operational powers of credit unions. The rule is adopted with
non-substantive changes to the proposed text published in the February 11,
2000 issue of the
Texas Register
(25 TexReg
1007). This rule replaces existing §91.401 whose repeal is published
elsewhere in this issue of the
Texas Register
.
The adopted rule is comprised of five subsections. Subsection (a) retains
the requirement that credit unions receive prior approval before exceeding
the 5.0% fixed assets-to-total assets limitation, further defines the term
"fixed assets," and adds certain requirements concerning transactions with
insiders. Subsection (b) requires member and Department notification if a
credit union office is closed. Subsection (c) expressly authorizes a credit
union to enter into service contracts for credit union services/activities
that relate to the daily operations of a credit union. Subsection (d) allows
credit unions to provide required notices electronically to their members
provided certain conditions are met. Lastly, subsection (e) allows credit
unions to charge a user fee for shared electronic terminals provided notice
is given to the user.
Comments were received from the Texas Credit Union League and five credit
unions--Educational Employees Credit Union, Dallas Teachers Credit Union,
Brownsville Teachers Credit Union, Southwest Resource Credit Union, and USE
Credit Union. Two parties commented on retaining the fixed asset limitation
waivers set forth in the current rule. The commenters believe that a basis
other than fixed assets as a percentage of total assets would be appropriate;
specifically, they recommend establishing fixed asset limitation thresholds
based on a credit union's capital/assets ratio. The Commission opines that
while a strong net worth position may mitigate some of the adverse effects
of a credit union's heavy investment in fixed assets, the relevance of the
5% limitation is still appropriate in today's market place. A credit union
is limited to its internal ability to generate income to augment its capital.
Non-earning assets in excess of 5% is a significant drain on earnings and
may compromise a credit union's ability to grow and cover its losses. Further,
it should be noted that this limitation is not a prohibition. Credit unions
with the financial ability and wherewithal to handle additional fixed assets
may apply for a waiver.
One commenter questioned the need to address notification of office closings
in the rules, stating this is a matter of providing good member service and
should be left to the credit union. While the Commission philosophically agrees
with the commenter, member complaints received by department staff indicates
that credit unions do not always provide adequate notice of closings to members,
which can cause great inconvenience and potentially pose a hardship to a member.
Members must be given adequate notice to make other financial arrangements
if an office closing may result in inadequate service to the member.
Two comments filed regarding subsection (c) indicate to the Commission
that further clarification as to the nature of the services subject to the
rule is needed. The words "credit union" were added to the subject heading
to clarify that the new subsection applies only to authorized services and
activities ordinarily performed by the credit union that are planned on being
outsourced to third parties.
Three comments were received on subsection (d). Two of the comments proposed
language changes for clarification purposes. The Commission has adopted most
of those changes. One comment addressed the proposed requirement that the
credit union's computer system cannot automatically delete an electronic notification.
The Commission modified this paragraph to require credit unions to retain
evidence of the notifications in accordance with the records retention rule.
One commenter also opined that the requirements of subsection (d) places an
undue burden on credit unions and, to some extent, members. The Commission
disagrees. Various state and federal laws require disclosure of certain notifications
to members. These have been traditionally made in writing. If a credit union
wants to provide such notices electronically, then there must be some mechanism
in place to demonstrate that the proper disclosures were made. The rule requires
credit unions to ensure that such a mechanism is in place.
One comment was received on subsection (e) regarding the disclosure of
user fees to non-credit union members. The purpose of this subsection is to
specifically authorize credit unions to charge non-member users of shared
electronic terminals, if the credit union so chooses, provided the charge
is disclosed to the non-member. Based on the comment received, language was
added to make this clear and to indicate that the credit unions must comply
with applicable federal law.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the Credit
Union Commission to adopt reasonable rules necessary for administering Subtitle
D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific section affected by this rule is Texas Finance Code §123.001.
§91.401.Operational Powers.
(a)
Purchase, lease and sale of property.
(1)
Fixed assets. For the purposes of this rule, the term means
real property, premises, and furniture, fixtures and equipment as defined
herein. Premises include real property with any improvements or leasehold
interest where the credit union transacts or intends to transact business.
Furniture, fixtures and equipment includes all office furnishings (e.g. tables,
chairs, desks, file cabinets, curtains, drapes, rugs, etc.), office machines,
word processing equipment, computer hardware and software, automated terminals,
and heating and cooling equipment. The term does not extend to any real property
which may be conveyed to the credit union in satisfaction of debts previously
contracted in the course of business, nor to such real estate as the credit
union shall purchase at sale on judgements, decrees, mortgage or deed of trust
foreclosures under A security agreement held by the credit union, but a credit
union shall not bid at such sale a larger amount than is necessary to satisfy
the debts and costs owed the credit union.
(2)
Limitations. A credit union may purchase fixed assets
or enter into a contract for the purchase or lease of fixed assets primarily
for its own use in conducting business if the aggregate of all such investments
does not exceed five percent of total assets.
(3)
Restrictions. A credit union shall not purchase real
estate (land or buildings) for the principal purpose of engaging in real estate
rentals or speculation.
(4)
Transactions with insiders. Without the prior approval
of a disinterested majority of the board of directors recorded in the minutes
or, if a disinterested majority cannot be obtained, the prior written approval
of the commissioner, a credit union may not directly or indirectly:
(A)
sell or lease an asset of the credit union to a director,
committee member, or senior executive staff; or
(B)
purchase or lease an asset in which a director, committee
member, or senior executive staff has an interest.
(5)
Use requirement. If real property or leasehold
interest is acquired for future expansion, the credit union must partially
satisfy the "primarily for its own use in conducting business" requirement
within five years after the credit union makes the investment.
(6)
Waiver. The commissioner may, upon written application,
waive or modify any of the limitations or restrictions placed on the investment
of fixed assets.
(7)
Written application. A credit union shall submit such
statements and reports as the commissioner may, in his discretion, require
in support of a waiver or modification of the limits imposed upon the investment
of fixed assets. Such reports and statements shall include but not be limited
to:
(A)
a description of the proposal in terms of cost, usage,
location and method of financing;
(B)
a statement of the economic advantage and disadvantages
relating to the proposed investment; and
(C)
current and past financial data of the credit union.
(b)
Closing of an office. A credit union may permanently close
any of its established offices. The credit union shall provide notice to its
members and the department no later than 60 days prior to the proposed closing.
The credit union shall also post a notice to members in a conspicuous manner
on the premises of the effected office at least 30 days prior to the proposed
closing.
(c)
Credit union service contracts. A credit union may enter
into contractual agreements with one or more credit unions or other organizations
for the purpose of engaging in authorized activities and/or services that
relate to the daily operations of the credit union. Agreements must be in
writing and shall advise all parties that the activities and services may
be subject to commission rules and examination by the commissioner to the
extent permitted by law.
(d)
Electronic notification. A credit union may, in accordance
with written board policy, satisfy any "written" notification requirement
of the Act, commission rules, or the credit union's bylaws by electronic means
provided:
(1)
the member agrees in writing or electronically to use electronic
instead of hard-copy notifications;
(2)
the member has the ability to print or download the
notification;
(3)
evidence of the electronic notification is retained
in accordance with §91.405 (relating to Records Retention); and
(4)
both the credit union and the member have the capacity
to receive electronic messages.
(e)
User fee for shared electronic terminal. A credit union
that owns an electronic terminal that is connected to a shared network may
impose a fee on a non-member for the use of that terminal if imposition of
the fee is disclosed in compliance with applicable federal law.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000
TRD-200002888
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.405
The Texas Credit Union Commission adopts new §91.405
pertaining to records retention, with the addition of non-substantive changes
to the proposed text published in the February 11, 2000 issue of the
New §91.405 is substantially the same as the existing §91.402
with the following exceptions. First, subsection (a) specifies that the retention
period for each record starts from the last entry or final action date and
not from the inception of the record. Second, subsection (b) clarifies that
unless otherwise stated in the rule, records may be retained in any form or
format as long as it meets certain conditions pertaining to retrieval or reproduction.
Third, board committee minutes are being added to the ten-year retention schedule.
Fourth, a requirement that a credit union shall provide reasonable protection
from damage by fire and other hazards is being added. Lastly, a subsection
is being added that requires credit unions to furnish promptly and at its
own expense legible, true and complete copies of any record requested by the
Department that is required to be kept by this section.
One comment was received from Dallas Teachers Credit Union supporting the
new rule and requesting the addition of a provision that would make the retention
period for any other document not specifically addressed in the rule the longer
of five years or upon the expiration of an applicable statue of limitations.
The Commission agreed that such an addition would be appropriate and inserted
a new subsection (f). The following subsections were renumbered accordingly.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted to authorize the Credit Union
Commission to adopt reasonable rules necessary for administering Subtitle
D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific section affected by this rule is Texas Finance Code §123.110.
§91.405.Records Retention.
(a)
General. Every credit union shall make and keep current
accounts, books, and other records of all of its transactions in sufficient
detail to permit examination, audit and verification of financial statements,
schedules, and reports it is required to file with the Department or which
it issues to its members. Such accounts, books and other records shall be
maintained in appropriate form and in sufficient detail to provide all of
the information with respect to the business of the credit union for such
minimum periods as prescribed by this section. The retention period for each
record starts from the last entry or final action date and not from the inception
of the record.
(b)
Manner of maintenance. Except for those records described
in subsection (c) of this section, records may be maintained in whatever manner,
form or format a credit union deems appropriate; provided, however, the records
required by this section must clearly and accurately reflect the information
required, provide an adequate basis for the examination and audit of the information,
and can be retrieved in a readable and useable format. Records may be maintained
in hard copy, automated or electronic form provided the records are easily
retrievable, ready available for inspection, and capable of being reproduced
in a hard copy. A credit union may contract with third party service providers
to maintain records required under this part.
(c)
Permanent retention. The following records must be retained
permanently in their original form:
(1)
charter, bylaws, articles of incorporation, and amendments
thereto;
(2)
currently effective certificates or licenses to operate
under programs of various government agencies, such as a certificate to act
as issuing agent for the sale of United States savings bonds; and
(3)
currently effective membership applications, joint
membership agreements, payable on death agreements, share draft agreements,
signature cards, and any other currently effective account agreements related
to share or deposit accounts.
(4)
A credit union board of directors may by policy elect
to maintain these membership records in other than original form after obtaining
a legal opinion that the proposed methodology continues all legal remedies
as if the original has been retained.
(d)
Ten year retention. Records which are significant to the
continuing operation of the credit union must be retained until the expiration
of ten years following the making of the record or the last entry thereon
or the expiration of the applicable statute of limitations, whichever is later.
The records are:
(1)
minutes of meetings of the members, the board of directors,
and board committees;
(2)
journal and cash record;
(3)
general ledger and subsidiary ledgers;
(4)
for active accounts, one copy of each individual share
and loan ledger or its equivalent;
(5)
comprehensive annual audit reports including evidence
of account verification; and
(6)
examination reports and official correspondence from
the department or any other government agency acting in a regulatory capacity.
(e)
Five year retention. The following records must be retained
until the expiration of five years following the making of the record or the
last entry thereon or the expiration of the applicable statute of limitations,
whichever is later:
(1)
records related to closed accounts including membership
applications, joint membership agreements, payable on death agreements, signature
cards, share draft agreements, and any other account agreements; loan agreements;
and
(2)
for an active account, any account agreement which
is no longer in effect.
(f)
Other records. Subject to applicable law, any other type
of document not specifically delineated in this rule may be destroyed after
five years or upon expiration of an applicable statute of limitations, whichever
is longer.
(g)
Data processing records. Provisions of this section apply
to records produced by a data processing system. Output reports that substitute
for standard conventional records or that provide the only support for entries
in the journal and cash record should be retained for the minimum period specified
in this rule.
(h)
Protection and storage of records. A credit union shall
provide reasonable protection from damage by fire, flood and other hazards
for records required by this section to be preserved and, in selection of
storage space, safeguard such records from unnecessary exposure to deterioration
from excessive humidity, dryness, or lack of proper ventilation.
(i)
Records destruction. The board of directors shall adopt
a written policy authorizing the destruction of specified records on a continuing
basis upon expiration of specified retention periods.
(j)
Records preservation. All state chartered credit unions
are required to maintain a records preservation program to identify and store
vital records in order that they may be reconstructed in the event the credit
union's records are destroyed. Storage of vital records is the responsibility
of the board but may be delegated to the responsible person(s). A vital records
storage center should be established at some location that is far enough from
the credit union office to avoid the simultaneous loss of both sets of records
in the event of a disaster. Records must be stored every calendar quarter
within 30 days following quarter-end at which time records stored for the
previous quarter may be destroyed. Stored records may be in any form which
can be used to reconstruct the credit union's records. This includes machine
copies, microfilm, or any other usable copy. The records to be stored shall
be for the most recent month-end and are:
(1)
a list of all shares and/or deposits and loan balances
for each member's account. Each balance on the list is to be identified by
an account name or number. Multiple balances of either shares or loans to
one account shall be listed separately;
(2)
a financial statement/statement of financial condition
which lists all the credit union's assets and liability accounts;
(3)
a listing of the credit union's banks, insurance policies
and investments. This information may be marked "permanent" and updated only
when changes are made.
(k)
Records preservation compliance. Credit unions that have
some or all of their records maintained by an off-site data processor are
considered to be in compliance so long as the processor meets the minimum
requirements of this section. Credit unions that have in-house capabilities
shall make the necessary provisions to safeguard the backup of data on a continuing
basis.
(l)
Reproduction of records. A credit union shall furnish promptly,
at its own expense, legible, true and complete copies of any record required
to be kept by this section as are requested by the department.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002889
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.501
The Texas Credit Union Commission adopts new §91.501
pertaining to members' eligibility to hold office, without changes to the
proposed text published in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1010). The rule replaces existing §91.503
whose repeal is published elsewhere in this edition of the
Texas Register
.
Section 91.501 is substantially the same as the existing §91.503 with
two exceptions. Two provisions have been added to the qualifications for a
director: the prospective director cannot have had a final judgment entered
against him/her in a civil action upon the grounds of fraud, deceit, or mispresentation;
nor can the individual have been personally made subject to an operating directive
for cause while serving as an officer, agency, employee or representative
of a financial institution. A new subsection has also been added that authorizes
a credit union to establish continuing education requirements for directors.
Two credit unions filed comments on the proposal: Dallas Teachers Credit
Union and Brownsville Teachers Credit Union. The former commented that since
the board can impose mandatory education requirements on directors, another
category for disqualification under subsection (e) could be a director's failure
to comply with the education requirements in a timely manner without good
cause or some other mitigating factor. The Commission determined that the
educational requirement is best left to the discretion of the board of directors
and that the penalty for failing to comply with an educational requirement
established by the board should be addressed at that level. The other commenter
expressed a concern about not instituting a financial cap on the amount that
can be spent by the credit union on board education. The Commission believes
the board of directors should have the responsibility of establishing that
amount during the annual budget process. Excessive spending could impair earnings
and lead to a safety and soundness concern that ultimately would be addressed
by the Department's examiners during the course of an examination.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the Credit
Union Commission to adopt reasonable rules necessary for administering Subtitle
D, Title 3, Texas Finance Code (Texas Credit Union Act); and §122.054
of the Texas Finance Code, which authorizes the Commission to establish by
rule the qualifications for a director.
The specific section affected by this rule is Texas Finance Code §
122.054.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002890
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
7 TAC §91.515
The Texas Credit Union Commission adopts new §91.515
pertaining to financial reporting for credit unions, without changes to the
proposed text published in the February 11, 2000 issue of the
Texas Register
(25 TexReg 1013). This rule replaces existing §91.507(a)
whose repeal is published elsewhere in this edition of the
Texas Register
.
Section §91.515 requires a credit union with $5 million or greater
in total assets to prepare and maintain its records and prepare its financial
statements in accordance with generally accepted accounting principles (GAAP).
Credit unions under $5 million in assets would be able to use any other comprehensive
basis of accounting (OCBOA). Given all credit unions are currently required
to comply with GAAP, this change provides some regulatory relief to the smaller
credit unions. The new rule also authorizes the commissioner to require reports
in addition to the semi-annual reports required by the Act.
One comment on the proposal was received from Dallas Teachers Credit Union,
which points out that federal credit unions with total assets less than $10
million are exempt from having to comply with GAAP. The commenter states that
this discrepancy between federal law and the Commission requirement places
small state-chartered credit unions at a disadvantage. The Commission would
point out that under the current rule, all credit unions must comply with
GAAP. Therefore, the newly instituted $5 million asset thresholds is granting
regulatory relief to the smaller state-chartered credit unions. For those
credit unions $5 million and above, the Commission believes that compliance
with GAAP is warranted.
The new rule is adopted under the provisions of §15.402
of the Texas Finance Code, which is interpreted as authorizing the Credit
Union Commission to adopt reasonable rules necessary for administering Subtitle
D, Title 3, Texas Finance Code (Texas Credit Union Act).
The specific sections affected by this rule are Texas Finance Code §§
122.101 and 122.102.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on April 21, 2000.
TRD-200002891
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: May 11, 2000
Proposal publication date: February 11, 2000
For further information, please call: (512) 837-9236
Subchapter B. ORGANIZATION PROCEDURES
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter D. POWERS OF CREDIT UNIONS
Subchapter E. DIRECTION OF AFFAIRS
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter D. POWERS OF CREDIT UNIONS
Subchapter E. DIRECTION OF AFFAIRS