Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter B. ORGANIZATION PROCEDURES
7 TAC §91.210
The Texas Credit Union Commission proposes amendments to §91.210
relating to foreign credit unions. The amendment makes several changes. First,
it defines local service area for foreign credit unions. Secondly it allows
foreign credit unions to expand its field of membership to include any group
with a community of interest (including geographic) within its local service
area and automatically includes certain groups in their entirety, even though
some of the potential members may be located outside the credit union's local
service area under specified conditions. Finally, a new subsection was added
to safeguard against foreign credit unions using its Texas office(s) as share/deposit
production office(s).
The amendment to the rule is adopted as a result of interested persons
petitioning the Commission to amend the rule to change the current language
in subsection (i) because it limited a foreign credit union's growth outside
of their service area and foreign credit unions were not on parity with state-chartered
credit unions for field of membership expansions.
Additional comments received stated that the proposed changes to Section
91.210 still set limits on a foreign credit union's ability to expand their
field of membership and objected to the new subsection dealing with prohibition
against share/deposit production offices. The Commission has determined from
its review of Section 91.210 and the comments received that a need exists
for this proposed amendment. The Commission felt that this amendment places
the foreign credit union on par with state chartered credit unions in connection
with expansion of field of membership and that the prohibition on share/deposit
production offices was based on sound public policy considerations and is
not unduly burdensome on foreign credit unions.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be greater choice for the Texas consumer,
while safeguarding against disproportionate funneling of deposits out of this
state to support loans in other states. There is no anticipated effect on
small businesses as a result of adopting the amended rule. There is no economic
cost anticipated to credit unions for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 122.013, that is interpreted as authorizing the Credit Union
Commission to adopt rules that govern foreign credit union operations in this
state..
The specific section affected by the proposed amendment is Texas Finance
Code, Section 122.013.
§91.210. Foreign Credit Unions [
(a)
Definitions
[
(1)
Foreign credit union
--
[
(2)
Local service area--an area
that is within reasonable proximity of a foreign credit union's office, allowing
members to be realistically served from that office.
(b)-(h)
(No change.)
(i)
Field of membership. A certificate of authority to do business
in this state is specifically issued to allow a foreign credit union to provide
services to its existing field of membership. However, the commissioner may
approve a foreign credit union's request to expand its field of membership
to include
groups with a community of interest that are
[
(j)
Location of Group. For the purposes of
a field of membership expansion, the group as a whole will be considered to
be within the local service area when:
(1)
A majority of the persons in the group live, work, or gather
regularly within the local service area;
(2)
The group's headquarters is located within the local service
area; or
(3)
The group's "paid from" or "supervised from" location is
within the local service area.
(k)
Prohibition against share/deposit
production offices. A foreign credit union may not use its certificate of
authority primarily for the purpose of deposit production. The foreign credit
union is expected to reasonably help meet the credit needs of the groups in
Texas that are served by the credit union. If the Commissioner determines
that the foreign credit union's level of lending in Texas relative to the
deposits from Texas members is less than half the average of total loans relative
to total deposits for all credit unions domiciled in Texas, the credit union
will not be permitted to further expand its field of membership nor open additional
offices in Texas.
(l)
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301988
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.403
The Texas Credit Union Commission proposes amendments to §91.403
concerning federal parity with respect to offering debt cancellation products.
The proposed amendment establishes additional standards governing debt cancellation
products in order to ensure that credit unions provide such products consistent
with safe and sound credit union practices.
The Credit Union Department has long recognized that state credit unions
may provide debt cancellation contracts as permissible credit union products.
The Credit Union Commission officially granted state credit unions parity
with federal credit unions relating to the sale of guaranteed auto protection
programs and debt cancellation contracts in 1999 based on the regulations
of the National Credit Union Administration at 12 C.F.R. Part 721.3(g) which
expressly noted debt cancellation and debt suspension agreements as permissible
loan-related products. In promulgating §91.403 the Commission codified
the Department's position and specifically stated the authority of state credit
unions under Texas Finance Code Section 123.003 to enter into debt cancellation
products as authorized credit union loan terms and to charge a fee for these
products.
The proposal removes references to a guaranteed auto protection program
and improves the definition of debt cancellation product.
The proposal also adds three new subsections. New subsection (b) imposes
additional standards that apply to credit unions offering debt cancellation
products. These standards prohibit a credit union from engaging in any form
of self-insurance to cover any loss resulting from these products; prohibit
tying the approval or terms of an extension of credit to a member's purchase
of a product; and requires the product provide for the refunding of, or credit
to, the member any unearned fees resulting from the termination of the member's
participation in the product. New subsection (c) requires a credit union to
notify the commissioner of its intention to offer debt cancellation products
and prescribes the information that must be included in the notification.
And finally, new subsection (d) imposes a new duty on the credit union's board
of directors to establish and maintain written policies concerning debt cancellation
products.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be member protection and clear guidance
on safety and soundness requirements for debt cancellation products. There
is no anticipated effect on small businesses as a result of adopting the amended
rule. There is no economic cost anticipated to credit unions for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the Texas Finance Code §15.402
and §123.003.
The Commission interprets §15.402 to authorize the Commission to adopt
reasonable rules, and the Commission interprets §123.003 to authorize
the Commission to adopt rules that authorize a state credit union to engage
in any activity in which it could engage, exercise any power it could exercise,
or make any loan or investment it could make, if it were operating as a federal
credit union.
The specific section affected by this proposed amendment is Texas Finance
Code §124.001.
§91.403.Federal Parity [
(a)
A credit union may
offer any
[
(b)
For any debt cancellation product offered
by a credit union:
(1)
The credit union must purchase insurance, from an insurer
authorized to do business in Texas, to indemnify itself from loss resulting
from operation of the product;
(2)
The credit union may not extend credit nor alter the terms
or conditions of an extension of credit conditioned upon the member choosing
a debt cancellation product; and
(3)
The debt cancellation product must provide for the refunding
of, or crediting to, the member any unearned fees resulting from termination
of the member's participation in the product, whether by prepayment of the
extension of credit or otherwise. Any unearned fees must be calculated using
the actuarial method or any other method at least as favorable to the member.
(c)
A credit union must notify the commissioner
in writing of its intent to offer any type of debt cancellation product at
least 30 days prior to any such product being offered to members. The notice
must contain:
(1)
A statement describing the type(s) of debt cancellation
product(s) that the credit union will offer to its membership; and
(2)
The name of the insurer from whom the credit union will
purchase the insurance policy required under subsection (b)(1).
(d)
Each credit union, before offering any
debt cancellation products, shall adopt written policies approved by it board
of directors that establish and maintain effective risk management and control
processes over the offering of these products. The policies shall also establish
reasonable fees, if any, that will be charged; the appropriate disclosures
that will be given; and the claims processing procedures that will be utilized.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301989
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.701
The Texas Credit Union Commission proposes amendments to §91.701
relating to lending powers. The amendment makes several nonsubstantive changes,
which clarify certain provisions of the rule.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.701 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.701 that a need exists for these proposed amendments.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be that a party will be afforded an opportunity
for a fair and expeditious presentation of the relevant issues in a contested
case. There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.701.Lending Powers.
(a)
(No change.)
(b)
Each credit union, before engaging in any lending activity,
shall establish written
lending
policies approved by its board
of directors that establish prudent credit underwriting and documentation
standards for each specific type of lending
activity
[
(1)
Be consistent with safe and sound credit union practices;
(2)
Be appropriate to the size and financial condition of the
credit union and the nature and scope of its operations;
(3)
Be compatible with the size and expertise of the credit
union's lending staff;
(4)
Be compliant with all related laws and regulations;
(5)
Be reviewed and approved by the credit union's board of
directors at least annually;
(6)
Address loan portfolio diversification standards to avoid
undue concentrations of risk;
(7)
Address underwriting standards that are clear and measurable;
(8)
Address loan administration procedures for monitoring the
loss exposure from
[
(9)
State the lending authority delegated to any individuals
or committees by the board of directors.
(c)
(No change.)
(d)
Except when a higher maturity date is provided for elsewhere
in this chapter, the maturity of a loan to a member may not exceed 15 years
unless the purpose of the loan is to finance the purchase of a manufactured
home and the loan is secured by a first lien, in which case the maturity may
not exceed 20 years. Open-end credit is not subject to a regulatory maturity
limit.
However,
[
(e)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301991
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.702
The Texas Credit Union Commission proposes amendments to §91.702
relating to lending powers. The amendment makes one change, which clarifies
that loan documentation practices must be written.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.702 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.702 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be consistency of application from written
loan documentation practices. There is no anticipated effect on small businesses
as a result of adopting the amended rule. There is no economic cost anticipated
to credit unions for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.702.Records for Lending Transactions.
A credit union shall maintain files containing credit and other information
adequate to demonstrate evidence of prudent business judgement in exercising
the lending powers granted under the Act, these rules, or other applicable
law. At a minimum, each credit union shall establish and maintain
written
loan documentation practices that ensure that the credit union can
make an informed lending decision and can assess risk on an ongoing basis;
and ensure that any claims against a member, guarantor, security holders,
and collateral are legally enforceable.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301993
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.704
The Texas Credit Union Commission proposes amendments to §91.704
relating to lending powers. The amendment makes several changes, which allows
30 year first lien home equity loans and clarifies several provisions under
the subsection dealing with exceptions to loan to value limitations.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.704 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.704 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be clarification of the applicable provisions.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.704.Real Estate Lending.
(a) - (b)
(No change.)
(c)
Notwithstanding the general 15-year maturity limit on lending
transactions to members, the board of directors shall establish in
written
policy internal maximum maturities for real estate lending transactions.
These maturities should not exceed the following regulatory limits:
(1)
Improved residential real estate loans (owner-occupied)
- 40 years
(2)
Improved residential real estate loans (not to be occupied
by owner) - 30 years
(3)
Interim construction loans - 18 months
(4)
Manufactured home (first lien) - 20 years
(5)
Home equity loans - 20 years
(second lien) - 30 years
(first lien)
(6)
Home improvement loans - 20 years
(7)
All other loans - 15 years
(d)
Exceptions to subsections (b) and (c) of this section are
permitted for the following:
(1)
Loans that subsequently become compliant with loan-to-value
ratio limits due to reduction in principal amount, elimination of senior liens,
or contribution of additional collateral or equity (e.g. improvements to the
real property securing the loan).
(2)
Loans guaranteed or insured by the U.S. government or its
agencies, provided that the amount of the guaranty or insurance is at least
equal to the portion of the loan that exceeds the regulatory loan-to-value
limit.
(3)
Loans
guaranteed, insured or otherwise
backed
by the full faith and credit of the state,
a municipality, a county government,
or an agency thereof,
provided that the amount of the
guaranty,
insurance, or
assurance is at least equal to the portion of the loan
that exceeds the regulatory loan-to-value limit.
(4)
Loans guaranteed or insured by
a private corporation,
organization or other entity
[
(5)
Loans that are to be sold promptly after origination, without
recourse, to a financially responsible third party.
(6)
Loans that are renewed, refinanced, or restructured without
the advancement of new funds or an increase in the line of credit (except
for reasonable closing costs) where consistent with safe and sound credit
union practices and part of a clearly defined and well-documented program
to achieve orderly liquidation of the debt, reduce risk of loss, or maximize
recovery on the loan.
(e)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301996
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.708
The Texas Credit Union Commission proposes amendments to §91.708
relating to lending powers. The amendment makes several changes, which prescribe
minimum standards for determining the market value of real estate loans with
a transaction value of less than $250,000.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.708 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.708 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be consistent documentation of real estate
loans. There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.708.Real Estate Appraisals.
(a)
For real estate loans in which the transaction
value exceeds $250,000,
the credit union shall obtain
a professional
appraisal report by a state certified or licensed appraiser [
(b)
Real estate loans with a transaction
value of less than $250,000 shall be supported by a written estimate of market
value either performed by a qualified individual who has no direct interest
in the property or from tax appraisal data of a governmental entity.
(c)
Reappraisals may be required
by the commissioner on real estate or other property or interests therein
securing loans, at the expense of the credit union, when the commissioner
has reasonable cause to believe the value of the security is overstated.
(d)
In the case of renewal of a
loan where additional funds are advanced by the credit union, a written certification
of current value by the original appraiser or an acceptable substitute shall
satisfy this section.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301997
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.710
The Texas Credit Union Commission proposes amendments to §91.710
relating to lending powers. The amendment rewrites the provision in its entirety
to allow state chartered credit unions the same overdraft protection programs
currently available to federally chartered credit unions.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.710 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
Comments were received from the Texas Credit Union League encouraging adoption
of overdraft protection provisions which put state chartered credit unions
in parity with federally chartered credit unions. The Commission has determined
from its review of Section 91.710 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be consistency with federal credit unions
and a written overdraft protection program disclosing details and fees to
its members. There is no anticipated effect on small businesses as a result
of adopting the amended rule. There is no economic cost anticipated to credit
unions for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.710.Overdraft Protection.
A credit union may advance money to a member to cover an account
deficit without having a credit application from the borrower on file if the
credit union has a written overdraft policy. The policy must: set a cap on
the total dollar amount of all overdrafts the credit union will honor consistent
with the credit union's ability to absorb losses; establish a time limit not
to exceed 45 calendar days for a member to either deposit funds or obtain
an approved loan from the credit union to cover each overdraft; limit the
dollar amount of overdrafts the credit union will honor per member; and establish
the fee and interest rate, if any, the credit union will charge members for
honoring overdrafts.
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301998
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.711
The Texas Credit Union Commission proposes amendments to §91.711
relating to lending powers. The amendment makes several changes, which clarify
when a loan participation is an investment and specifically authorizes a credit
union to sell or purchase the servicing of any loan in which it owns a participation
interest.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.711 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.711 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be clarification of the applicable provisions.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.711.Loan Participations.
(a)
A credit union may participate in loans jointly
with other credit unions, credit union organizations, corporations or other
financial organizations pursuant to written policies established by the board
of directors. Before
the disbursement of proceeds to the originating
lender,
[
(b)
A participating credit union
shall treat a participation as an investment, unless the participation is
in a loan of a type that the credit union is authorized to make and the borrower
is a member of the credit union or a member of another participating credit
union.
(c)
A credit union may sell to
or purchase from any participant the servicing of any loan in which it owns
a participation interest.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200302002
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.712
The Texas Credit Union Commission proposes amendments to §91.712,
relating to lending powers. The amendments makes several changes, which are
technical corrections.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years.) Notice of Intention to Review §91.712
was published in the
Texas Register
on December
13, 2002 (27 TexReg 11797) for the purpose of accepting public comment. No
comments have been received. However, the Commission has determined from its
review of §91.712 that a need exists for the proposed amendments.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be clarification of the applicable provisions.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699.
The amendments are proposed under the provision of the Texas
Finance Code, §124.001, which provides the Credit Union Commission with
the authority to adopt rules governing loans made to credit union members;
and under the Texas Finance Code, §15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.712.Plastic Cards.
(a)
Definitions. The following words and terms, when used in
this chapter, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Card Activation--process of sending new plastic cards from
the issuer to the legitimate cardholder in an "inactive" mode. Once the legitimate
cardholder receives the card, they must call the issuer/processor and go through
a member verification process before the card is "activated".
(2)
Card Security Code--a set of unique numbers encoded on
the magnetic strip of plastic cards used to combat counterfeit fraud.
(3)
Neural Network--a computer program that monitors usage
patterns of an account and typical fraud patterns. The program analyzes activity
to determine fraud risk scores to detect potentially fraudulent activity.
[
(4)
Plastic Cards--includes credit cards, debit cards, automated
teller machine (ATM) or specific network cards; and predetermined stored value
and smart cards with micro-processor chips.
(b)
(No change.)
(c)
Program Review.
(1)
A credit union shall review, on at least an annual basis,
its plastic card program with particular emphasis on:
(A)
Losses caused by theft and fraud;
(B)
Loss prevention measures and their adequacy; and
(C)
The availability and use of appropriate loss prevention
measures including card activation, card security codes, neural networks,
and other evolving technology.
(2)
The review shall be documented in writing, with any changes
to the plastic card program being entered into the minutes of the board meeting.
(3)
[
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200302003
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.713
The Texas Credit Union Commission proposes amendments to §91.713,
relating to lending powers. The amendments makes several changes, which clarify
requirements regarding retail installment contracts.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years.) Notice of Intention to Review §91.713
was published in the
Texas Register
on December
13, 2002 (27 TexReg 11797) for the purpose of accepting public comment. No
comments have been received. However, the Commission has determined from its
review of §91.713 that a need exists for the proposed amendments.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be clarification of the applicable provisions.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699.
The amendments are proposed under the provision of the Texas
Finance Code, §124.001, which provides the Credit Union Commission with
the authority to adopt rules governing loans made to credit union members;
and under the Texas Finance Code, §15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.713.Indirect Financing of Motor Vehicles or Other Chattels.
(a)
Credit unions may implement a program of indirect financing
of motor vehicles and other chattels. For the purposes of this chapter, a
retail installment contract purchased under this authority may be treated
as a loan on the books and records of the credit union and is subject to the
same limitations and restrictions imposed upon loan transactions. As with
other lending, the credit union is responsible for making the final underwriting
decision
.
The
[
(b)
Credit unions may purchase or otherwise hold retail
installment contracts when authorized by applicable law. The
[
(c)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200302004
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.715
The Texas Credit Union Commission proposes amendments to §91.715,
relating to lending powers. The amendments makes several changes, which clarify
that standards of review and approval of exceptions to general loan policies
should be written and make other review procedures mandatory.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years.) Notice of Intention to Review §91.715
was published in the
Texas Register
on December
13, 2002 (27 TexReg 11797) for the purpose of accepting public comment. No
comments have been received. However, the Commission has determined from its
review of §91.715 that a need exists for the proposed amendments.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be greater equity and control over exceptions
to lending policies. There is no anticipated effect on small businesses as
a result of adopting the amended rule. There is no economic cost anticipated
to credit unions for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699.
The amendments are proposed under the provision of the Texas
Finance Code, §124.001, which provides the Credit Union Commission with
the authority to adopt rules governing loans made to credit union members;
and under the Texas Finance Code, §15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.715.Exceptions to the General Lending Policies.
(a)
Credit unions may provide for the consideration
of loan requests from creditworthy members whose credit needs do not fit within
the credit union's general lending policies. A credit union may provide for
prudently underwritten exceptions to its lending policies. However, the Board
is responsible for establishing
written
standards for the review
and approval of exception loans.
(b)
Each credit union
establishing exceptions
to its general lending policies shall
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200302005
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
7 TAC §91.718
The Texas Credit Union Commission proposes amendments to §91.718
relating to lending powers. The amendment makes one change which requires
the commissioner to act in accordance with generally accepted accounting principals
when determining value.
The amendments to the rule are proposed as a result of the general rule
review mandated by the Government Code and General Appropriations Act. (Both
contain provisions requiring state agencies to review and consider for readoption
each of their rules every four years). Notice of Intention to Review Section
91.718 was published in the
Texas Register
on
December 13, 2002 (27 TexReg 11797) for the purpose of accepting public comment.
No comments have been received. However, the Commission has determined from
its review of Section 91.718 that a need exists for this proposed amendment.
Kerri T. Galvin, General Counsel, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rule.
Ms. Galvin has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be enhancement of the applicable provision.
There is no anticipated effect on small businesses as a result of adopting
the amended rule. There is no economic cost anticipated to credit unions for
complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the Texas Register to Kerri T. Galvin, General Counsel,
Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed under the provision of the Texas Finance
Code, Section 124.001, which provides the Credit Union Commission with the
authority to adopt rules governing loans made to credit union members; and
under the Texas Finance Code, Section 15.402, which authorizes the commission
to adopt reasonable rules for administering Title 2, Chapter 15 and Title
3, Subchapter D of the Texas Finance Code.
The specific section affected by the proposed amendment is Texas Finance
Code, Section 124.001.
§91.718.Charging Off or Setting Up Reserves.
(a)
The commissioner, after a determination of value
in accordance with generally accepted accounting principles
, may order
that assets in the aggregate, to the extent that such assets have depreciated
in value, or to the extent the value of such assets, including loans, are
overstated in value for any reason, be charged off, or that a special reserve
or reserves equal to such depreciation or overstated value be established.
(b)-(c)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 25, 2003.
TRD-200301992
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: May 11, 2003
For further information, please call: (512) 837-9236
Certificate of Authority to Do Business in the State of Texas ].
Definition
].
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.
distinct, definable single occupational and /or associational communities
of interest
] within
the foreign credit union's local service area
[
the state of Texas that can be conveniently served from it s
office(s)
] if it is organized in a state or country that allows a credit
union organized under the act to expand its field of membership to at least
the same extent.
After being satisfied that the group is within the foreign
credit union local service area, the
[
The
] commissioner shall
use[
, in making a determination on the expansion request,
] the
same criteria and the same procedures as used when a Texas credit union seeks
to expand its field of membership. The commissioner shall make a reasonable
effort to coordinate this determination with the foreign credit union's primary
regulator to assure that each agency's material interests, authorities and
responsibilities are fulfilled.
(j)
] Enforcement; penalty. The commissioner
has grounds to issue a cease and desist order to an officer, employee, director,
and/or the foreign credit union itself, if the commissioner determines from
examination or other credible evidence that the credit union has violated
or is violating any applicable Texas law or rules of the commission. If the
foreign credit union does not comply with an order, the commissioner may assess
an administrative penalty as authorized by §122.260, Finance Code, as
well as suspend or revoke the certificate of authority.
Subchapter D. POWERS OF CREDIT UNIONS Guaranteed Auto Protection (GAP) Program/Debt Cancellation Contracts ] Debt Cancellation Products .
establish and operate a
]
debt cancellation product it could offer
[
GAP program for its members as
] if it were operating as
a federal credit union
, so long as it complies with this section
.
For the purposes of this section, a
debt cancellation product is one
[
GAP program is defined as a program in
] which the credit
union
agrees to waive, suspend, defer, or cancel all or part of a member's
obligation to pay an indebtedness under a lease, loan, or other extension
of credit upon the occurrence of a specified event
[
purchases insurance
to protect itself from losses resulting when a leased vehicle or vehicle securing
a loan or other extension of credit held by the credit union is declared a
total loss or is stolen and the primary insurance settlement is not sufficient
to cover the outstanding balance
]. The credit union may
offer debt
cancellation products for a fee.
[
then, with or without a fee,
enter into a debt cancellation contract, GAP waiver, or similar agreement
under which the member will not be held responsible for the deficiency.
]
If the debt cancellation
product
[
contract, GAP waiver, or
similar agreement
] is offered on a fee basis, then participation must
be optional for the member.
Subchapter G. LENDING POWERS
in which
the credit union will engage
]. The lending policies shall contain a
general outline of the manner in which loans are made, serviced, and collected.
In addition the policies must:
condition of
] the loan portfolio; and
Amortization of line of credit balances and
the type and amount of security on any line of credit shall be as determined
by the contract between the credit union and the member but
] the amortization
scheduling on a line of credit balance shall not exceed 15 years.
the state, a municipal or local government,
or an agency thereof
] provided that the amount of
guaranty or insurance
is at least equal to the portion of the
loan that exceeds the regulatory
loan-to-value limit, and provided that the credit union has determined that
the guarantor or insurer has the financial capacity and willingness to perform
under the terms of the guaranty or insurance agreement.
as required
by the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
is necessary. Reappraisals may be required by the commissioner on real ester
or other property or interests therein securing loans , at the expense of
the credit union, when the commissioner has reason to believe the value of
the security is overstated for any reason
]. The appraisal report shall
be in writing and conform to generally accepted appraisal standards as evidenced
by the Uniform Standards of Professional Appraisal Practice promulgated by
the Appraisal Standards Board of the Appraisal Foundation,
in
[
1029 Vermont Avenue, NW,
] Washington, D.C. [
2005. In the case of
renewal of a loan where additional funds are advanced by the credit union,
a written certification of current value by the original appraiser or an acceptable
substitute shall satisfy this section.
]
A credit union which permits withdrawal of
funds from an account payable to third parties may offer in connection with
such accounts overdraft protection to members in the form, on the terms and
in amounts consistent with the credit union's policies. For purposes of financial
reporting, funds advanced to or for the benefit of a member in connection
with an overdraft condition shall be considered as a loan to the member.
]
participating in a loan transaction,
] each credit
union shall perform its own due diligence of the
loan(s)
[
transaction
]
Strategies are then used to determine actions to mitigate frauds. Human
intervention occurs to validate if the activity is actually fraudulent.
]
(d)
] At least annually, the credit
union's board shall
also
cause to be performed an assessment of
earnings and the capital position to ensure that the credit union can absorb
potential related plastic card program losses. This review shall include a
cost benefit analysis of supplemental insurance coverage for theft and fraud
related losses. Establishment of a segregated contingency reserve may be utilized
to further mitigate the credit union's risk exposure for losses resulting
from its plastic card program.
Although the
] seller may initially
determine whether the prospective buyer is a member or eligible for membership
in the credit union,
but the final determination of
[
responsibility
for
] membership eligibility
is the responsibility of the credit
union
[
decisions must be the credit union's first consideration
] .
A
] retail installment contract
must
[
may
] provide
for a rate or amount of time price differential that does not exceed
a
[
the
] rate or amount authorized by
applicable law
[
Chapter 124 of the Texas Finance Code
].
should
] establish
an appropriate internal process for the review and approval of loans that
do not conform to its own internal policy standards. The approval of any such
loan
shall also
[
should
] be supported by a written justification
that clearly sets forth all of the relevant credit factors that support the
underwriting decision. The justification and approval documents for such loans
will
[
should
] be maintained as a part of the permanent loan
file. Each credit union
shall
[
should
] monitor compliance
with its lending policies and individually report exception loans of a significant
size to its board of directors.