1-1 By: Barrientos S.B. No. 464
1-2 (In the Senate - Filed February 24, 1993; February 25, 1993,
1-3 read first time and referred to Committee on Economic Development;
1-4 May 6, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; May 6, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Parker x
1-10 Lucio x
1-11 Ellis x
1-12 Haley x
1-13 Harris of Dallas x
1-14 Harris of Tarrant x
1-15 Leedom x
1-16 Madla x
1-17 Rosson x
1-18 Shapiro x
1-19 Wentworth x
1-20 COMMITTEE SUBSTITUTE FOR S.B. No. 464 By: Rosson
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to the regulation of credit unions.
1-24 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-25 SECTION 1. Subsections (c), (d), (e), (f), (g), (h), (j),
1-26 (k), (l), and (m), Section 10.01, Texas Credit Union Act (Article
1-27 2461-10.01, Vernon's Texas Civil Statutes), are amended to read as
1-28 follows:
1-29 (c) After a suspension order has been served on the credit
1-30 union, the commissioner shall take possession and control of the
1-31 books, records, property, assets, and business of the credit union,
1-32 and the credit union shall cease all operations, except those
1-33 authorized by the commissioner and conducted under his supervision.
1-34 Not later than 15 days after the date an order of suspension or
1-35 conservation is served, the board of directors <shall file a
1-36 written reply to the order, and> may file a written request in a
1-37 district court in Travis County for a show cause hearing at which
1-38 the commissioner must show cause that the commissioner or the
1-39 conservator should not be ordered to return control of the credit
1-40 union to its board of directors <to present to the commissioner a
1-41 plan to continue operations under the control of the board of
1-42 directors setting out proposed corrective actions>. The board of
1-43 directors may as an alternative request a hearing by the commission
1-44 to review the commissioner's order of suspension or conservation.
1-45 Such hearing shall be held in accordance with rules adopted by the
1-46 commission. A final order resulting from such a hearing may be
1-47 appealed by the board of directors to the district court in Travis
1-48 County. The availability of this alternative shall not prejudice
1-49 or affect the right of the board of directors to request a show
1-50 cause hearing under this subsection. If under an order of
1-51 suspension, the board of directors may request that a conservator
1-52 be appointed for the credit union or that the credit union be
1-53 closed and a liquidating agent be appointed and waive rights to
1-54 further appeal, in which event the commissioner may immediately
1-55 appoint a conservator, or order that the credit union be liquidated
1-56 and appoint a liquidating agent. If under an order of
1-57 conservation, the board of directors may consent to the
1-58 conservatorship and waive rights to further appeals.
1-59 (d) If the board of directors <files its reply and> requests
1-60 a show cause hearing as provided by Subsection (c), the district
1-61 court <commissioner> shall set and hold the hearing not less than
1-62 10 nor more than 30 days after the date of receipt of such a
1-63 request. Before the show cause hearing <The commissioner shall
1-64 promptly give notice to the credit union of the date, time, and
1-65 place of the hearing. Not later than 10 days after the earlier of
1-66 the date of conclusion of the hearing or the date on which the
1-67 suspension expires>, the commissioner may <shall> adopt a <the>
1-68 plan to continue operations under the control of the board of
2-1 directors presented by the credit union or<,> agree with the credit
2-2 union on an alternative plan to continue operations under the
2-3 control of the board of directors or other appropriate measures<,
2-4 reject the plan to continue operations under the control of the
2-5 board of directors and issue an order of conservation appointing a
2-6 conservator, continue a previous order of conservation, or issue an
2-7 order of liquidation ordering that the credit union be closed,
2-8 ordering that its affairs and business be liquidated, and
2-9 appointing a liquidating agent>. If the board of directors and the
2-10 commissioner reach an agreement under this subsection, the board of
2-11 directors shall notify the court that the board waives its right to
2-12 the show cause hearing. If the board of directors and the
2-13 commissioner do not reach an agreement under this subsection, the
2-14 order of conservation or suspension shall remain in effect pending
2-15 final adjudication of a show cause hearing.
2-16 (e) If the commissioner prevails at the show cause hearing,
2-17 or at a hearing held by the commission, or a show cause hearing is
2-18 waived under this section <rejects the credit union's plan to
2-19 continue operations> and the commissioner determines that it is in
2-20 the public interest and in the best interest of the members,
2-21 depositors, and creditors of the credit union to rehabilitate the
2-22 credit union, he may permit the credit union to operate under his
2-23 direction and control, and shall continue or issue an order of
2-24 conservation appointing a conservator to manage the affairs of the
2-25 credit union. The commissioner shall serve the order of
2-26 conservation in the same manner as provided for service of an order
2-27 of suspension.
2-28 (f) Subject to rules adopted by the commission and under the
2-29 supervision of the commissioner, the conservator may take charge of
2-30 the books, records, property, assets, and business of the credit
2-31 union and conduct the business and affairs of the credit union;
2-32 determine the existence of and the amount of any claims and allow
2-33 proved claims of security, preference, or priority or disallow
2-34 claims of security, preference, or priority not proved; repudiate
2-35 any contract or unexpired lease the conservator considers
2-36 burdensome to the credit union; sell or assign assets to himself;
2-37 settle, compromise, or release claims in favor of or against the
2-38 credit union; and do all other things that may be necessary in
2-39 connection with the conservation. The conservator shall take the
2-40 steps toward the removal of the causes and conditions that have
2-41 necessitated the order that the commissioner directs. During the
2-42 conservatorship, the conservator shall make the reports to the
2-43 commissioner from time to time that the commissioner requires. The
2-44 conservator may take all necessary measures to preserve, protect,
2-45 and recover the assets or property of the credit union, including
2-46 claims or causes of action belonging to or that may be asserted by
2-47 the credit union, may deal with that property in his own name as
2-48 conservator, and may file, prosecute, or defend against a suit by
2-49 or against the credit union if the conservator considers this
2-50 action necessary to protect the interested parties or property
2-51 affected by the suit. The commissioner shall document and retain
2-52 information on the qualifications, recommendations, and fees of a
2-53 conservator and on insurance held by the conservator for the
2-54 benefit of the credit union.
2-55 (g) The commissioner shall determine what costs are <the
2-56 cost> incident to the conservatorship. Those costs are charges
2-57 <This cost is a charge> against the assets and funds of the credit
2-58 union to be allowed and paid as the commissioner in writing
2-59 directs. The commissioner shall retain detailed documentation of
2-60 all costs paid under this subsection.
2-61 (h) Except as provided by this section, no <No> court may
2-62 restrain or affect the exercise of the powers or functions of the
2-63 conservator of a credit union, and no court has jurisdiction over
2-64 claims against the conservator or the credit union<, until all
2-65 administrative remedies have been exhausted>. A suit filed against
2-66 a credit union or its conservator while a conservatorship order is
2-67 in effect must be brought in a court of competent jurisdiction in
2-68 Travis County. The conservator may file suit in a court of
2-69 competent jurisdiction in Travis County against any person for the
2-70 purpose of preserving, protecting, or recovering assets or property
3-1 of the credit union, including a claim or cause of action belonging
3-2 to or that may be asserted by the credit union.
3-3 (j) If, after final adjudication of a show cause hearing,
3-4 waiver of the hearing, or final order of the commission, the
3-5 commissioner makes written findings <determines> that the credit
3-6 union in conservatorship is not in a condition to continue business
3-7 and cannot be rehabilitated as provided by this section, he may
3-8 issue an order of liquidation appointing a liquidating agent.
3-9 (k) In a show cause hearing requested under this section,
3-10 the burden of proof is on the commissioner to show that the
3-11 commissioner or conservator should not be ordered to return control
3-12 of the credit union to its board of directors. If the court
3-13 decides in favor of the commissioner, the conservatorship or
3-14 suspension remains in effect during any pending appeal by the board
3-15 of directors. If the court decides in favor of the credit union,
3-16 control of the credit union shall be returned immediately to its
3-17 board of directors, and control remains with the board during any
3-18 pending appeal by the commissioner. An order issued by a district
3-19 court in a show cause hearing under this section is a final order
3-20 for the purpose of appeal <If, after a hearing under this section,
3-21 the board of directors of the credit union is dissatisfied with the
3-22 decision of the commissioner, the board may appeal to the
3-23 commission by filing with the commissioner a written appeal,
3-24 including a duly certified resolution of the board, not later than
3-25 10 days after the day that the commissioner's order is served. If
3-26 an appeal is duly filed, the commissioner shall set a date for a
3-27 hearing on the appeal not more than 30 days after the date on which
3-28 the appeal is filed. The commissioner shall promptly give notice
3-29 of the date, time, and place of the hearing to the credit union and
3-30 any other interested party. The filing of an appeal does not
3-31 suspend the effect of the order of conservation and this order
3-32 remains in force pending final disposition of the appeal by the
3-33 commission. At the conclusion of the hearing, the commission may
3-34 reverse the order of the commissioner and adopt and approve the
3-35 credit union's plan to continue operations, affirm the
3-36 commissioner's order of conservation, or order that other
3-37 appropriate action be taken>.
3-38 (l) If the board of directors of the credit union does not
3-39 request a show cause hearing after an <file a reply to the> order
3-40 of suspension or an order of conservation as required by this
3-41 section or fails to request and appear at the hearing provided for
3-42 by this section, the <commissioner may dispose of the matter as he
3-43 considers appropriate. The> credit union is presumed to have
3-44 consented to this action and may not contest it.
3-45 (m) The period of suspension and the date and time of a
3-46 hearing <the hearings> provided for by this section may be extended
3-47 by written agreement of the parties and the commissioner.
3-48 SECTION 2. Section 10.05, Texas Credit Union Act (Article
3-49 2461-10.05, Vernon's Texas Civil Statutes), is amended to read as
3-50 follows:
3-51 Sec. 10.05. APPOINTMENT OF CONSERVATOR, <OR> LIQUIDATING
3-52 AGENT, OR LEGAL COUNSEL. The commission shall adopt rules on the
3-53 selection of a conservator, liquidating agent, or legal counsel for
3-54 a credit union in conservatorship or liquidation. The rules must
3-55 include minimum experience and demonstrated ability requirements
3-56 for the person appointed. The commissioner may appoint any person
3-57 or entity, including the share and deposit guaranty corporation or
3-58 credit union provided for by Subsection (e) of Section 11.10 of
3-59 this Act, that meets the requirements imposed by rule to be a
3-60 conservator or a liquidating agent under this chapter. The
3-61 commissioner shall attempt to make the appointment in a manner that
3-62 imposes a reasonable financial burden on the credit union in
3-63 conservatorship or liquidation, taking into consideration the size
3-64 of the credit union and other relevant factors.
3-65 SECTION 3. Subsection (c), Section 11.01, Texas Credit Union
3-66 Act (Article 2461-11.01, Vernon's Texas Civil Statutes), is amended
3-67 to read as follows:
3-68 (c) The Credit Union Commission is subject to Chapter 325,
3-69 Government Code (Texas Sunset Act). Unless continued in existence
3-70 as provided by that chapter, the commission is abolished and this
4-1 Act expires September 1, 1995 <1997>.
4-2 SECTION 4. Subsections (a) and (d), Section 11.02, Texas
4-3 Credit Union Act (Article 2461-11.02, Vernon's Texas Civil
4-4 Statutes), are amended to read as follows:
4-5 (a) Six members of the commission must be individuals who
4-6 are currently engaged in the exercise of the duties,
4-7 responsibilities, rights, and powers of a duly authorized director,
4-8 officer, or committee member of a credit union that is organized
4-9 and doing business in this state under this Act or the Federal
4-10 Credit Union Act and that has its principal office in this state,
4-11 and who have five years or more of active experience as such a
4-12 director, officer, or committee member. No more than one person
4-13 from a federal credit union may serve on the commission at any
4-14 time. Experience as an <a commissioner, deputy commissioner, or>
4-15 examiner is equivalent to the type of experience required by this
4-16 subsection. If a person holding a position in accordance with this
4-17 subsection ceases to be engaged in the exercise of the duties,
4-18 responsibilities, rights, and powers prescribed by this subsection
4-19 for a period exceeding 90 days, the person is ineligible to serve
4-20 as a member and the person's position on the commission is vacant.
4-21 (d) A person currently serving as an officer or board member
4-22 <chairman, first vice-chairman, president, vice-president,
4-23 secretary, or treasurer> of a state trade association in the credit
4-24 union industry that employs paid staff, or an employee or paid
4-25 consultant of such an organization, may not serve as a member of
4-26 the commission.
4-27 SECTION 5. Section 11.07, Texas Credit Union Act (Article
4-28 2461-11.07, Vernon's Texas Civil Statutes), is amended by adding
4-29 Subsection (d) to read as follows:
4-30 (d) On request of any person in attendance at a meeting to
4-31 discuss proposed rules, the commission must supply the person with
4-32 a written copy of the text of the proposed rule.
4-33 SECTION 6. Subsections (b) and (c), Section 11.08, Texas
4-34 Credit Union Act (Article 2461-11.08, Vernon's Texas Civil
4-35 Statutes), are amended to read as follows:
4-36 (b) The commissioner must have three <at least 5> years'
4-37 practical experience in the operation of credit unions <within the
4-38 10 years immediately preceding his appointment>. The experience
4-39 may consist of experience in the exercise of the duties,
4-40 responsibilities, rights, and powers of a duly authorized director,
4-41 officer, or committee member of a credit union or in the employment
4-42 of a credit union regulatory agency.
4-43 (c) The commissioner may not be:
4-44 (1) compensated for serving as an <a salaried>
4-45 officer, board member, <salaried> employee, or <salaried>
4-46 consultant of a trade association in the credit union industry; or
4-47 (2) related within the second degree by affinity or
4-48 consanguinity, as determined under Article 5996h, Revised Statutes,
4-49 to a person who is a salaried officer, salaried employee, or paid
4-50 <salaried> consultant of a trade association in the credit union
4-51 industry.
4-52 SECTION 7. (a) Subsection (i), Section 5.09, Texas Credit
4-53 Union Act (Article 2461-5.09, Vernon's Texas Civil Statutes), is
4-54 amended to read as follows:
4-55 (i) An order to cease and desist, an order for removal from
4-56 office, and each copy of a notice, correspondence, or other record
4-57 relating to an order concerning violations or unsound practices are
4-58 confidential and may not be revealed to the public except in a
4-59 lawsuit authorized by this Act or by other lawful order or
4-60 authority. However, the commissioner may disclose this information
4-61 to a share and deposit guaranty corporation or credit union, or a
4-62 department, agency, or instrumentality of this state or the United
4-63 States if he determines the disclosure to be necessary or proper
4-64 for the enforcement of the laws of this state or the United States.
4-65 The commissioner may also disclose this information to a member if:
4-66 (1) the member requests the information in writing
4-67 fully describing the information sought and the reason for the
4-68 request;
4-69 (2) the commissioner determines that the requested
4-70 disclosure will not result in harm to the safety and soundness or
5-1 reputation of the credit union or impair or endanger the rights of
5-2 any individual; and
5-3 (3) if requested by the commissioner, the member
5-4 agrees not to reveal the information to the public.
5-5 (b) Subsection (o), Section 10.01, Texas Credit Union Act
5-6 (Article 2461-10.01, Vernon's Texas Civil Statutes), is repealed.
5-7 SECTION 8. The amendment of Subsection (d), Section 11.02,
5-8 Texas Credit Union Act (Article 2461-11.02, Vernon's Texas Civil
5-9 Statutes), shall not apply to any member of the commission who, on
5-10 the effective date of this Act, has previously been appointed by
5-11 the governor, with the advice and consent of the senate, and whose
5-12 term of office has not expired.
5-13 SECTION 9. The importance of this legislation and the
5-14 crowded condition of the calendars in both houses create an
5-15 emergency and an imperative public necessity that the
5-16 constitutional rule requiring bills to be read on three several
5-17 days in each house be suspended, and this rule is hereby suspended,
5-18 and that this Act take effect and be in force from and after its
5-19 passage, and it is so enacted.
5-20 * * * * *
5-21 Austin,
5-22 Texas
5-23 May 6, 1993
5-24 Hon. Bob Bullock
5-25 President of the Senate
5-26 Sir:
5-27 We, your Committee on Economic Development to which was referred
5-28 S.B. No. 464, have had the same under consideration, and I am
5-29 instructed to report it back to the Senate with the recommendation
5-30 that it do not pass, but that the Committee Substitute adopted in
5-31 lieu thereof do pass and be printed.
5-32 Parker,
5-33 Chairman
5-34 * * * * *
5-35 WITNESSES
5-36 FOR AGAINST ON
5-37 ___________________________________________________________________
5-38 Name: John Hale x
5-39 Representing: Texas Credit Union Dept.
5-40 City: Round Rock
5-41 -------------------------------------------------------------------
5-42 Name: Karen Brenner x
5-43 Representing: Self
5-44 City: Austin
5-45 -------------------------------------------------------------------
5-46 Name: Jeff Huffman x
5-47 Representing: Texas Credit Union League
5-48 City: Dallas
5-49 -------------------------------------------------------------------
5-50 Name: John Lederer x
5-51 Representing: Texas Credit Union League
5-52 City: Dallas
5-53 -------------------------------------------------------------------