Part II.
Texas Department of Banking
Chapter 29.
Sale of Checks Act
7 TAC §29.11
The Finance Commission of Texas (the commission) proposes
new §29.11, concerning the effect a criminal conviction of certain officials
of an applicant for or holder of a license to engage in the business of selling
checks may have on the application or license.
As required by Texas Civil Statutes, Article 6252-13d, the section defines
the crimes that are considered to be directly related to the duties and responsibilities
of selling checks, the persons whose conviction of such a crime could adversely
affect a proposed or existing license, and specifies the administrative and
judicial review available if a criminal conviction results in the denial of
a license application, or revocation of a license.
Everette Jobe, General Counsel, Texas Department of Banking, has determined
that for the first five-year period the section as proposed will be in effect,
there will be no fiscal implications for state or local government as a result
of enforcing or administering the section.
Mr. Jobe also has determined that for each year of the first five-year
period the sections as proposed will be in effect, the public benefit anticipated
as a result of the proposed sections will be that applicants for a license
can better assess the prospects of obtaining a license prior to expending
the resources necessary to do so when an official of the applicant has a criminal
conviction, and existing license holders may avoid adverse action with respect
to the license because of such a conviction. There will be no effect on small
businesses. There is no anticipated economic cost to persons who are required
to comply with the sections as proposed.
Comments on the proposal may be submitted in writing to Loren E. Svor,
Assistant General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard,
Austin, Texas 78705-4294, or by e-mail to loren.svor@banking.state.tx.us.
The sections are proposed under Texas Civil Statutes, Article
6252-13d, which requires a licensing authority to issue guidelines relating
to the suspension, revocation, or denial of a license because of a conviction
of a crime which directly relates to the licensed occupation, and Finance
Code, §152.102(a), which authorizes the commission to adopt rules to
enforce and administer Finance Code, Chapter 152, including rules related
to an application for a license.
Finance Code, §152.203 and §152.306, are affected by the proposal.
§29.11. Effect of Criminal Conviction on Licenses.
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise:
(1)
Commissioner--The banking commissioner of Texas.
(2)
Official--An individual applying for or holding a
license, or an owner, director, or officer of an entity license applicant
or holder.
(3)
License--The authorization issued by the commissioner
to sell checks, or to maintain, utilize or otherwise control an account for
the purpose of engaging in the business of selling checks, as required by
Finance Code, §152.201, or Texas Civil Statutes, Article 489d, §3.
(b)
Effect of conviction for a felony or a crime involving
moral turpitude on proposed or existing license. As required by Finance Code,
§152.203(a)(3), the commissioner shall deny an application for a license
if the applicant is an individual who has been convicted of any felony, or
a crime involving moral turpitude that is reasonably related to the individual's
fitness to hold a license. For purposes of this subsection, the crimes listed
in subsections (d)(1)-(3) of this section are considered to be crimes involving
moral turpitude.
(c)
Effect of other criminal convictions on proposed or existing
license. The commissioner may deny an application for a license, or revoke
an existing license if an official of the license applicant or holder has
been convicted of a crime which directly relates to the duties and responsibilities
of a check seller.
(d)
Crimes directly related to fitness for a license. The sale
of checks involves or may involve the making of representations to prospective
check purchasers, the maintenance of fund accounts sufficient to pay the checks
upon presentment, and filing reports with governmental agencies relating to
certain currency transactions, the financial condition and performance of
the license holder, and the adequacy of the bond or alternate security maintained.
Consequently, a crime involving the misrepresentation of costs or benefits
of a product or service, the improper handling of money or property entrusted
to the person, or a crime involving failure to file a governmental report
or filing a false report is a crime directly related to the duties and responsibilities
of a license holder, including a crime involving:
(1)
fraud, misrepresentation, deception, or forgery;
(2)
breach of trust or other fiduciary duty;
(3)
dishonesty or theft;
(4)
violation of a statute governing check issuers of
this or another state;
(5)
failure to file a required report with a governmental
body, or falsification of such a report; or
(6)
attempt, preparation, or conspiracy to commit one
of the preceding crimes.
(e)
Mitigating considerations. In determining whether a conviction
for a directly-related crime renders a person or an entity related to the
person presently unfit to be a license holder, the commissioner shall consider:
(1)
the extent and nature of the person's past criminal activity;
(2)
the age of the person at the time of the commission
of the crime;
(3)
the time elapsed since the person's last criminal
activity;
(4)
the conduct and work activity of the person prior
to and following the criminal activity;
(5)
the person's rehabilitation or rehabilitative effort
while incarcerated or following release; and
(6)
the person's present fitness for a license, evidence
of which may include letters of recommendation from prosecution, law enforcement,
and correctional officers who prosecuted, arrested, or had custodial responsibility
for the person, the sheriff and chief of police in the community where the
person resides, and other persons in contact with the convicted person.
(f)
The applicant must, to the extent possible, secure and
provide to the commissioner reliable documents and/or testimony evidencing
the information required to make a determination under subsection (e), including
the recommendations of the prosecution, law enforcement, and correctional
authorities. The applicant must also furnish proof in such form as may be
required by the commissioner that he or she has maintained a record of steady
employment and has supported his or her dependents and has otherwise maintained
a record of good conduct and has paid all outstanding court costs, supervision
fees, fines, and restitution as may have been ordered in all criminal cases
in which he or she has been convicted.
(g)
Notification of adverse action. If a license application
is to be denied, or if a license is to be revoked because of the criminal
conviction of an official, the commissioner will so notify the applicant or
license holder in writing. The notification must include a statement of the
reasons for the action and a description of the procedure for administrative
and judicial review of the action.
(h)
Administrative hearing on adverse action. Before an application
is denied or a license revoked, the applicant or license holder is entitled
to an administrative hearing. The commissioner will schedule the hearing and
notify the applicant or license holder. A hearing is subject to the provisions
of the Administrative Procedure Act, Government Code, Chapter 2001, and the
provisions of Chapter 9, Subchapter B of this title (relating to Contested
Case Hearings).
(i)
Judicial review. An applicant whose license application
has been denied, or a license holder whose license has been revoked because
of the criminal conviction of an official, and who has exhausted all administrative
appeals, may petition a district court in Travis County for a review of the
evidence presented to the department and its decision. The petition must be
filed within 30 days of the date the decision is final and appealable.
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
April 23, 1999.
TRD-9902387
Everette D. Jobe
General Counsel
Texas Department of Banking
Proposed date of adoption: June 25, 1999
For further information, please call: (512) 475-1300
Chapter 91.
Chartering, Operations, Mergers, Liquidations
Subchapter G. Lending Powers
7 TAC §§91.701-91.719
The Texas Credit Union Commission is republishing for comment
the proposed new Subchapter G, §§91.701 through 91.719, concerning
loans and extensions of credit by or involving a credit union. Notice of the
withdrawal of the previously published proposal is published elsewhere in
this issue of the
Texas Register
. In conjunction
with these proposed new sections, the Commission has proposed the repeal of
existing §§91.701 and 91.705. Notice of the repeals was published
in the February 5, 1999, issue of the
Texas Register
.
In July 1998, the Commission identified its lending rules as an important
area for updating and streamlining. Lending is a key area of credit union
operations and these rules had not been comprehensively reviewed in a number
of years. In order to grant credit unions the maximum flexibility to exercise
the authorities granted to them by the Texas Finance Code, the Commission
has determined to revise the general approach to regulating lending activities.
Accordingly, Subchapter G will now address only the authority of credit unions
to limit, interpret or recognize incidental authority. Credit unions may exercise
all of the authority granted by the Texas Finance Code subject only to limitations
contained in the rules.
Credit union rules traditionally have been lengthy, generally providing
far more detail and leaving less room for the exercise of judgement by credit
unions and examiners than have other financial institution lending regulations.
By proposing to remove some specific lending rules and to rely more heavily
on general safety and soundness standards, the Commission is in no way signaling
that a credit union would not need to properly underwrite loans or maintain
adequate loan documentation. Generally accepted accounting principles and
principles of safety and soundness will still require these steps to be taken.
In most circumstances, supervisory guidance and other sources can and should
be relied upon to define safe and sound practices.
Provided both management and examiners understand the proper role of rules
and guidance, and the overarching requirements for safe and sound operations
and practices, a move away from detailed rules and toward greater reliance
on guidance should provide credit unions with more flexibility without diminishing
safety and soundness. The Commission believes that rules should be reserved
for core safety and soundness requirements. Details on prudent operating practices
should be relegated to guidance. Otherwise, credit unions can find themselves
unable to respond to market innovations because they are trapped in a rigid
regulatory framework developed in accordance with conditions prevailing at
an earlier time.
This proposal represents the Commission's current best judgement about
the right balance between which provisions affecting lending should be binding
regulations and which should be guidance conveying the Commission's more detailed
view on what generally constitutes safe and sound standards under current
market conditions. Based on comments received on the originally published
version, the Commission has made substantive revisions to proposed §91.701,
§91.704, and §91.712. Minor changes also have been made to §91.711
and §91.713.
Lynette Pool, Deputy Commissioner, has determined that there will be no
fiscal implications for state or local governments as a result of enforcing
or administering the proposed new sections.
Ms. Pool has also determined that for each of the first five years the
new sections, as proposed, are in effect, the public benefit anticipated as
a result of enforcing the rules will be a greater flexibility in originating
loans provided certain safety and soundness concerns are addressed, clarifications
of confusing language, and greater readability. There will be no effect on
small businesses as a result of enforcing this section as amended. There is
no economic cost anticipated to the entities that are required to comply with
the rules as proposed, nor will there by any impact on local employment.
Written comments on the proposed new sections must be submitted within
30 days after their publication in the
Texas Register
to Lynette Pool-Harrris, Deputy Commissioner, Credit Union Department,
914 East Anderson Lane, Austin, Texas 78752-1699.
The new sections are proposed under the provisions of the Texas
Finance Code, §124.001 and §15.402. The Commission interprets §124.001
as providing the Credit Union Commission with the authority to adopt rules
governing loans made to credit union members. The Commission interprets §15.402
as authorization for the commission to adopt reasonable rules for administering
the Texas Credit Union Act.
The specific sections affected by the proposed amendments are contained
within Texas Finance Code, Chapter 124, Subchapter A through Subchapter G.
§91.701.Lending Powers.
(a)
A credit union may originate, invest in, sell, purchase,
service, or participate in loans or otherwise extend credit in accordance
with the Act, these Rules, and other applicable law.
(b)
Each credit union, before engaging in any lending activity,
shall establish written policies approved by its board of directors that establish
prudent credit underwriting and documentation standards for each specific
type of lending 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:
(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 condition of the loan portfolio; and
(9)
State the lending authority delegated to any individuals
or committees by the board of directors.
(c)
A credit union shall address specific lending procedures
for determining and documenting the following, as applicable:
(1)
The capacity of the member to adequately service the debt
from the source(s) specified by the member;
(2)
The value of the collateral;
(3)
The overall creditworthiness of the member;
(4)
The level of equity invested in the collateral;
(5)
Loan-to-collateral value limits;
(6)
Any secondary sources of repayment;
(7)
Any additional collateral or credit enhancement (such
as guarantees or mortgage insurance);
(8)
Maximum loan maturities for each type of lending;
(9)
Repayment terms and conditions;
(10)
Collateral protection insurance; and
(11)
Lien filing/recordation.
(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. 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.
(e)
The commissioner in the exercise of discretion may grant
a waiver in writing of any of the lending requirements described in this chapter.
A decision to deny a requested waiver, however, is not appealable.
§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 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.
§91.703.Interest.
(a)
A credit union's board of directors may delegate all or
part of its power to determine the interest rates on all lending transactions.
The board may also authorize any refund of interest on loans under the conditions
it may prescribe.
(b)
A loan may provide for variable interest rates, so long
as the factor or index governing the extent of the variation is not under
the control of the credit union and can be readily ascertained from sources
available to the public or any other index approved in writing by the commissioner
which is not available to the public.
§91.704.Real Estate Lending.
(a)
A credit union, before engaging in any real estate lending
activity, shall establish, in addition to the requirements of §91.701(c)
of this title (relating to Lending Powers), loan administration procedures
that address the following, as applicable:
(1)
Title insurance;
(2)
Escrow administration;
(3)
Loan payoffs;
(4)
Collection and foreclosure; and
(5)
Servicing and participation agreements.
(b)
Loan to Value Limitations.
(1)
The board of directors shall establish their own internal
loan-to-value limits for real estate loans based on type of loan. These internal
limits, however, shall not exceed the following regulatory limits:
(A)
Unimproved land held for investment/speculation - Loan
to value limit 60%
(B)
Interim Construction - Loan to value limit 90%
(C)
Owner-occupied - Loan to value limit 95%
(D)
Home equity - Loan to value limit 80%
(E)
Other - Loan to value limit 80%
(2)
In determining the loan to value limit, a credit
union shall include all loans secured by the same property and the recourse
obligation of any such loan sold with recourse.
(c)
Notwithstanding the general 15-year maturity limit on lending
transactions to members, the board of directors shall establish in 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
(6)
Home improvement loans - 20 years
(7)
All other loans - 15 years
(d)
Exceptions to subsections (b) and (c) are permitted for
the following:
(1)
Loans that subsequently become compliant with loan-to-value
ration 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 backed by the full faith and credit of the state,
provided that the amount of the 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 the state, a municipal
or local government, or an agency thereof, provided that the amount of 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.
(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)
Exception loans granted in compliance with subsection (d)
of this section shall be identified in the credit union's records and reported
to the board of directors.
§91.705.Home Improvement Loans.
In addition to the requirements of this chapter, all loans in which
the proceeds are used to construct new improvements or renovate existing improvements
on a homestead property must also comply with the requirements of Section
50(a)(5), Article XVI, Texas Constitution.
§91.706.Home Equity Loans.
For any loan secured by an encumbrance against the equity in a homestead
property, the terms and conditions set forth in this chapter and in Section
50, Article XVI, Texas Constitution will apply. If there is an irreconcilable
conflict between a constitutional provision and the provision of this section,
the constitutional requirement shall prevail.
§91.707.Reverse Mortgages.
A credit union may offer reverse mortgages to its members under the
terms and conditions set forth in Section 50, Article XVI, Texas Constitution
and other applicable law. In the event of an irreconcilable conflict between
any specific requirement contained in this section and a constitutional provision,
the constitutional requirement shall prevail.
§91.708.Real Estate Appraisals.
For real estate loans in which the transaction value exceeds $100,000
or in the case of a member business loan exceeding $50,000, a professional
appraisal report by a state certified or licensed appraiser, as required by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, is
necessary. 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 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, 1029 Vermont Avenue, NW, Washington,
D.C. 20005. 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.
§91.709.Member Business Loans.
(a)
Definition. A member business loan includes any loan, line
of credit, or letter of credit, the proceeds of which will be used for a commercial,
corporate, business investment property or venture, or agricultural purpose,
except that the following shall not be considered a member business loan for
the purposes of this rule:
(1)
A loan secured by a lien on a 1 to 4 family dwelling that
is the member's primary residence;
(2)
A loan fully secured by shares in the credit union
making the extension of credit or deposits in other financial institutions;
(3)
Loan(s) otherwise meeting the definition of a member
business loan made to a member or associated member that, in the aggregate,
is less than $50,000; or
(4)
A loan where a federal or state agency or one of its
political subdivisions fully insures repayment, or fully guarantees repayment,
or provides an advance commitment to purchase in full.
(b)
A credit union that engages in this type of lending shall
adopt specific member business loan policies and review them at least annually.
The policies, at a minimum, shall address all of the following areas:
(1)
Types of business loans to be made.
(2)
The maximum amount of credit union assets, relative
to credit union equity, that will be invested in member business loans.
(3)
The maximum amount of credit union assets, relative
to credit union equity, that will be invested in a given category or type
of member business loan.
(4)
The maximum amount of credit union assets, relative
to credit union equity, that will be loaned to any one member or group of
associated members, subject to subsection (c) of this section.
(5)
The qualifications and experience requirements for
personnel involved in making and servicing business loans.
(6)
Analysis of the member's initial and ongoing financial
capacity to repay the debt.
(7)
Documentation supporting each request for an extension
of credit or an increase in an existing loan or line of credit, which shall
address all of the following:
(A)
A balance sheet;
(B)
An income statement;
(C)
A cash flow analysis;
(D)
Tax returns;
(E)
Leveraging; and
(F)
Receipt and the periodic updating of financial statements,
tax returns, and other documentation.
(8)
Collateral requirements which include all of
the following:
(A)
Loan-to-value (LTV) ratios;
(B)
Appraisal, title search, and insurance requirements; and
(C)
Steps to be taken to secure various types of collateral.
(9)
Identification, by position, of the officials
and senior management employees who are prohibited from receiving member business
loans.
(c)
The aggregate amount of outstanding member business loans
to any one member or group of associated members shall not be more than 15%
of the credit union's equity (less the Allowance for Loan Losses account)
or $75,000.00, whichever is higher. If any portion of a member business loan
is secured by shares in the credit union or deposits in another financial
institution, or is fully or partially insured or guaranteed by, or subject
to an advance commitment to purchase by, any agency of the Federal government
or of a state or any of its political subdivisions, such portion shall not
be calculated in determining the 15% limit.
(d)
For the purposes of this section, "associated member" means
any member with a common ownership, investment, or other pecuniary interest
in the business or agricultural endeavor for which the business loan is being
made.
§91.710.Overdraft Protection.
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.
§91.711.Loan Participations.
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
participating in a loan transaction, each credit union shall perform its own
due diligence of the transaction.
§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.
Strategies are then used to determine actions to mitigate frauds. Human intervention
occurs to validate if the activity is actually fraudulent.
(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)
A credit union may issue credit cards in accordance with
the credit union's written policies, which shall include at a minimum:
(1)
Credit policies to set individual limits for credit card
accounts:
(2)
A process for reviewing each member's payment and/or
credit history periodically for the purpose of determining risk; and
(3)
The credit underwriting standards for each type of
card program offered.
(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.
(d)
At least annually, the credit union's board shall 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.
§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.
Although the seller may initially determine whether the prospective buyer
is a member or eligible for membership in the credit union, responsibility
for membership eligibility decisions must be the credit union's first consideration.
(b)
A retail installment contract may provide for a rate or
amount of time price differential that does not exceed the rate or amount
authorized by Chapter 124 of the Texas Finance Code.
(c)
The board of directors shall establish, implement, and
maintain prudent and reasonable written policies that specify guidelines and
criteria to be used in purchasing contracts consistent with safe and sound
credit union practices.
§91.714.Leasing.
(a)
Definitions. For the purposes of this section:
(1)
The term net lease means a lease under which the credit
union will not, directly or indirectly, provide or be obligated to provide
for:
(A)
the servicing, repair or maintenance of leased property
during the lease term;
(B)
the purchasing of parts and accessories for the leased
property, except that improvements and additions to the leased property may
be leased to the lessee upon its request in accordance with the full-payout
requirements of subsection (c) (2) (A) of this section;
(C)
the loan of replacement or substitute property while the
leased property is being serviced;
(D)
the purchasing of insurance for the lessee, except where
the lessee has failed to discharge a contractual obligation to purchase or
maintain insurance; or
(E)
the renewal of any license, registration, or filing for
the property unless such action by the credit union is necessary to protect
its interest as an owner or financier of the property.
(2)
The term full-payout lease means a lease transaction
in which any unguaranteed portion of the estimated residual value relied on
by the credit union to yield the return of its full investment in the lease
property, plus the estimated cost of financing the property over the term
of the lease, does not exceed 25% of the original cost of the property to
the lessor. In general, a lease will qualify as a full payout lease if the
scheduled payments provide at least 75% of the principal and interest payments
that a lessor would receive if the finance lease were structured as a market-rate
loan.
(3)
The term realization of investment means that a credit
union that enters into a lease financing transaction must reasonably expect
to realize the return of its full investment in the leased property, plus
the estimated cost of financing the property over the term of the lease from:
(A)
Rentals; and
(B)
The estimated residual value of the property at the expiration
of the term of the lease.
(b)
Permissible Activities. Subject to the limitations of this
section, a credit union may engage in leasing activities. These activities
include becoming the legal or beneficial owner of tangible personal property
or real property for the purpose of leasing such property, obtaining an assignment
of a lessor's interest in a lease of such property, and incurring obligations
incidental to its position as the legal or beneficial owner and lessor of
the leased property.
(c)
Finance Leasing.
(1)
A credit union may conduct leasing activities that are
functional equivalent of loans made under those leases. Such financing leases
are subject to the same restrictions that would be applicable to a loan.
(2)
To qualify as the functional equivalent of a loan:
(A)
The lease must be a net, full-payout lease representing
a non-cancelable obligation of the lessee, notwithstanding the possible early
termination of the lease;
(B)
The portion of the estimated residual value of the property
relied upon by the lessor to satisfy the requirements of a full-payout lease
must be reasonable in light of the nature of the leased property and all relevant
circumstances so that realization of the lessor's full investment plus the
cost of financing the property depends primarily on the creditworthiness of
the lessee, and not on the residual market value of the leased property; and
(C)
At the termination of the financing lease, either by expiration
or default, property acquired must be liquidated or released on a net basis
as soon as practicable. Any property held in anticipation of releasing must
be reevaluated and recorded at the lower of fair market value or the value
carried on the credit union's books.
(d)
General Leasing. A credit union may invest in tangible
personal property, including vehicles, manufactured homes, equipment, or furniture,
for the purpose of leasing that property. In contrast to financing leases,
lease investments made under this authority need not be the functional equivalent
of loans.
(e)
Leasing Salvage Powers. If a credit union believes that
there has been an unanticipated change in conditions that threatens its financial
position by significantly increasing its exposure to loss, it may:
(1)
As the owner and lessor, take reasonable and appropriate
action to salvage or protect the value of the property or its interest arising
under the lease;
(2)
As the assignee of a lessor's interest in a lease,
become the owner and lessor of the leased property pursuant to its contractual
right, or take any reasonable and appropriate action to salvage or protect
the value of the property or its interest arising under the lease; or
(3)
Include any provision in a lease, or make any additional
agreements, to protect its financial position or investment in the circumstances
set forth subsection (e)(1) and (e)(2) of this section.
§91.715.Exceptions to the General Lending Policies.
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 standards for the review and approval of exception loans. Each
credit union 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 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
should be maintained as a part of the permanent loan file. Each credit union
should monitor compliance with its lending policies and individually report
exception loans of a significant size to its board of directors.
§91.716.Prohibited Fees.
A credit union shall not make any loan or extend any credit if, either
directly or indirectly, any commission, fee, or other compensation from any
person or entity other than the credit union is to be received by the credit
union's directors, committee members, senior management employees, loan officers,
or any immediate family members of such individuals, in connection with underwriting,
insuring, servicing, or collecting the loan or extension of credit.
§91.717.More Stringent Restrictions.
The Commissioner may impose more stringent restrictions on a credit
union's loans if the Commissioner determines that such restrictions are necessary
to protect the safety and soundness of the credit union.
§91.718.Charging Off or Setting Up Reserves.
(a)
The commissioner, after a determination of value, 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)
A credit union's financial statements shall provide for
full and fair disclosure of all assets, liabilities, and members' equity,
including such valuation allowance accounts as may be necessary to present
fairly the financial position; and all income and expenses necessary to present
fairly the results of operations for the period concerned.
(c)
As a minimum, adjustments to the valuation allowance for
loan losses shall be made prior to the distribution or posting of any dividends
to the accounts of members so that the valuation allowance established fairly
presents the value of loans and probable losses for all categories.
§91.719.Loans to Officials and Employees.
(a)
The rates, terms, conditions, and availability of any loan
or other extension of credit made to, or endorsed or guaranteed by, a director,
employee, member of the credit committee or an immediate family member of
any such individual shall not be more favorable than the rates, terms, conditions,
and availability of comparable loans or credit to other credit union members.
(b)
Before making a loan, extending credit, or becoming contractually
liable to make a loan or extend credit to a director, employee, member of
the credit committee, or an immediate family member of such individual, the
board of directors must approve the transaction if the loan or the extension
of credit or aggregate of outstanding loans and extensions of credit to any
one person, the person's business interests, and the members of the person's
immediate family is greater than 15% of the credit union's net capital. A
loan fully secured by shares in the credit union or deposits in other financial
institutions shall not be subject to, or included in the aggregate amounts
included in this section.
(c)
For purposes of this section, the term immediate family
member includes spouse or other family member living in the same household.
(d)
The aggregate of all outstanding loans or extensions of
credit made to, or endorsed or guaranteed by all directors, credit committee
members, senior executive staff, and immediate family members of all such
individuals shall not exceed 20% of the credit union's total assets. The requirements
described in this subsection shall apply unless waived in writing by the commissioner
for good cause shown.
(e)
At least semiannually, the president shall make a report
to the board of directors on the outstanding indebtedness of all directors,
credit committee members, senior executive staff, and immediate family members
of such individuals. The report required by this section shall include the
following information:
(1)
The amount of each indebtedness; and
(2)
A description of the terms and conditions (including
the interest rate, the original amount and date, maturity date, payment terms,
security, if any, and any other unusual term or condition) of each extension
of credit.
(f)
At the discretion of the Board, the reporting requirement
of subsection (e) of this section may be waived if the aggregate of outstanding
loans and extensions of credit to any one person, the person's business interests,
and the members of the person's immediate family is less than $25,000. Each
report must ordinarily be retained at the credit union for a period of three
years and shall not be filed with the Department unless specifically requested.
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
April 23, 1999.
TRD-9902414
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
7 TAC §91.5001, §91.5002
The Texas Credit Union Commission proposes new §91.5001
and §91.5002, concerning a credit union's closing of an office or operation.
Section 91.5001 is being proposed to provide specific authorization for a
state-chartered credit union to close its place of business in the event of
an emergency, which is defined in the rule. The new rule also limits the number
of consecutive days that a credit union can be closed without first obtaining
the approval of the commissioner. New §91.5002 prescribes that an emergency
closing shall be deemed a legal holiday for all purposes with respect to any
credit union business affected by the closed office or operation.
Lynette Pool, Deputy Commissioner, has determined that for the first five-year
period the new rules are in effect, there will be no fiscal implications for
state or local government as a result of enforcing or administering the rules.
Ms. Pool has also determined that for each year of the first five years
the proposed rules are in effect, the public benefit anticipated will be that
it will standardize procedures for handling credit union emergency closings
which should ease member concerns and ensure that members are not unduly inconvenienced
by their inability to access funds because of such a closure. There will be
no effect on small businesses as a result of adopting these sections. There
is no anticipated economic cost to entities that will be required to comply
with the new sections, nor will there be an impact on local employment.
Written comments on the proposed rules must be submitted within 30 days
after its publication in the
Texas Register
to Lynette Pool, Deputy Commissioner, Credit Union Department, 914 East Anderson
Lane, Austin, Texas 78752-1699.
The new sections are proposed under the provisions of Texas Finance
Code, Section 15.402, which authorizes the commission to adopt reasonable
rules for administering Title 2, Chapter 15 and Title 3, Subtitle D of the
Texas Finance Code. The Commission interprets this section as authorizing
it to address the issue of emergency closings in its rules to foster member
confidence in the safety of their deposits and of their credit unions.
The specific section affected by the proposed rule is Texas Finance Code,
Section 123.001 pertaining to general powers of a credit union.
§91.5001.Emergency Closing.
(a)
If the officer in charge of a credit union determines that
an emergency that affects or may affect one or more of the credit union's
offices or operations exists or is impending, the officer may determine:
(1)
not to conduct the involved operations or open the offices
on any normal business day of the credit union until the emergency has passed;
or
(2)
if the credit union is open, to close the offices
or the involved operations for the duration of the emergency.
(b)
Subject to subsection (c) of this section, a closed office
or operation may remain closed until the officers determine that the emergency
has ended and for any additional time reasonably required to reopen.
(c)
A credit union that closes an office or operation under
this section shall notify the commissioner of its action by any means available
and as promptly as conditions permit. An office or operation may not be closed
for more than three consecutive days, excluding days on which the credit union
is customarily closed, without the commissioner's written approval.
(d)
In this chapter, the following words and terms shall have
the following meanings:
(1)
Emergency - means a condition or occurrence that physically
interferes with the conduct of normal business at the offices of a credit
union or of a particular credit union operation or that poses an imminent
or existing threat to the safety or security of persons, property, or both.
The term includes a condition or occurrence arising from:
(A)
fire, flood, earthquake, hurricane, tornado, or wind, rain,
ice or snow storm;
(B)
labor dispute or strike;
(C)
disruption or failure of utilities, transportation, communication
or information systems;
(D)
shortage of fuel, housing, food, transportation, or labor;
(E)
robbery, burglary, or attempted robbery or burglary;
(F)
epidemic or other catastrophe; or
(G)
riot, civil commotion, enemy attack, or other actual or
threatened act of lawlessness or violence.
(2)
Officer in charge - means the president of the
credit union, or a person designated by the president, who shall have the
authority to take all necessary and appropriate actions to deal appropriately
with the emergency. The president of a credit union shall always have an individual
designated as an officer in charge during his/her absence or unavailability.
§91.5002.Effect of Closing.
A day on which a credit union or one or more of its operations is closed
during its normal business hours as provided by this chapter shall be deemed
a legal holiday for all purposes with respect to any credit union business
affected by the closed credit union or credit union operation.
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
April 26, 1999.
TRD-9902415
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
The Texas Credit Union Commission proposes the repeal of 7 TAC Chapter
93 Administrative Proceedings. Specifically, the Commission proposes to repeal
§93.1 Definitions contained in Subchapter A, Common Definitions; and
§93.11 Delegation of Authority; §93.12 Finality and Request for
SOAH Hearing; §93.13 Referral to ADR; §93.14 Appeals of Applications
Decisions; §93.15 Appeals of Applications for Certificates of Authority
and all Other Applications for which No Specific Procedure is Provided by
This Title; §93.16 Appeals of Cease and Desist Orders and Orders of Removal;
§93.17 Appeals of Orders of Conservation; §93.18 Failure to Appear
at Hearing; §93.19 Notice and Service; §93.20 Interrogatories to
Parties; §93.21 Requests for Admissions; §93.22 Pre-Hearing Conference;
§93.23 Witness Placed Under Rule; §93.24 Prefiled Direct Testimony;
and §93.25 Administrative Record, all contained in Subchapter B, General
Rules.
The Appropriations Act of 1997, House Bill 1, Article IX, §167, requires
that each state agency review and consider for readoption each rule adopted
by that agency pursuant to the Government Code, Chapter 2001 (Administrative
Procedures Act). Such reviews shall include, at a minimum, an assessment by
the agency as to whether the reason for adopting or readopting the rule continues
to exist. After conducting a preliminary review of its rules, the Commission
determined that the chapter should be updated to (1) repeal rules that are
not necessary, (2) update existing rules based on rules adopted by the State
Office of Administrative Hearings, (3) adopt new rules for pertinent issues
that are not addressed in current rules, and (4) reorganize the rules based
on the type of application decision or action being appealed.
Lynette Pool, Deputy Commissioner, has determined that for each year of
the first five years the repeals are in effect, there will be no fiscal implications
for state or local government as a result of enforcing or administering the
repeal of these sections.
Lynette Pool has determined that for each year of the first five years
the repeals are in effect, the public benefit anticipated as a result of the
repeals will be a set of new rules that are more clear and comprehensive.
There will be no effect on small businesses as a result of repealing these
sections. There is no anticipated economic cost to entities that are currently
required to comply with these sections as result of their repeal.
Written comments on the proposed repeals must be submitted within 30 days
after its publication in the
Texas Register
to Lynette Pool-Harris, Deputy Commissioner, Credit Union Department, 914
East Anderson Lane, Austin, Texas, 78752-1699.
Subchapter A. Common Terms
7 TAC §93.1
(Editor's note: The text of the following section proposed for
repeal will not be published. The section may be examined in the offices of
the Credit Union Department or in the Texas Register office, Room 245, James
Earl Rudder Building, 1019 Brazos Street, Austin.)
This repeal is proposed under the provisions of Section
15.402 of the Texas Finance Code, which authorizes the commission to adopt
reasonable rules.
The specific sections affected by this proposal are §§122.007,
122.011, 122.013, 122.153, 122.257, 122.259, and 126.105 of the Texas Finance
Code pertaining to appeals of certain actions taken by the Commissioner.
§93.1.Definitions.
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
April 26, 1999.
TRD-9902436
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
7 TAC §§93.11-93.25
(Editor's note: The text of the following sections proposed for
repeal will not be published. The sections may be examined in the offices
of the Credit Union Department or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The repeals are proposed under the provisions of
Section 15.402 of the Texas Finance Code, which authorizes the commission
to adopt reasonable rules.
The specific sections affected by this proposal are §§122.007,
122.011, 122.013, 122.153, 122.257, 122.259, and 126.105 of the Texas Finance
Code pertaining to appeals of certain actions taken by the Commissioner.
§93.11.Delegation of Authority.
§93.12.Finality and Request for SOAH Hearing.
§93.13.Referral to ADR.
§93.14.Appeals of Applications to Decisions
§93.15.Appeals of Applications for Certificates of Authority and All Other Applications for Which No Specific Procedure is Provided by This Title.
§93.16.Appeals of Cease and Desist Orders and Orders of Removal.
§93.17.Appeals of Orders of Conservation.
§93.18.Failure to Appear at Hearing.
§93.19.Notice and Service.
§93.20.Interrogatories to Parties.
§93.21.Requests for Admissions.
§93.22.Pre-Hearing Conference.
§93.23.Witness Placed Under Rule.
§93.24.Prefiled Direct Testimony.
§93.25.Administrative Record.
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
April 26, 1999.
TRD-9902437
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
The Texas Credit Union Commission proposes new Chapter 93 pertaining
to administrative hearings. Under this proposal, Chapter 93 would be comprised
of the following sections: §93.101 Scope; Definitions; Severability;
§93.201 Party Status; §93.202 Computation of Time; §93.203
Ex Parte Communications; §93.204 Presiding Officer or Body; §93.205
Notice of Hearing; §93.206 Default; §93.207 Service; §93.208
Delegation of Authority; §93.209 Subpoenas; §93.210 Protective Orders;
Motions to Compel; §93.211 Administrative Record; §93.212 Proposed
for Decision; §93.301 Finality and Request for SOAH Hearing; §93.302
Referral to ADR; §93.303 Hearings of Applications to Incorporate, Amend
Bylaws, or Merge or Consolidate; §93.304 Appeals of Applications for
Certificates of Authority; §93.305 Appeals of all Other Applications
for Which No Specific Procedure is Provided by this Title; §93.401 Appeals
Of Cease And Desist Orders And Orders of Removal; §93.402 Stays; §93.501
Request for Hearing to Appeal an Order of Conservation; §93.601 Motion
for Appeal to the Commission; §93.602 Decision by the Commission; §93.603
Oral Arguments before the Commission; §93.604 Motion for Rehearing; §93.605
Final Decisions and Appeals. Notice of the proposed repeal of existing Chapter
93 rules §93.1 and §§93.11-93.25 is published elsewhere is
this issue of the
Texas Register
.
During the past few years the Credit Union Department has seen an increase
in the number of decisions on applications appealed by interested parties.
As these cases have progressed, various procedural questions have arisen that
the existing rules do not address. Furthermore, while some of the procedures
contained within the proposed rules are addressed in the Texas Administrative
Procedures Act, the Commission believes it appropriate to include those procedures
in the rules so credit union management will have a better understanding of
the appeal process and what will be required of them as a party to the matter.
The 1997 General Appropriations Act, House Bill 1, Article IX, Rider 167,
requires that each state agency review and consider for readoption each rule
adopted by that agency pursuant to Government Code, Chapter 2001. Although
Chapter 93 was scheduled for review at the January 1999 Commission meeting,
agency staff had already reviewed the corresponding rules, recognized the
need to rewrite them for the reasons previously stated, and made such a recommendation
to the Commission. Nonetheless, the Credit Union Department published a Notice
of Intention to Review Chapter 93 as required by the 1997 General Appropriations
Act, House Bill 1, Article IX, Rider 167, in the
Texas Register
on December 25, 1998 (23 TexReg 13107), for the purpose
of accepting public comment.
Lynette Pool, Deputy Commissioner, has determined that there will be no
fiscal implications for state or local government as a result of enforcing
or administering the proposed rules.
Lynette Pool has also determined that for each year of the first five years
the proposed new rules are in effect, the public benefits anticipated as a
result of enforcing the rules will be that state-chartered credit unions will
have procedures for appealing Commissioner decisions that are more comprehensive
and well-defined. There is no anticipated effect on small businesses as a
result of adopting the new chapter and its corresponding rules. There is no
economic cost anticipated to entities that are required to comply with the
new rules as a result of their adoption.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Lynette
Pool, Deputy Commissioner, Credit Union Department, 914 East Anderson Lane,
Austin, Texas, 78752-1699.
Subchapter A. Common Terms
7 TAC §93.101
The new rule is proposed under the provisions of the following
sections of the Texas Finance Code that authorize the Credit Union Commission
to adopt rules for the purposes noted: §15.402 for administering the
Texas Credit Union Act (Texas Finance Code, Title 3, Subtitle D); §122.007
for the appeal by an incorporator or other aggrieved person of the commissioner's
order pertaining to a new charter application; §122.011 for the appeal
of a commissioner's decision regarding an amendment to bylaws or articles
of incorporation; §122.259 for the appeal of a cease and desist order
or a removal order; and for the appeal of a conservatorship order. The Commission
interprets §15.402 as authorizing the Commission to adopt reasonable
rules. The Commission interprets the remaining sections to authorize the Credit
Union Commission to adopt rules pertaining to the appeal of certain decisions
made and actions taken by the commissioner for the purposes of supervising
and regulating state-chartered credit unions.
The specific sections affected by this proposed rule are Texas Finance
Code, §§122.007, 122.011, 122.153, 122.259, and 126.105.
§93.101.Scope; Definitions; Severability.
(a)
These rules of practice are applicable to contested cases
arising under the Texas Credit Union Act.
(b)
The following words and terms, when used in this chapter,
shall have the following meanings, unless the context clearly indicates otherwise.
(1)
ADR--alternative dispute resolution.
(2)
ALJ--administrative law judge employed by the State
Office of Administrative Hearings.
(3)
Contested case--a proceeding in which the legal rights,
duties, or privileges of a party are to be determined by the Commissioner
or the Commission after an opportunity for adjudicative hearing. A contested
case at the Department commences upon the filing of a proper and timely request
for hearing.
(4)
Party--an applicant, a protestant, a respondent, or
department staff, who is admitted as a party.
(5)
PFD--a proposal for decision issued by an ALJ.
(6)
SOAH--the State Office of Administrative Hearings.
(c)
If any section of this chapter is found to be invalid,
the invalidity shall not affect the validity of any other provision of this
chapter.
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
April 26, 1999.
TRD-9902430
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
7 TAC §§93.201-93.212
The new rules are proposed under the provisions of the Texas
Finance Code §15.402 that authorizes the Credit Union Commission to adopt
rules for administering the Texas Credit Union Act (Texas Finance Code, Title
3, Subtitle D).
The specific sections affected by these proposed rules are the Texas Finance
Code, §§122.007, 122.011, 122.153, 122.259, and 126.105.
§93.201.Party Status.
Party status will be conferred on persons or entities that have a current
and cognizable interest in the subject matter of the contested case other
than an interest that is common to members of the general public.
§93.202.Computation of Time.
Unless otherwise required by law, in computing any period of time set
forth in this chapter, the date of the act, event, or default after which
the designated period of time begins to run is not to be included. The last
day of the period so computed is to be included, unless it is a Saturday,
Sunday, or a state legal holiday, in which event the period runs until the
end of the next day which is not a Saturday, Sunday, or a state legal holiday.
§93.203.Ex Parte Communications.
(a)
Upon receipt of a request for hearing and continuing until
the time a motion for rehearing is denied, the time for ruling on such a motion
has expired, or the proceeding is otherwise final, the commissioner and members
of the commission may not communicate directly or indirectly with any party
or a representative of a party in a contested case in connection with any
issue of fact or law in the contested case except upon notice and opportunity
for each party to participate.
(b)
The commissioner and members of the commission may communicate
ex parte with employees of the department who did not participate in any hearing
in the case in order to utilize special skills or knowledge of the department's
staff in evaluating the record in the case. Prohibited ex parte communications
shall not include any written communication if the communicator contemporaneously
serves copies of the communication on all parties to the contested case.
§93.204.Presiding Officer or Body.
All hearings in contested cases will be conducted by SOAH pursuant
to the Administrative Procedures Act and these rules. The commissioner at
any time during the proceedings may make an informal disposition of a contested
case by stipulation of the parties, agreed settlement, consent order, or default.
§93.205.Notice of Hearing.
(a)
A notice of hearing shall include:
(1)
A statement of the time, place and nature of the hearing;
(2)
A statement of the legal authority and jurisdiction
under which the hearing is to be held;
(3)
A reference to the particular sections of the statutes
and rules involved;
(4)
A short, plain statement of the matters asserted;
(5)
A description of the relief requested; and
(6)
At the discretion of the Commissioner, the following
disclosure language set forth in capital letters: "IF YOU DO NOT FILE A WRITTEN
ANSWER OR OTHER WRITTEN RESPONSIVE PLEADING TO THIS NOTICE OF HEARING ON OR
BEFORE THE ___TH DAY AFTER THE DATE ON WHICH THIS NOTICE WAS MAILED TO YOU,
OR IF YOU FAIL TO ATTEND THE HEARING, THE COMMISSIONER MAY DISPOSE OF THIS
CASE WITHOUT HEARING AND GRANT THE RELIEF SET FORTH IN THIS NOTICE. THE RESPONSE
MUST BE FILED IN AUSTIN, TEXAS, WITH THE STAFF OF THE DEPARTMENT AND STATE
OFFICE OF ADMINISTRATIVE HEARINGS".
(b)
The commissioner may require any or all parties to file
a written response to the matters asserted in the notice of hearing and the
relief requested. If required, the response shall specifically admit or deny
each of the assertions contained in the notice of hearing. Any assertion not
denied will be deemed to be admitted.
(c)
If required pursuant to subsection (a) of this section,
a written response to a notice of hearing shall be filed in Austin, Texas,
with the Department and SOAH. Failure of a party to timely file a written
response as provided in this subsection shall entitle the Department to the
remedies relating to default set forth in §93.206 of this title (relating
to Default).
§93.206.Default.
(a)
The commissioner may make an informal disposition of a
contested case by default by issuing an order in which the relief requested
in the notice of hearing is granted and the matters set forth in the notice
are deemed admitted as true upon proof to the commissioner of proper notice
to the parties in a contested case and that parties failed to file a written
response as provided in §93.205 of this title (relating to Notice of
Hearing), or failed to appear in person or through a legal representative
on the day and at the time set for the hearing of the case, whether or not
a written response has been filed.
(b)
In a case of default, the ALJ assigned to a contested case
shall promptly grant a motion by department staff for remand for informal
disposition by entry of a default order.
(c)
Upon the motion of a respondent or protesting party, the
commissioner may, for good cause shown, set aside a default order and reschedule
a hearing with SOAH.
(d)
A motion by a respondent or protesting party to set aside
a default order shall be filed with the commissioner not later than the 20th
day after the date of service of notice to the party(s) of the default order.
A reply by the department staff to the motion to set aside a default order
must be filed with the commissioner not later than the 30th day after the
date of service of notice of the default order. If the commissioner does not,
in writing, grant or deny the motion to set aside a default order not later
than the 45th day after the date of service of notice of the default order,
the motion shall be considered denied by operation of law.
§93.207.Service.
(a)
Unless otherwise specified in this chapter, notice to an
interested person or a party in a contested case shall be by personal service
or certified mail to the party's last known address. Service by mail shall
be complete upon deposit of the document, enclosed in a postpaid, properly
addressed wrapper, in a post office or official depository under the care
and custody of the United States Postal Service.
(b)
A certificate by the party, who files a pleading stating
that it has been served on all other parties, is prima facie evidence of service.
§93.208.Delegation of Authority.
Unless otherwise provided by law, any duty imposed on the commission
or the commissioner may be delegated to a duly authorized representative.
The provisions of any rule referring to the commission or the commissioner
shall be construed to also apply to the duly authorized representative of
the commission or the commissioner.
§93.209.Subpoenas.
(a)
Any party desiring the issuance of a subpoena to compel
the appearance of a witness or the production of documents at any hearing
shall file a written application with the ALJ setting forth the name and address
of the witness, time and place of appearance, and any documents or tangible
things sought to be produced.
(b)
The party requesting the subpoena shall arrange for service
of the subpoena in the manner as provided in civil actions. Subpoenas issued
at the request of the department staff may be served by an employee of the
department.
(c)
A party may request issuance of an amended subpoena, which
shall be served as provided in subsection (b) of this section.
(d)
The person to whom the subpoena is directed may, within
ten days after the service thereof or on or before the return date if the
return date is less than ten days after service, serve upon the commissioner,
the ALJ, and the attorney or party designated in the subpoena, written objection
to the appearance or to the inspection or copying of any or all of the designated
material. If objection is made, the party serving the subpoena shall not be
entitled to inspect and copy the materials except pursuant to an order of
the commissioner or ALJ. The party serving the subpoena shall have five days
within which to file a written response to the objection. The commissioner's
order on the objection shall be based upon the written objection and response.
No oral argument shall be heard on the objection unless the commissioner or
ALJ directs.
§93.210.Protective Orders; Motions To Compel.
All exemptions and privileges recognized under Texas laws are recognized
in hearings to the same extent as they are recognized in civil cases in the
courts of this state. If a party or witness is asked to produce privileged
information, the party, in addition to filing a written objection under §93.209(d)
of this title (relating to Subpoenas), may make a motion with the ALJ for
such protective orders as are reasonable and necessary. The requested information
may be withheld until a ruling on its production is obtained in response to
a motion to compel. The ALJ shall hold such hearings and issue such orders
on motions to compel or requests for protective orders as are required by
the law applicable to the facts and circumstances of the case.
§93.211.Administrative Record.
(a)
Arguments taken at any hearing on a contested matter will
be recorded stenographically and transcribed by a court reporter. The costs
of transcribing the hearing and for the preparation of an original transcript
of the record for the department shall be assessed against all parties to
the proceeding, excluding department staff, in such proportions as the ALJ
may determine.
(b)
In the event a decision of the commission is appealed or
otherwise taken to district court and the department is required to transmit
to the court a copy of the record of the department proceeding, or any part
thereof, the appealing party shall pay all of the costs of preparing the copy
of the record that is to be transmitted to the reviewing court at rates approved
by the General Services Commission. If more than one party appeals the decision,
the cost of the preparation of the record shall be divided equally among the
appealing parties or as agreed by the parties. The ALJ shall prepare and certify
the record on behalf of the department and is responsible for transmitting
the certified copy to the commissioner.
§93.212.Proposal for Decision.
(a)
Following the hearing the ALJ shall review the evidence
and testimony, and prepare a PFD containing a statement of the reasons for
the proposed decision and of each finding of fact and conclusion of law necessary
for the proposed decision. The ALJ shall also prepare a proposed final order
for the commissioner to sign adopting the proposed decision. Upon completion,
the ALJ shall serve copies of the PFD and proposed final order on all parties
and give each adversely affected party an opportunity to file exceptions and
present briefs. If a party files exceptions or presents briefs, the ALJ shall
give an opportunity to other parties to file replies to the exceptions or
briefs. Unless otherwise indicated, exceptions, replies to exceptions, and
related briefs must be filed within deadlines established by the ALJ. The
ALJ may amend the PFD and proposed final order in response to the exceptions,
replies, or briefs submitted. If the ALJ makes substantive revisions, the
ALJ shall circulate the amended PFD and proposed final order to the parties
for additional exceptions and briefs before submitting the PFD and proposed
final order to the Commissioner.
(b)
No additional briefs may be submitted after the case is
under submission to the commissioner for decision unless requested by the
commissioner. The commissioner may:
(1)
Adopt the PFD and proposed final order, in whole or in
part;
(2)
Modify and adopt the PFD and proposed final order,
in whole or in part;
(3)
Decline to adopt the PFD and proposed final order,
in whole or in part;
(4)
Remand the proceedings for further examination by
the ALJ, including for the limited purpose of receiving additional briefing
or evidence from the parties on specific issues; or
(5)
Take another lawful and appropriate action with regard
to the case.
(c)
The commissioner shall make a final determination within
30 days of the date of receipt of the PFD and proposed final order.
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
April 26, 1999.
TRD-9902431
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
7 TAC §§93.301-93.305
The new rules are proposed under the provisions of the Texas
Finance Code §15.402 that authorizes the Credit Union Commission to adopt
rules for administering the Texas Credit Union Act (Texas Finance Code, Title
3, Subtitle D).
The specific sections affected by these proposed rules are Texas Finance
Code, §§122.007, 122.011, 122.153, 122.259, and 126.105.
§93.301.Finality and Request for SOAH Hearing.
Except as provided otherwise by this chapter, the preliminary decision
of the commissioner becomes final 20 days from the date of service, unless
prior thereto, an applicant or protestant files with the commissioner a written
request for hearing. The commissioner may, at the commissioner's sole discretion,
refer any matter to SOAH for hearing prior to entering a preliminary decision
when a hearing is requested by a party, whether or not it has been referred
to ADR.
§93.302.Referral to ADR.
The commissioner may order the parties to participate in non-binding
ADR if the commissioner determines that any two of the following conditions
are present:
(1)
the parties have not engaged in meaningful negotiation;
(2)
the controversy is reasonably susceptible to compromise
or resolution; or
(3)
ADR may produce cost savings.
§93.303.Hearings of Applications to Incorporate, Amend Bylaws, Or Merge or Consolidate.
(a)
If ADR is not utilized or fails to resolve the controversy,
the commissioner shall furnish to the ALJ all information upon which the preliminary
decision was based.
(b)
The ALJ shall consider this information along with the
evidence developed at the hearing in preparing a proposal for decision.
(c)
Burden of Proof for Unprotested Applications. The applicant
must establish by a preponderance of the evidence all statutory criteria.
(d)
Burden of Proof for Protested Applications. The applicant
must establish by a preponderance of the evidence the criteria set forth in
the applicable statutes and rules. In cases in which field of membership is
at issue, the protestant must establish by a preponderance of the evidence
that overlapping fields of membership will unreasonably harm the protestant.
§93.304.Appeals of Applications for Certificates of Authority.
If ADR is not utilized or fails to resolve the controversy, whether
the application is unprotested or protested, the applicant for a certificate
of authority must establish by a preponderance of the evidence the criteria
set forth in §91.211(c) of this title (relating to Application for a
Certificate of Authority to Do Business in the State of Texas).
§93.305.Appeals of All Other Applications for Which No Specific Procedure is Provided by this Title.
If ADR is not utilized or fails to resolve the controversy, whether
the application is protested or unprotested, the applicant has the burden
of proof.
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
April 26, 1999.
TRD-9902432
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
7 TAC §93.401, §93.402
The new rules are proposed under the provisions of the Texas
Finance Code §15.402 that authorizes the Credit Union Commission to adopt
rules for administering the Texas Credit Union Act (Texas Finance Code, Title
3, Subtitle D); and §122.259 that authorizes the Commission to adopt
rules for the appeal of a cease and desist order or a removal order.
The specific section affected by these proposed rules is Texas Finance
Code, §122.259.
§93.401.Appeals Of Cease And Desist Orders And Orders Of Removal.
(a)
The commissioner's cease and desist order or order of removal
is final, unless within ten days of service of the order, the board of directors
or the person removed files a written request for hearing to the commissioner's
order.
(b)
If a request for hearing is filed, the commissioner shall
forward the matter to SOAH to set a hearing.
(c)
The hearing on a cease and desist order or order of removal
is closed to the public. The orders and correspondence and records relating
thereto are confidential and cannot be revealed to the public.
(d)
At the hearing, the commissioner has the burden to prove
by a preponderance of the evidence the violations or unsafe or unsound practices
that justify the cease and desist order or order of removal.
§93.402.Stays.
Where an order by its terms, by statute or by these rules will become
effective before a hearing can be held, any aggrieved party who has filed
a timely request for hearing under this chapter may file a written request
with the Commissioner to stay the effectiveness part or all such order until
the matter has been heard and a final decision issued. The Commissioner may
grant a stay where the respondent has adequately demonstrated that the respondent
has a reasonable defense which might result in his prevailing on the merits
at the hearing; the respondent will be irreparably injured in the absence
of the stay; the stay would not substantially or irreparably harm other interested
persons; and the stay would not jeopardize the public interest or contravene
public policy.
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
April 26, 1999.
TRD-9902433
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: June 6, 1999
For further information, please call: (512) 837-9236
Part VI.
Credit Union Department
Subchapter N. Emergency Closing of Office or Operation
Chapter 93.
Administrative Proceedings
Subchapter B. General Rules
Chapter 93.
Contested Cases
Subchapter B. General Rules
Subchapter C. Appeals of Preliminary Determinations on Applications
Subchapter D. Appeals of Cease and Desist Orders of Removal
Subchapter E. Appeals of Orders of Conservation