Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter A. GENERAL RULES
7 TAC §91.101
The Credit Union Commission proposes an amendment to rule §91.101
relating to definitions and interpretations.
The Credit Union Commission has completed its review of Texas Administrative
Code Title 7, Chapter 91, §91.101 relating to definitions and interpretations.
The Commission believes that the reasons for initially adopting this rule
continue to exist; however, it has determined from its review that certain
definitions need to be modified for clarity.
The amendments clarify the definitions of Construction or development loan
and Loan to Value ratio. A grammatical revision is also made to the definition
of Reserves.
Kerri T. Galvin, General Counsel, has determined that for each year of
the first five years the proposed amended rule is in effect, 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 definitions.
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 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 and Texas Finance Code Section 123.201, which authorizes
the Commission to adopt rules governing credit unions' lending of funds.
The specific sections affected by the proposed amendment are Texas Finance
Code, Sections 123.201, 124.001, 124.003, and 124.052.
§91.101.Definitions and Interpretations.
(a)
Words and terms used in this chapter that are defined in
Finance Code §121.002, have the same meanings as defined in the Finance
Code. The following words and terms, when used in this chapter, shall have
the following meanings, unless the context clearly indicates otherwise.
(1)
Act--the Texas Credit Union Act (Texas Finance Code, Subtitle
D).
(2)
Allowance for loan and lease losses (ALLL)--a general valuation
allowance that has been established through charges against earnings to absorb
losses on loans and lease financing receivables. An ALLL excludes the regular
reserve and special reserves.
(3)
Applicant--an individual or credit union that has submitted
an application to the commissioner.
(4)
Application--a written request filed by an applicant with
the department seeking to incorporate, amend articles of incorporation or
bylaws, deviate from standard bylaws, obtain a certificate of authority to
do business in the state of Texas or to obtain other relief for which the
commission is authorized by the act to issue a final decision or order subject
to judicial review.
(5)
Automated teller machine (ATM)--an automated, unstaffed
credit union facility owned by or operated exclusively for the credit union
at which deposits are received, cash dispensed, or money lent.
(6)
Community of interest--a unifying factor among persons
that by virtue of its existence, facilitates the successful organization of
a new credit union or promotes economic viability of an existing credit union.
The types of community of interest currently recognized are:
(A)
Occupational--based on an employment relationship that
may be established by:
(i)
employment (or a long term contractual relationship equivalent
to employment) by a single employer, affiliated employers or employers under
common ownership with at least a 10% ownership interest;
(ii)
employment or attendance at a school; or
(iii)
employment in the same trade, industry or profession
(TIP) with a close nexus and narrow commonality of interest, which is geographically
limited.
(B)
Associational--based on groups consisting primarily of
natural persons whose members participate in activities developing common
loyalties, mutual benefits, or mutual interests. In determining whether a
group has an associational community of interest, the commissioner shall consider
the totality of the circumstances, which include:
(i)
whether the members pay dues,
(ii)
whether the members participate in furtherance of the
goals of the association,
(iii)
whether the members have voting rights,
(iv)
whether there is a membership list,
(v)
whether the association sponsors activities,
(vi)
what the association's membership eligibility requirements
are, and
(vii)
the frequency of meetings. Associations formed primarily
to qualify for credit union membership and associations based on client or
customer relationships, do not have a sufficient associational community of
interest.
(C)
Geographic--based on a clearly defined and specific geographic
area where persons have common interests and/or interact. More than one credit
union may share the same geographic community of interest. There are currently
four types of affinity on which a geographic community of interest can be
based: persons, who
(i)
live in,
(ii)
worship in,
(iii)
attend school in, or
(iv)
work in that community. The geographic community of interest
requirements are met if the area to be served is in a recognized single political
jurisdiction, e.g., a city or a county, or a portion thereof.
(D)
Other--The commissioner may authorize other types of community
of interest, if the commissioner determines that either a credit union or
foreign credit union has sufficiently demonstrated that a proposed factor
creates an identifiable affinity among the persons within the proposed group
. Such a factor shall be well-defined, have a geographic definition, and may
not circumvent any limitation or restriction imposed on one of the other enumerated
types.
(7)
Construction or development loan--a financing arrangement
for [
(8)
Core capital--has the same meaning as "tier one capital"
as set forth in the capital regulations adopted by the appropriate federal
banking regulatory agency.
(9)
Corporate credit union--a credit union whose field of membership
consists primarily of other credit unions.
(10)
Day--whenever periods of time are specified in this title
in days, calendar days are intended. When the day, or the last day fixed by
statute or under this title for taking any action falls on Saturday, Sunday,
or a state holiday, the action may be taken on the next succeeding day which
is not a Saturday, Sunday, or a state holiday.
(11)
Department newsletter--the monthly publication that serves
as an official notice of all applications, and by which procedures to protest
applications are described.
(12)
Field of membership (FOM)--refers to the totality of persons
a credit union may accept as members. The FOM may consist of one group, several
groups with a related community of interest, or several unrelated groups with
each having its own community of interest.
(13)
Imminent danger of insolvency--a circumstance or condition
in which a credit union is unable or lacks the means to meet its current obligations
as they come due in the regular and ordinary course of business, even if the
value of its assets exceeds its liabilities; or the credit union has a positive
net worth ratio equal to two percent or less of its assets.
(14)
Improved residential property--real property consisting
of a residential dwelling having one to four dwelling units, at least one
of which is occupied by the owner of the property. This term shall also include
a one to four unit dwelling occupied in whole or in part by the owner on a
seasonal basis.
(15)
Indirect financing--a program in which a credit union
makes the credit decision in a transaction where the credit is extended by
the vendor and assigned to the credit union or a loan transaction that generally
involves substantial participation in and origination of the transaction by
a vendor.
(16)
Loan-to-value ratio--the aggregate amount of all sums
borrowed including outstanding balances plus any unfunded commitment or line
of credit from all sources
[
(17)
Loan and extension of credit--a direct or indirect advance
of funds to a member, or on that member's behalf, that is conditioned upon
the repayment of the funds by the member or the application of collateral.
The terminology also includes the purchase of a member's loan or other obligation,
a lease financing transaction, a credit sale, a line of credit or loan commitment
under which the credit union is contractually obligated to advance funds to
or on behalf of a member, an advance of funds to honor a check or share draft
drawn on the credit union by a member, or any other indebtedness not classified
as an investment security.
(18)
Manufactured home--a HUD-code manufactured home as defined
by the Texas Manufactured Housing Standards Act.
(19)
Metropolitan Statistical Area (MSA)--a geographic area
as defined by the director of the U. S. Office of Management and Budget.
(20)
Mobile office--a branch office that does not have a single,
permanent site, including a vehicle that travels to various public locations
to enable members to conduct their credit union business.
(21)
Office--includes any service facility or place of business
established by a credit union at which deposits are received, checks or share
drafts paid, or money lent. This definition includes a credit union owned
branch, a mobile branch, an office operated on a regularly scheduled weekly
basis, a credit union owned ATM, or a credit union owned electronic facility
that meets, at a minimum, these requirements; however, it does not include
the credit union's Internet website. This definition also includes a shared
branch or a shared branch network if either:
(A)
the credit union has an ownership interest in the service
facility either directly or through a CUSO or similar organization; or
(B)
the service facility is local to the credit union and the
credit union is an authorized participant in the service center.
(22)
Overlap--the situation which exists when a group of persons
is eligible for membership in two or more state, foreign, or federal credit
unions doing business in this state. Notwithstanding this provision, no overlap
exists if eligibility for credit union membership results solely from a family
relationship.
(23)
Person--an individual, partnership, corporation, association,
government, governmental subdivision or agency, business trust, estate, trust,
or any other public or private entity.
(24)
Principal office--the home office of a credit union.
(25)
Protestant--a credit union that opposes or objects to
the relief requested by an applicant.
(26)
Remote service facility--an automated, unstaffed credit
union facility owned or operated by, or operated for, the credit union, such
as an automated teller machine, cash dispensing machine, point-of-sale terminal,
or other remote electronic facility, at which deposits are received, cash
dispensed, or money lent.
(27)
Reserves--allocations of retained earnings
including
[
(28)
Resident of this state--a person physically located in,
living in or employed in the state of Texas.
(29)
Respondent--a credit union or other person against whom
a disciplinary proceeding is directed by the department.
(30)
Shared service center--a facility which is connected electronically
with two or more credit unions so as to permit the facility, through personnel
at the facility and the electronic connection, to provide a credit union member
at the facility the same credit union services that the credit union member
could lawfully obtain at the principal office of the member's credit union.
(31)
Secured credit--a loan made or extension of credit given
upon an assignment of an interest in collateral pursuant to applicable state
laws so as to make the enforcement or promise more certain than the mere personal
obligation of the debtor or promisor. Any assignment may include an interest
in personal property or real property or a combination thereof.
(32)
Title--Title 7, Part VI of the Texas Administrative Code
(TAC), Banking and Securities, which contains all of the department's rules.
(33)
Underserved area--a geographic area, which could be described
as one or more contiguous metropolitan statistical areas (MSA) or one or more
contiguous political subdivisions, including counties, cities, and towns,
that satisfy any one of the following criteria:
(A)
A majority of the residents earn less than 80 percent of
the average for all wage earners as established by the u. S. Bureau of labor
statistics;
(B)
The annual household income for a majority of the residents
falls at or below 80 percent of the median household income for the nation;
or
(C)
The commission makes a determination that the lack of available
or adequate financial services has adversely effected economic development
within the specified area.
(34)
Uninsured membership share--funds paid into a credit union
by a member that constitute uninsured capital under conditions established
by the credit union and agreed to by the member including possible reduction
under section 122.105 of the act, risk of loss through operations, or other
forfeiture. Such funds shall be considered an interest in the capital of the
credit union upon liquidation, merger, or conversion.
(35)
Unsecured credit--a loan or extension of credit based
solely upon the general credit financial standing of the borrower. The term
shall include loans or other extensions of credit supported by the signature
of a co-maker, guarantor, or endorser.
(b)
(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 June 22, 2004.
TRD-200404092
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: August 8, 2004
For further information, please call: (512) 837-9236
7 TAC §91.201
The Credit Union Commission proposes an amendment to rule §91.201
relating to incorporation procedures.
The Credit Union Commission has completed its review of Texas Administrative
Code Title 7, Chapter 91, §91.201 relating to incorporation procedures.
The Commission believes that the reasons for initially adopting this rule
continue to exist; however, it has determined from its review that modifications
need to be made to itemize the details needed in the business plan required
by Texas Finance Code Section 122.001.
The proposed amendment sets out the items that need to be included in the
three year business plan submitted with an application to incorporate. Specifically,
the business plan must describe the credit union's business, including the
products, member services, and other activities; provide pro forma financial
information for the three years of operation, including annual totals for
the income statement; describe in detail all of the assumptions used to prepare
the projected financial information; discuss the capital goals and the means
to achieve them; discuss the overall marketing/advertising strategy to reach
potential members; and describe the economic forecast for the three years
of the plan.
Kerri T. Galvin, General Counsel, has determined that for each year of
the first five years the proposed amended rule is in effect, 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 charter application
requirements and a more in depth analysis of charter applications increasing
the safety and soundness of newly chartered credit unions. 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, 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 and Texas Finance Code Section 122.001, which authorizes
the Commission to prescribe the form of charter applications.
The specific section affected by the proposed amendments is Texas Finance
Code, Sections 122.001.
§91.201.Incorporation Procedures.
(a)
An application to incorporate a credit union shall be in
writing and supported by such information and data as the commissioner may
require to make the findings necessary for the issuance of a certificate of
incorporation.
(b)
Business Plan. The application must include
a business plan that covers three years and provides detailed explanations
of actions that are proposed to accomplish the primary functions of the credit
union. The description should provide enough detail to demonstrate that the
institution has a reasonable chance for success, will operate in a safe and
sound manner, and will maintain adequate capital to support its operations.
Specifically the plan must:
(1)
Describe the credit union's business, including the products,
member services, and other activities;
(2)
Provide pro forma financial information for the three years
of operation, including annual totals for the Income Statement;
(3)
Describe in detail all of the assumptions used to prepare
the projected financial information;
(4)
Discuss the capital goals and the means to achieve them;
(5)
Discuss the overall marketing/advertising strategy to reach
potential members; and
(6)
Describe the economic forecast for the three years of the
plan.
(c)
[
(d)
[
(e)
[
(1)
the group has less than 3000 primary potential members
or the overlap is otherwise incidental in nature;
(2)
the overlapped credit union does not object to the overlap;
(3)
there is limited participation by members or employees
of the group in the original credit union after the expiration of a reasonable
period of time; or
(4)
a single occupational or associational based credit union
overlaps a community chartered credit union.
(f)
[
(g)
[
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 June 22, 2004.
TRD-200404090
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: August 8, 2004
For further information, please call: (512) 837-9236
the purpose of
] acquiring property or rights to property,
including land or structures, with the intent of converting the property into
income-producing property[
, including
]
such as
residential
housing for rental or sale
;
[
,
] commercial
use;
[
,
] industrial
use;
or similar use.
owed
] on an item of collateral
[
securing a loan
] divided by the
market
value of the
collateral
used to secure the loan
.
and includes
] regular and special reserves, except for
any allowances for loan, lease or investment losses.
Subchapter B. ORGANIZATION PROCEDURES
(b)
] The commissioner shall determine
whether or not an application is complete within thirty days of its receipt
and provide written notice of the determination. If the application is deemed
incomplete, the notice shall provide with reasonable specificity the deficiencies
in the application.
(c)
] Upon the determination that
an application is complete, the commissioner shall make or cause to be made
an investigation and examination of the facts concerning the applicant. It
is essential that the investigation and examination confirm to the satisfaction
of the commissioner that the proposed institution will have a reasonable opportunity
to succeed.
(d)
] Proposed credit unions must
investigate the possibility of an overlap with existing state or federal credit
unions doing business in this state prior to submitting an application. When
an overlap situation does arise, officials of the involved entities must attempt
to resolve the overlap issue. Typically, an overlap will not be considered
adverse to the overlapped credit union if:
(e)
] When the applicant and a credit
union agree and/or the commissioner has determined that overlap protection
is appropriate, an exclusionary clause will be included in the proposed field
of membership for a period of 24 months from the date the proposed credit
union commences business. The commissioner, for good cause shown, may extend
this period for an additional 24 months.
(f)
] The commissioner may approve
the application conditioned upon specific requirements being met, but the
certificate of incorporation shall not be issued unless such conditions have
been meet within the time specified in the approval order or any extension
as set forth in Finance Code §122.006.
Subchapter C. MEMBERS