Proposed Rules Title 7

TITLE 7. BANKING AND SECURITIES

Part 6. CREDIT UNION DEPARTMENT

Chapter 91. CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS

Subchapter C. MEMBERS

7 TAC §91.301

The Credit Union Commission proposes amendments to §91.301, concerning Field of Membership. The proposed amendments to §91.301 add a new subsection granting the commissioner the authority to approve field of membership expansions that have been approved by the National Credit Union Administration. A second new subsection formalizes the criteria needed to add a Group to a credit union's field of membership. In addition, the amendments clarify that credit unions have the option to include businesses and other organizations whose employees are within the Group in its field of membership unlike other entities that must receive separate expansion approval. Finally, the amendments eliminate some redundant overlap language and make grammatical and technical corrections to the rule.

The amendments are proposed as a result of the Department's general rule review.

Betsy Loar, General Counsel, has determined that for the first five year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the rule.

Ms. Loar 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 clarity and ease of use of the rule. There will be no effect on small businesses as a result of adopting the amended rule. There is no economic cost anticipated to credit unions or individuals for complying with the amended rule if adopted.

Written comments on the proposal must be submitted within 30 days after its publication in the Texas Register to Betsy Loar, General Counsel, Credit Union Department, 914 East Anderson Lane, Austin, Texas 78752-1699. Oral comments on the proposal can be made at the Commission's Legislative Advisory Committee meeting on Friday, May 2, 2008 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.

The amendments are proposed under 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 and under Texas Finance Code §122.051, concerning membership.

The specific section affected by the proposed amended rule is Texas Finance Code, §122.051.

§91.301.Field of Membership.

(a) General. Membership in a credit union shall be limited [ Approval of Field of Membership. State credit unions will be allowed to have, as a minimum, at least as much flexibility as federal credit unions in the regulation of fields of membership. The commissioner may approve a state credit union's field of membership under its original articles of incorporation and bylaws or pursuant to a request for approval of an amendment of its bylaws ] to one or more [ ~~include~~ ] groups , each of which (the Group) has its own community [ ~~with a communities~~ ] of interest and is [ ~~(Group) that are~~ ] within the credit union's local service area. In this section, local service area shall mean an area that is within reasonable proximity of a credit union's office, and allows [ ~~allowing~~ ] members to be realistically served from that office. For purposes of field of membership, 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 [ ~~with~~ ] the local service area;

(2) The Group's headquarters is located within the local service area; or

(3) The persons in the Group are "paid from" or "supervised from" an office or facility located within the local service area. The commissioner may impose a geographical limitation on any Group [ ~~field of membership~~ ] if the commissioner reasonably determines that the applicant credit union does not have the facilities and staffing [ ~~ability~~ ] to serve a larger group or there are other operational or management concerns.

(b) Other persons eligible for membership. A number of persons by virtue of their close relationship to a Group may be included in the field of membership at the option of the applicant credit union. These include:

(1) members of the family or household of a member of the Group;

(2) volunteers performing services for or on behalf of the Group;

(3) organizations owned or controlled by a member or members of the Group , and any employees and members of those organizations ;

(4) spouses [ ~~spouse~~ ] of persons who died while in the Group;

(5) employees of the credit union;

(6) subsidiaries of the credit union and their employees [ ~~unions~~ ]; and businesses and other organizations whose employees or members are within the Group.

~~[ ~~(7)~~ corporate or other legal entities.]~~

(1) The commissioner may approve a credit union's original articles of incorporation [ ~~incorporations~~ ] and bylaws or a request for approval of an amendment to a credit union's bylaws to serve one or more communities of interest or a combination of types of communities of interest.

(2) In addition to general requirements, special requirements pertaining to multiple-Group applications may be required before the commissioner will grant such a certificate or approve such an amendment.

(A) Each Group to be included in the proposed field of membership of the credit union must have its own community of interest.

(B) Each associational or occupational Group must individually request inclusion in the proposed credit union's field of membership.

(d) Overlap protection.

(1) The commissioner will only consider the financial effect of an overlap proposed by an application to expand a credit union's field of membership or when a charter application proposes an overlap for a Group of 3,000 members or more. [ An overlap is permitted for a Group of less than 3,000 members or when the expansion's beneficial effect in meeting the convenience and needs of the members of a Group of 3,000 members or more outweighs any adverse effect on the overlapped credit union(s). ]

(2) The commissioner will weigh the information in support of the application and any information provided by a protesting or affected credit union. If the applicant has the financial capacity to serve the financial needs of the proposed members, demonstrates economic feasibility, complies with the requirements of this rule, and no protestant reasonably establishes a basis for denying the request, it shall be approved.

(3) If a finding is made that overlap protection is warranted, the commissioner shall reject the application or require the applicant to limit or eliminate the overlap by adding exclusionary language to the text of the amendment, e.g., "excluding persons eligible for primary membership in any occupation or association based credit union that has an office within a specified proximity of the applicant credit union at the time membership is sought." [ ~~Generally, overlap protection will not be considered warranted unless the financial effect on the overlapped credit union will present a safety and soundess concern.~~ ] Exclusionary clauses are rarely appropriate for inclusion on a geographic community of interest.

(4) Generally, if the overlapped credit union does not submit a notice of protest form, and the department determines that there is no safety and soundness problem, an overlap will be permitted. If, however, a notice of protest is filed, the commissioner will consider the following in performing an overlap analysis:

(A) whether the overlap is incidental in nature, ie., the group(s) in question is so small as to have no material effect on the overlapped credit union;

(B) whether there is limited participation by members of the group(s) in the overlapped credit union after the expiration of a reasonable period of time;

(D) the financial effect on the overlapped credit union;

(E) the desires of the group(s); and

(F) the best interests of the affected group(s) and the credit union members involved.

(5) Where a sponsor organization expands its operations internally, by acquisition or otherwise, the credit union may serve these new entrants to its field of membership if they are part of the community of interest described in the credit union's bylaws. Where acquisitions are made which add a new subsidiary or affiliate, the group cannot be served until the entity is included in the field of membership through the application process.

(6) Credit unions affected by the organizational restructuring or merger of a group within its field of membership must apply for a modification of their fields of membership to reflect the group to be served.

(e) Underserved communities.

(1) All credit unions may include underserved areas in their fields of membership, without regard to location[ ~~, communities satisfying the definition for underserved areas~~ ]. More than one credit union can serve the same underserved area.

(2) Once an underserved area has been added to a credit union's field of membership, the credit union must establish and maintain an office or facility in the community. For the purposes of this subsection, service facility is defined as a place where shares are accepted for members' accounts, loan applications are accepted and loan proceeds are disbursed. This definition includes a credit union owned branch, a shared branch, a mobile branch, and an office operated on a regularly scheduled weekly basis, or a credit union owned electronic facility that meets, at a minimum, these requirements. This definition does not include an ATM or a credit union's Internet website.

(3) A credit union desiring to add an underserved area must document that the community meets the definition. In addition, the credit union must develop a business plan specifying how it will serve the community. The business plan, at a minimum, must identify the credit and depository needs of the community and detail how the credit union plans to serve those needs. The credit union will be expected to regularly review the business plan to determine if the community is being adequately served. The commissioner may require periodic service status reports from a credit union pertaining to the underserved area to ensure that the needs of the area are being met, as well as requiring such reports before allowing a credit union to add an additional underserved [ ~~unserved~~ ] area.

(f) Parity with Federal Credit Unions. Credit unions will be allowed to have, at a minimum, at least as much flexibility as federal credit unions have in field of membership regulation. If a credit union proposes a type of Group that the National Credit Union Administration has previously determined meets the Federal requirements, the commissioner shall approve the application unless the commissioner finds that the credit union has not demonstrated sufficient managerial and financial capacity to safely and soundly serve such expanded membership.

(g) Application. In order to request the approval of the commissioner to add a Group to its bylaws, a credit union must submit a written application to the Department. The applicant credit union shall have the burden to show to the Department such facts and data that support the requirements and considerations in this rule. In reviewing such application, the commissioner shall consider:

(1) Whether the Group has adequate unifying characteristics or a mutual interest such that the safety and soundness of the credit union is maintained;

(2) The ability of credit unions to maintain parity and to compete fairly with their counterparts;

(3) Service by the credit union that is responsive to the convenience and needs of prospective members;

(4) Protection for the interest of current and future members of the credit union; and

(5) The encouragement of economic progress in this State by allowing opportunity to expand services and facilities.

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 February 11, 2008.

TRD-200800796

Harold E. Feeney

Commissioner

Credit Union Department

Earliest possible date of adoption: March 23, 2008

For further information, please call: (512) 837-9236

7 TAC §91.302

The Credit Union Commission proposes amendments to §91.302, Election or Other Vote By Electronic Device, Absentee Ballot, or Mail Ballot. The proposed amendments to §91.302 change the title of the section to Election or Other Membership Vote by Electronic Balloting, Early Voting, Absentee Voting, or Mail Balloting. The amendments also include provisions on early voting and encourage credit unions to promote member participation in elections and other membership votes. Additional amendments provide that early or absentee ballots must be received prior to the beginning of the meeting, eliminating the five calendar day requirement, and make grammatical and technical amendments.

The amendments are proposed as a result of the Department's general rule review.

Ms. Loar has also determined that for each year of the first five years the proposed amendments are in effect, the public benefits anticipated as a result of enforcing the rule will be greater clarity and ease of use of the rule. There will be no effect on small businesses as a result of adopting the amended rule. There is no economic cost anticipated to credit unions or individuals for complying with the amended rule if adopted.

The specific section affected by the proposed amended rule is Texas Finance Code, §122.052.

§91.302.Election or Other Membership Vote By Electronic Balloting, Early Voting [ ~~Device~~ ], Absentee Voting [ ~~Ballot~~ ], or Mail Balloting [ ~~Ballot~~ ].

(a) All credit unions should actively promote member participation in elections and other membership votes as long as the costs are reasonable and the integrity of the vote is not compromised. Any credit union instituting alternative procedures or systems to benefit members who find it difficult or inconvenient to vote at annual or special meetings must ensure that the alternative is thoroughly explained and publicized so that all members will be able to take advantage of those procedures or systems.

(b) [ ~~(a)~~ ] The board of directors, before holding an election or other membership vote [ ~~by the membership~~ ] that uses [ ~~utilizes an~~ ] electronic balloting, early voting [ ~~device~~ ], absentee voting [ ~~ballot~~ ], or mail balloting [ ~~ballot~~ ], shall establish written election rules, including procedures to: control, tabulate and retain ballots; identify [ ~~capture~~ ] invalid ballots; and handle disputed election results and tie votes.

[ ~~(b)~~ The use of an electronic device, absentee or mail ballot by any credit union shall ensure fair and equitable opportunity for any qualified member to seek office, including a provision for nomination by petition, and providing the appropriate notice and information to all members.]

(c) Any elections or other membership vote using [ ~~held by~~ ] electronic balloting, early voting, absentee voting, [ ~~device~~ ] or mail balloting [ ~~ballot~~ ] are subject to the following conditions:

(1) The election tellers shall be appointed by the board of directors;

(2) At least 30 days prior to the annual or special meeting, the board of directors will cause either a printed ballot or notice of a ballot, along with appropriate instructions, to be mailed to all members eligible to vote;

(3) Completed electronic or mail ballots cast during early or absentee voting [ ~~Ballots~~ ] must be received prior to convening [ ~~no later than midnight 5 calendar days prior to~~ ] the annual or special meeting;

(4) The votes will be tallied by the tellers and the results of the vote will be made public at the annual or special meeting.

(d) In the event of a malfunction of the electronic balloting system, the board of directors may in its discretion order elections or other vote to be held by mail ballot only. The board may make reasonable adjustments to the voting time frames in subsection (c) of this section, or postpone the annual or special meeting if necessary, to complete the elections prior to the annual or special meeting.