BILL ANALYSIS H.B. 2529 By: Marchant (Lucio) Economic Development 5-22-95 Senate Committee Report (Unamended) BACKGROUND Currently, under Section 10.01 of the Texas Credit Union Act, the Banking Commissioner has the option to put a credit union into suspension or conservation when there are difficulties. A conservatorship allows credit unions to operate while under regulatory supervision, thereby allowing the credit union to return to the membership when the problems are corrected. However, suspension of charter without further action effectively closes the credit union. PURPOSE As proposed, H.B. 2529 deletes provisions providing for the suspension of a state chartered credit union by the credit union commissioner. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the banking commission under SECTION 1 (Sec.10.01(c), Article 2461-10.01, V.T.C.S.) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 10.01, Article 2461-10.01, V.T.C.S. (Texas Credit Union Act), as follows: Sec. 10.01 New heading: CONSERVATION. (a) Authorizes the banking commissioner (commissioner), if the commissioner makes certain findings and determines that the findings are of such severity that immediate affirmative action is needed to prevent further dissipation of the assets of the credit union, to issue an order of conservation and appoint a conservator to manage the affairs of the credit union. Requires service of the order of conservation to be delivered to an officer or director of the credit union by the commissioner, the deputy commissioner, or any other authorized designee. Authorizes mail delivery, if no officer or director is available for service on the date of issuance. Provides that service by certified or registered mail, addressed to the credit union at the last address of its principal office as shown by the records of the department is complete on deposit of the paper. Deletes certain mailing requirements for orders of suspension and conservation. (b) Requires the order to clearly state the grounds for conservation, rather than suspension. Sets forth guidelines for service of conservation. (c) Sets forth authorized actions for the conservator which are subject to rules adopted by the banking commission (commission) and under supervision of the commissioner. Makes a conforming change. (d) Requires the conservator to take the steps toward the removal of the causes and conditions that have necessitated the order that the commissioner directs. Requires the conservator, during the conservatorship, to make required reports to the commissioner. Sets forth authorized actions for the conservator. (e) Requires the commissioner to determine the cost incident to the conservatorship. Provides that this cost is a charge against the assets and funds of the credit union to be allowed and paid as the commissioner directs. (f) Prohibits a court from restraining or affecting the exercise of the powers or functions of the conservator of a credit union, and provides that no court has jurisdiction over claims against the conservator or the credit union, until all administrative remedies have been exhausted. (g) Requires the conservator to serve for the period necessary to accomplish the purposes of the conservatorship as intended by this Act. Requires the credit union, if it is rehabilitated, to be returned to the management of the board of directors under the terms that are necessary to prevent recurrence of the conditions that occasioned the conservatorship. (h) Authorizes the commissioner, if the commissioner determines that the credit union in conservatorship is not in a condition to continue business and cannot be rehabilitated as provided by this section, to issue an order of liquidation appointing a liquidating agent. (i) Provides that an agreement that tends to diminish or defeat the right, title, or interest of the conservator in any asset acquired by the conservator under this section, either as security for a loan or by purchase, is invalid against the conservator unless the agreement meets certain provisions. (j) Requires the board of directors of the credit union, no later than 30 days after an order of conservation is served, to file a written reply to the order. Authorizes the credit union board of directors to appeal the order to the commission by filing with the commissioner a written appeal, including a duly certified resolution of the board. Requires the commissioner, if the board of directors files an appeal and requests a hearing, to request a hearing date from the State Office of Administrative Hearings (hearings office) that is not less than 10 or more than 30 days after receipt of the request. Requires the commissioner to give notice to the credit union of the date, time, and place of the hearing. Provides that the filing of an appeal does not suspend the effect of the order of conservation, and the order remains in force pending final disposition of the appeal by the commission. Requires the commission, no later than 45 days after receipt of a proposal for decision from the hearings office, to meet to consider the proposal for decision. Deletes the provision that the board of directors file a reply to an order. Deletes existing Subsections (d)-(k). Makes conforming changes. (k) Redesignates existing Subsection (l). Deletes the provision that if the board of directors of the credit union does not file a reply to the order of suspension, the commissioner may dispose of the matter as he considers appropriate. (l) Makes conforming changes. (m) Deletes existing Subsection (n). (o) Makes a conforming change. SECTION 2. Emergency clause. Effective date: upon passage.