Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter E. DIRECTION OF AFFAIRS
7 TAC §91.502
The Credit Union Commission adopts an amendment to §91.502
relating to the payment of director fees and expenses without changes to the
text published in the March 12, 2004 issue of the
Texas Register
(29 TexReg 2495).
The amendment clarifies that the payment of fees and expenses that are
excessive or that could lead to material financial loss is considered an unsafe
and unsound practice. The amendment specifically indicates that fees and expenses
shall be considered excessive when amounts paid are disproportionate to the
services performed, or unreasonable considering the financial condition of
the credit union and similar practices at credit union’s of comparable
asset size, geographic location, and/or operational complexity.
No comments were received on the proposal.
The amendment is adopted 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 under Texas Finance Code Section 122.062, which authorizes
the Commission to establish by rule the fees that may be paid and expenditures
that may be reimbursed to persons serving as directors and committee members
of a credit union.
The specific section affected by the amendment is Texas Finance Code Section
122.062.
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 June 21, 2004.
TRD-200404073
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
7 TAC §91.510
The Credit Union Commission adopts amendments to §91.510
relating to fidelity bond and insurance requirements with non-substantive
grammatical changes to the text published in the March 12, 2004 issue of the
The amendments clarify that the prescribed minimum coverage thresholds,
which is computed based upon a credit union’s total asset size, apply
to any single loss. The amendments also require that any aggregate limit of
liability provided for in a fidelity bond policy must be at least twice the
single loss limit of liability. Finally, a new subsection was added to make
clear that a credit union must also comply with all bond requirements imposed
by an insuring organization as a condition to maintain insurance on share
and deposit accounts, including the minimum fidelity bond specifications contained
within Part 741.201 of the NCUA Rules and Regulations.
No comments were received on the proposal.
The amendments are adopted 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 under Texas Finance Code Section 122.063, which authorizes
the Commission to establish by rule the requirements for fidelity bond coverage.
The specific section affected by the amendments is Texas Finance Code Section
122.063.
§91.510.Bond and Insurance Requirements.
(a)
Fidelity bond. Each credit union shall purchase and maintain
a blanket fidelity bond covering the officers, directors, employees, committee
members, and its agents, against loss caused by dishonesty, burglary, robbery,
larceny, theft, holdup, forgery or alteration of instruments, misplacement
or mysterious disappearance. All carriers writing credit union blanket bonds
must be authorized by the Insurance Commissioner for the state of Texas as
an acceptable fidelity on bonds in this state.
(1)
The amount of coverage to be required for each credit union
shall be determined by the credit union’s board of directors, based
on its assessment of the level that would be safe and sound in view of the
credit union’s potential exposure to risk. In making its determination
the board shall be guided by the following minimum required amount of fidelity
bond coverage for any single loss computed according to asset categories:
(2)
Any aggregate limit of liability provided for in a fidelity
bond policy must be at least twice the single limit of liability. This requirement
does not apply to optional insurance coverage.
(3)
The following maximum amounts of blanket bond deductibles
are authorized according to asset categories:
(4)
A deductible may be applied separately to one or more insuring
clauses in a blanket bond. No deductible will exceed ten percent of a credit
union’s unencumbered reserves and undivided earnings unless the credit
union creates a segregated Contingency Reserve for the amount of the excess.
Valuation allowance accounts, e.g., allowance for loan losses, may not be
considered part of the unencumbered reserves and undivided earnings when determining
the maximum deductible.
(5)
The commissioner may require additional coverage of any
credit union when, in his opinion, the fidelity bond in force is insufficient
to provide adequate fidelity coverage. It shall be the duty of the board of
directors to obtain the additional coverage within 30 days after the date
of written notice of the findings by the commissioner.
(6)
After the effective date of this section, any bond coverage
purchased or renewed by any credit union shall conform to this section.
(b)
Cancellation. A fidelity bond must include a provision
requiring written notification by the fidelity to the commissioner prior to
cancellation of any or all coverages set out in the bond which includes a
brief statement of cause for termination.
(c)
Other insurance. Each credit union shall, subject to approval
by the board, purchase appropriate insurance coverages to insure the credit
union and its assets against loss or damage by fire, liability, casualty or
any other insurance risks.
(d)
Board review. The board of directors of each credit union
shall formally approve the credit union’s bond and insurance coverages.
In deciding whether to approve the coverages, the board shall review the adequacy
of the standard coverage and the need for supplemental coverage. Documentation
of the board’s approval shall be included as part of the minutes of
the meeting at which the board approves coverages. Additionally, the board
of directors shall review the credit union’s bond and insurance coverages
at least annually to assess the continuing adequacy of coverage.
(e)
Review by fidelity company. Credit unions which are analyzed
by a fidelity company shall notify the commissioner of the analysis within
30 days of the review commencement. The report of the review is to be provided
to the commissioner upon request. The confidentiality of the report shall
be preserved in the same manner afforded a report of examination conducted
by the department.
(f)
Insuring organization’s bond requirements. As applicable,
a credit union shall also comply with all bond requirements imposed by an
insuring organization as a condition to maintain insurance on share and deposit
accounts, including, the minimum fidelity bond specifications contained within
Part 741.201 of the NCUA Rules and Regulations.
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 June 21, 2004.
TRD-200404074
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
7 TAC §91.602
The Credit Union Commission adopts an amendment to §91.602
relating to the solicitation and acceptance of brokered deposits with changes
to the text published in the March 12, 2004, issue of the
Texas Register
(29 TexReg 2497).
The amendment adds a new subsection to clarify that credit unions utilizing
brokered deposits must have proper risk management practices in place, including
appropriate written asset/liability management policies, business strategies,
concentration limits, monitoring procedures, and contingency funding plans.
In addition, a credit union must implement adequate due diligence procedures
prior to establishing a business relationship with a deposit broker.
No comments were received on the proposal.
The amendment is adopted 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.
The specific sections affected by the amendment are Texas Finance Code
Sections 123.202, 123.203, and 123.204.
§91.602.Solicitation and Acceptance of Brokered Deposits.
(a)
Definitions.
(1)
Brokered deposit means any deposit that is obtained, directly
or indirectly, from or through the mediation or assistance of a deposit broker.
(2)
Deposit broker means a person engaged in the business of
placing deposits, or facilitating the placement of deposits, of third parties
with financial institutions; or the business of placing funds with financial
institutions for the purpose of selling interests in the deposit to third
parties.
(b)
Limitation. A credit union that has a net worth ratio of
less than six percent as defined in §91.901 of this title (relating to
Reserve Requirements) or is not deemed adequately capitalized by its insuring
organization may not accept, renew or roll over any brokered deposit unless
it has been granted a waiver by the commissioner.
(c)
Risk management and due diligence. Credit unions utilizing
brokered deposits shall ensure that proper risk management practices are in
place, including appropriate written asset/liability management policies,
business strategies, concentration limits, monitoring procedures, and contingency
funding plans. In addition, credit unions must implement adequate due diligence
procedures before entering into a business relationship with a deposit broker.
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 June 21, 2004.
TRD-200404078
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
7 TAC §91.608
The Credit Union Commission adopts amendments to §91.608
relating to the confidentiality of member records with changes to the text
published in the March 12, 2004, issue of the
Texas
Register
(29 TexReg 2497).
The amendments require that a credit union's written privacy policy be
consistent with the disclosure and reporting requirements applicable to federally
insured credit unions as provided in Part 716 of NCUA Rules and Regulations.
In addition, a new subsection was added to clarify that the provisions of
this rule may not be construed to alter or affect any applicable federal statute,
regulation, or interpretation that affords a member greater protection than
provide in this rule.
No comments were received on the proposal.
The amendments are adopted 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 under Texas Finance Code Section 125.402, which authorizes
the Commission to establish rules relating to the confidentiality of the accounts
of credit union members and the duties of a credit union to maintain that
confidentiality.
The specific section affected by the amendments is Texas Finance Code Section
125.402.
§91.608.Confidentiality of Member Records.
(a)
Confidentiality of members' accounts. No credit union officer,
director, committee member or employee may disclose to any person, other than
the member, or to any company or governmental body the individual savings,
shares, or loan records of any credit union member, contained in any document
or system, by any means unless specifically authorized to do so in writing
by such members, except as follows:
(1)
reporting credit experience to a bona fide credit reporting
agency, another credit union, or any other bona fide credit-granting business
and/or merchants information exchange, provided that applicable state and
federal laws and regulations pertaining to credit collection and reporting
are followed;
(2)
furnishing information in response to a valid request from
a duly constituted government agency or taxing authority, or any subdivision
thereof, including law enforcement agencies;
(3)
furnishing information, orally or in written form, in response
to the order of a court of competent jurisdiction or pursuant to other processes
of discovery duly issuing from a court of competent jurisdiction;
(4)
furnishing reports of loan balances to co-borrowers, co-makers,
and guarantors of loans of a member and of share or deposit account balances,
signature card information, and related transactions to joint account holders;
(5)
furnishing information to and receiving information from
check and draft reporting, clearing, cashing and authorization services relative
to past history of a member's draft and checking accounts at the credit union;
or
(6)
as otherwise authorized by law, including access by examiners
of the Department.
(b)
Non-disclosure statement. Nothing in this rule shall prohibit
the credit union from releasing the name and address of members to assist
the credit union in its marketing efforts or sale of third party products,
provided, however, that the credit union obtains a written non-disclosure
statement providing assurances that the information will be used exclusively
for the benefit of the credit union and no other.
(c)
Privacy policy. Each credit union shall develop, implement
and maintain a written policy on the protection of nonpublic personal information
of individual members in its possession. This policy shall be consistent with
the disclosure and reporting requirements applicable to federally insured
credit unions as addressed in Part 716 of NCUA Rules and Regulations.
(d)
Relation to federal laws. This section shall not be construed
as altering or affecting any applicable federal statute, regulation, or interpretation
that affords a member greater protection than provided under this section.
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 June 21, 2004.
TRD-200404079
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
7 TAC §91.801
The Credit Union Commission adopts amendments to §91.801
relating to investments in credit union service organizations with changes
to the text published in the March 12, 2004, issue of the
Texas Register
(29 TexReg 2499).
The amendments make the existing restrictions on receiving compensation
from a credit union service organization applicable to credit union directors.
In addition, the amendments impose a new requirement on a credit union to
provide written notice to the Commissioner of its intent to perform new activities
in an existing credit union service organization. The amendments also provides
specific guidelines as to the content of the required notice that must be
given to the Commissioner prior to commencing certain credit union service
organization activities.
No comments were received on the proposal.
The amendments are adopted 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 under Texas Finance Code Section 124.352, which allows
the Commission to authorize by rule certain investments.
The specific sections affected by the amendments are Texas Finance Code
Sections 124.351 and 124.352.
§91.801.Investments in Credit Union Service Organizations.
(a)
Definition. When used in this section, a credit union service
organization (CUSO) is an organization whose primary purpose is to strengthen
or advance the credit union movement, serve or otherwise assist credit unions
or their operations, or provide services authorized by subsection (f) of this
section to members of credit unions.
(b)
A credit union by itself, or with other parties, may only
organize, invest in or make loans to a CUSO which is structured and operated
in a manner that demonstrates to the public that it maintains a legal existence
separate from the credit union. A credit union and a CUSO must operate so
that:
(1)
their respective business transactions, accounts, and records
are not intermingled;
(2)
each observes the formalities of their separate corporate
or other organizational procedures;
(3)
each is adequately financed as a separate unit in light
of normal obligations reasonably foreseeable in a business of its size and
character;
(4)
each is held out to the public as a separate enterprise;
and
(5)
unless the credit union has guaranteed a loan to the CUSO,
all borrowings by the CUSO indicate that the credit union is not liable.
(c)
Notice. A credit union shall provide written notice to
the commissioner of its intent to make an initial investment in, make an initial
loan to a CUSO, or perform new activities in an existing CUSO at least 15
days prior to commencing efforts to effect such activity. The written notice
must include a complete description of the credit union’s investment
in or loan to the CUSO, the activity to be conducted, and a representation
and undertaking that the activity will be conducted in accordance with applicable
law. The credit union shall provide any additional information reasonably
requested by the commissioner.
(d)
Limitations. The board of directors of a credit union that
organizes, invests in, or lends to any CUSO shall establish, in writing, the
maximum amount relative to the credit union’s net worth, that will be
invested in or loaned to any one CUSO. Investments and loans described in
this section shall not, in the aggregate, exceed 10% of the total assets of
the credit union, unless the credit union receives the prior written approval
of the commissioner. The amount of loans to CUSOs, cosigned, endorsed, or
otherwise guaranteed by the credit union, shall be included in the aggregate
for the purpose of determining compliance with the limitations set forth in
this section.
(e)
Prohibitions. No credit union may invest in or make loans
to a CUSO:
(1)
if any officer, director, committee member, or employee
of such credit union or any member of the immediate family of such persons
owns or makes an investment in or has made or makes a loan to the CUSO;
(2)
unless the organization is structured as a corporation,
limited liability company, registered limited liability partnership, or limited
partnership and the credit union has obtained a written legal opinion that
the CUSO is established in a manner that will limit the credit union’s
potential exposure to not more than the loss of funds invested in or loaned
to such CUSO;
(3)
if the CUSO engages in any revenue producing activity other
than the performance of services for credit unions or members of credit unions,
and such activity equals or exceeds one half (1/2) of the CUSO’s total
revenue;
(4)
unless prior to investing in or making a loan to a CUSO
the credit union obtains a written agreement which requires the CUSO to follow
GAAP, render financial statements to the credit union at least quarterly,
and provide the department, or its representatives, complete access to the
CUSO's books and records at reasonable times without undue interference with
the business affairs of the CUSO; or
(5)
if any director is an employee of the CUSO, or anticipates
becoming an employee of the CUSO upon its formation.
(f)
Permissive activities and services. A CUSO shall be engaged
in providing products and services that include, but are not limited to:
(1)
operational services including credit and debit card services,
cash services, wire transfers, audits, ATM and other EFT services, share draft
and check processing and related services, shared service center operations,
electronic data processing, development, sale, lease, or servicing of computer
hardware and software, alternative methods of financing and related services,
other lending related services, and any other services or activity, including
consulting, related to the operations of credit unions;
(2)
financial services including financial planning and counseling,
securities brokerage and dealer activities, estate planning, tax services,
insurance services, administering retirement, deferred compensation and other
employee or business benefit plans, or any other service deemed economically
beneficial or attractive to the members of the participating credit union
or credit unions;
(3)
internet based or related services including sale and delivery
of products to credit unions or members of credit unions; or
(4)
any other service or activity approved, in writing, by
the commissioner.
(g)
Compensation. A credit union director, senior management
employee, or committee member or immediate family member of any such person
may not receive any salary, commission, or other income or compensation, either
directly or indirectly, from a CUSO affiliated with their credit union, unless
received in accordance with a written agreement between the CUSO and the credit
union. The agreement shall describe the services to be performed, the rate
of compensation (or a description of the method of determining the amount
of compensation) and any other provisions deemed desirable by the CUSO and
the credit union. The agreement, and any amendments, must be approved by the
board of directors of the credit union and the board of directors (or equivalent
governing body) of the CUSO prior to any performance of service or payment
and annually thereafter. For purposes of this section, senior management employee
shall include the chief executive officer, any assistant chief executive officers
(e.g. vice presidents and above), and the chief financial officer; and immediate
family shall include a person’s spouse or any other person living in
the same household.
(h)
Examination fee. If a CUSO is requested by the commissioner
to make its books and records available for inspection and examination, the
CUSO shall pay a supplemental examination fee as prescribed in §97.113(d)
of this title (relating to Supplemental Examinations). The commissioner may
waive the supplemental examination fee or reduce the fee as he deems appropriate.
(i)
Exclusion. A credit union which has a net worth ratio greater
than six percent (6%) and is deemed adequately capitalized by its insuring
organization may invest in or make loans to a CUSO that is not limited by
the restriction set forth in subsection (e)(3); provided the activities of
the CUSO are exclusively limited to activities which could be conducted directly
by a credit union or are incidental to the conduct of the business of a credit
union. Notwithstanding this exclusion, all other provisions of the act and
this chapter applicable to a CUSO apply. In the event a credit union’s
net worth or capital declines below the required thresholds, the credit union
may not renew, extend the maturity of, or restructure an existing loan, advance
additional funds or increase the investment in the CUSO without the prior
written approval of the commissioner.
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 June 21, 2004.
TRD-200404080
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
7 TAC §91.803
The Credit Union Commission adopts amendments to §91.803
relating to investment limits and prohibitions without changes to the text
published in the March 12, 2004, issue of the
Texas
Register
(29 TexReg 2503).
The amendments establish the criteria the Commissioner will consider in
rendering a decision on a request to participate in an investment pilot program.
The amendments also provide authority for the Commissioner to rescind an approval
to participate in an investment pilot program upon the finding that certain
conditions exist. Finally, the amendments remove the exception to the prescribed
limitation for loan participations purchased from other credit unions, in
order to comply with a recently adopted amendment to §91.711.
One comment in support of the amendments was received from an individual.
The amendments are adopted 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 under Texas Finance Code Section 124.351, which authorizes
the Commission to adopt rules authorizing other investments permissible for
credit unions that are responsive to changes in economic conditions or competitive
practices and to the need for safety and soundness of credit union investments.
The specific section affected by the amendments is Texas Finance Code Section
124.351.
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 June 21, 2004.
TRD-200404081
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: July 11, 2004
Proposal publication date: March 12, 2004
For further information, please call: (512) 837-9236
Subchapter F. ACCOUNTS AND SERVICES
Subchapter H. INVESTMENTS