78R3432 RCJ-F
By: Marchant H.B. No. 1307
A BILL TO BE ENTITLED
AN ACT
relating to the administration, operation, and regulation of credit
unions.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 15.402, Finance Code, is amended by
amending Subsection (a) and adding Subsections (b-1) and (d) to
read as follows:
(a) The commission may adopt reasonable rules necessary to
administer [for administering] this chapter and to accomplish the
purposes of Subtitle D, Title 3.
(b-1) In adopting rules under this section, the commission
shall consider the need to:
(1) promote a stable credit union environment;
(2) provide credit union members with convenient,
safe, and competitive services;
(3) preserve and promote the competitive parity of
credit unions with regard to other depository institutions
consistent with the safety and soundness of credit unions; and
(4) promote or encourage economic development in this
state.
(d) The presence or absence in this chapter or Subtitle D,
Title 3, of a specific reference to rules regarding a particular
subject does not enlarge or diminish the rulemaking authority
provided by this section.
SECTION 2. Section 15.403, Finance Code, is amended to read
as follows:
Sec. 15.403. SUPERVISION AND REGULATION OF CREDIT UNIONS.
[(a) The commission and commissioner have the jurisdiction,
powers, and duties formerly conferred by law on the banking
commissioner of Texas in relation to managing, regulating, and
supervising credit unions.
[(b)] The commissioner shall supervise and regulate a
credit union doing business in this state, other than a federal
credit union, in accordance with this chapter and Subtitle D, Title
3, including rules adopted under this chapter and Subtitle D, Title
3.
SECTION 3. Subchapter E, Chapter 15, Finance Code, is
amended by adding Sections 15.4031 and 15.4032 to read as follows:
Sec. 15.4031. CREDIT UNION COMMISSIONER HEARING. (a) The
commissioner may convene a hearing to receive evidence and argument
regarding any matter under this chapter or Subtitle D, Title 3,
before the commissioner for decision or review. The hearing must be
conducted under Chapter 2001, Government Code. A matter made
confidential by law must be considered by the commissioner in a
closed hearing.
(b) A hearing officer may conduct any hearing on behalf of
the commissioner.
Sec. 15.4032. EXAMINATION OF RELATED ENTITIES. (a) In
accordance with rules adopted by the commission, the commissioner
may examine, to the same extent as if the services or activities
were performed by a credit union on its own premises:
(1) a credit union service organization in which a
credit union has an interest;
(2) an organization engaged primarily in the business
of managing one or more credit unions; and
(3) a third-party contractor providing electronic
data processing, electronic fund transfers, or other member
services on behalf of a credit union.
(b) The commissioner may collect a fee from an examined
contractor or organization in connection with each examination to
cover the cost of the examination or may collect that fee from the
credit unions that use the examined contractor.
SECTION 4. Section 15.404, Finance Code, is amended to read
as follows:
Sec. 15.404. ADMINISTRATION AND ENFORCEMENT OF STATUTES AND
RULES. The commissioner shall administer and enforce this chapter
and Subtitle D, Title 3, and rules adopted under this chapter and
Subtitle D, Title 3.
SECTION 5. Subchapter E, Chapter 15, Finance Code, is
amended by adding Sections 15.4041, 15.4042, 15.4043, 15.413, and
15.414 to read as follows:
Sec. 15.4041. ISSUANCE OF INTERPRETIVE STATEMENTS. (a)
The commissioner may issue interpretive statements containing
matters of general policy to guide the public and credit unions, and
may amend or repeal a published interpretive statement by issuing
an amended statement or notice of repeal of a statement.
(b) An interpretive statement may be disseminated by
newsletter, through an electronic medium such as the Internet, in a
volume of statutes or related materials published by the
commissioner or others, or by any other means reasonably calculated
to notify persons affected by the interpretive statement. Notice
of an amended or withdrawn statement must be disseminated in a
substantially similar manner as the affected statement was
originally disseminated.
Sec. 15.4042. ISSUANCE OF OPINION. (a) In response to a
specific request from a member of the public or the credit union
industry, the commissioner may issue an opinion directly or through
the deputy commissioner or a department attorney.
(b) If the commissioner determines that the opinion is
useful for the general guidance of the public or credit unions, the
commissioner may disseminate the opinion by newsletter, through an
electronic medium such as the Internet, in a volume of statutes or
related materials published by the commissioner or others, or by
any other means reasonably calculated to notify persons affected by
the opinion. A published opinion must be redacted to preserve the
confidentiality of the requesting party unless the requesting party
consents to be identified in the published opinion.
(c) The commissioner may amend or repeal a published opinion
by issuing an amended opinion or notice of repeal of an opinion and
disseminating the opinion or notice in a substantially similar
manner as the affected opinion was originally disseminated. The
requesting party may rely on the original opinion if:
(1) all material facts were originally disclosed to
the commissioner;
(2) the safety and soundness of the affected credit
union will not be endangered by further reliance on the original
opinion; and
(3) the text and interpretation of relevant governing
provisions of this chapter or Subtitle D, Title 3, have not been
changed by legislative or judicial action.
Sec. 15.4043. EFFECT OF INTERPRETIVE STATEMENT OR OPINION.
An interpretive statement or opinion issued under this subchapter
does not have the force of law and is not a rule for the purposes of
Chapter 2001, Government Code, unless adopted by the commission as
provided by Chapter 2001, Government Code. An interpretive
statement or opinion is an administrative construction of this
chapter, may be relied on by credit unions authorized to engage in
business in this state, and is entitled to great weight if the
construction is reasonable and does not conflict with this chapter
or Subtitle D, Title 3.
Sec. 15.413. GIFTS OF MONEY OR PROPERTY. The department may
accept money or property by gift, bequest, devise, or otherwise for
any department purpose authorized by this chapter and Subtitle D,
Title 3.
Sec. 15.414. AUTHORITY TO CONTRACT FOR PROFESSIONAL OR
PERSONAL SERVICES. For the purpose of carrying out the powers,
duties, and responsibilities of the department, the commissioner
may negotiate, contract, or enter into an agreement for
professional or personal services. The commission by rule shall
adopt policies and procedures consistent with applicable state
procurement practices for soliciting and awarding contracts under
this section.
SECTION 6. Section 121.002, Finance Code, is amended by
adding Subdivisions (9)-(12) to read as follows:
(9) "Membership share" means a designated share
account of a credit union consisting of the balance held by the
credit union and established by a credit union member in accordance
with the standards specified by the credit union.
(10) "Organization" means a corporation, partnership,
association, limited liability company, or other legal entity.
(11) "Unsafe or unsound condition," with respect to a
credit union, includes:
(A) being insolvent;
(B) having incurred or being likely to incur a
loss that will deplete all or substantially all of the credit
union's net worth; and
(C) being in imminent danger of losing the credit
union's share and deposit insurance or guarantee.
(12) "Unsafe or unsound practice" means an action or
inaction in the operation of a credit union that is contrary to
generally accepted standards of prudent operation, the likely
consequences of which, if continued, would be abnormal and material
risk of loss or danger to a credit union, the credit union's
members, or an organization insuring or guaranteeing the credit
union's shares and deposits.
SECTION 7. Section 121.006(a), Finance Code, is amended to
read as follows:
(a) If the commissioner [commission] proposes to [suspend
or] revoke a credit union's certificate of incorporation, the
credit union is entitled to a hearing conducted by the State Office
of Administrative Hearings.
SECTION 8. Section 122.001(c), Finance Code, is amended to
read as follows:
(c) The application must contain:
(1) two copies of the articles of incorporation, which
must state:
(A) the name of the credit union;
(B) the municipality and county where the credit
union's principal place of business is to be located;
(C) that the credit union's term of existence is
perpetual;
(D) that the credit union's fiscal year is the
calendar year;
(E) the initial share accounts;
(F) the name and address of, and the number of
shares subscribed by, each incorporator;
(G) the number of directors constituting the
initial board and the name and address of each person who will serve
as director until the first annual meeting or until a successor is
elected and qualified; and
(H) the definable community of interest shared by
the members of the credit union at the time of incorporation; [and]
(2) two copies of the standard bylaws for the general
operation of the credit union; and
(3) a business plan covering three years and providing
a detailed explanation of actions intended to accomplish the
primary functions of the credit union.
SECTION 9. Section 122.003(a), Finance Code, is amended to
read as follows:
(a) The name of a credit union must include the words
"credit union" or the abbreviation "CU" and an appropriate
descriptive word or words, or an acronym made up of initials of the
appropriate descriptive word or words and ending in "CU," approved
by the commissioner.
SECTION 10. Sections 122.006(a), (b), and (c), Finance
Code, are amended to read as follows:
(a) The commissioner shall approve an application to
incorporate a credit union if the commissioner determines:
(1) that the incorporators have complied with this
chapter and rules adopted under this chapter; and
(2) [the commissioner finds,] from information
furnished with the application, the results of any investigation,
the evidence submitted at any hearing, and information in the
department's official records, that:
(A) the character and general fitness of the
incorporators and the members of the initial board warrant belief
that the credit union's business and affairs will be properly
administered in accordance with this subtitle and rules adopted
under this subtitle;
(B) the character and size of the field of
membership to be served by the credit union conform with this
subtitle and rules adopted under this subtitle and favor the credit
union's economic viability; and
(C) the incorporators and the members of the
initial board are acting in good faith and are making the
application in accordance with the purposes of this subtitle.
(b) In addition to the determinations made [findings] under
Subsection (a) and in accordance with commission rules, the
commissioner shall consider the effect of overlapping fields of
membership on the applicant credit union and existing state or
federal credit unions doing business in this state. The
commissioner may consider the availability and adequacy of
financial services in the local community and the effect that the
incorporation of the credit union would have on the local
community. As a condition of approval of the application, the
commissioner may require the applicant credit union to limit or
eliminate overlaps, in accordance with the rules, to achieve the
purposes of this subtitle and promote the welfare and stability of
those credit unions.
(c) The commissioner by written order shall state the
determinations [findings] required by Subsection (a) and approve or
deny the application. The commissioner may make approval of an
application conditional and shall include any conditions in the
order approving the application.
SECTION 11. Sections 122.011(a) and (b), Finance Code, are
amended to read as follows:
(a) The board may amend the articles of incorporation or
bylaws by a two-thirds vote of the directors present at a meeting at
which a quorum is present. The board [and] shall submit amendments
to the commissioner.
(b) Unless the amendment is a standard bylaw adopted by the
commission, the [The] commissioner in writing shall approve or
disapprove an amendment.
SECTION 12. Section 122.013, Finance Code, is amended by
amending Subsection (c) and adding Subsection (e) to read as
follows:
(c) The commissioner may suspend or revoke a foreign credit
union's authority to do business in this state if the commissioner
finds that the foreign credit union:
(1) has violated a rule adopted under this subtitle;
(2) is in an unsafe or unsound condition;
(3) is engaged in a pattern of unsafe or unsound
practices; or
(4) does not meet a commission requirement.
(e) A foreign credit union from a jurisdiction that allows a
credit union to exercise additional powers not granted in this
state may not exercise any of those powers in this state until the
foreign credit union requests and obtains permission from the
commissioner to exercise those powers. If the commissioner
determines that there are no safety and soundness concerns, the
commissioner shall approve the request and shall publish the powers
granted in the manner authorized by Section 15.4041 or 15.4042 for
the issuance of an interpretive statement or an opinion. When
approved, those powers shall be available to all credit unions
authorized to engage in business under this subtitle.
SECTION 13. Subchapter A, Chapter 122, Finance Code, is
amended by adding Section 122.014 to read as follows:
Sec. 122.014. UNDERSERVED-AREA CREDIT UNION. (a) In this
section, "secondary capital account" means a nontransactional
account in an amount greater than $100,000 as established by the
commission that is:
(1) owned by a person other than an individual; and
(2) subordinated to other creditors.
(b) A credit union may apply to the commissioner for the
designation of the credit union as an underserved-area credit
union.
(c) The commissioner may designate a credit union as an
underserved-area credit union only if:
(1) at least 50 percent of a defined segment of the
credit union's members or potential members who are at least 15
years of age earn not more than 80 percent of the state or national
household median income, whichever is higher;
(2) the credit union submits an acceptable written
strategic plan for marketing to and serving the segment described
by Subdivision (1); and
(3) the credit union submits other information and
satisfies other criteria as may reasonably be required by the
commissioner.
(d) In addition to the powers granted to credit unions under
this subtitle or otherwise, an underserved-area credit union may:
(1) issue secondary capital accounts to members or
nonmembers of the credit union on the filing of an application with
and the advance approval of the commissioner; and
(2) accept shares and deposits from nonmembers.
(e) The commission may adopt rules for the organization and
operation of underserved-area credit unions, including rules
requiring disclosures to purchasers of secondary capital accounts
and other rules concerning those accounts.
SECTION 14. Section 122.051, Finance Code, is amended by
amending Subsection (d) and adding Subsections (e) and (f) to read
as follows:
(d) In this subsection, "good cause" includes the act of
physically or verbally abusing a credit union member or employee. A
member may have the person's membership in a credit union
terminated or suspended [be expelled] for good cause or for not
maintaining membership requirements, under the conditions and in
accordance with the procedures provided in [by] the bylaws. A
credit union may also discontinue providing any or all services to a
member for good cause without terminating the person's membership.
Termination or suspension of a person's membership in the credit
union does not relieve the person from any outstanding obligations
owed to the credit union.
(e) Two or more persons within the credit union's field of
membership who have jointly subscribed for one or more share or
deposit accounts under a joint account and who have complied with
all membership requirements may each be admitted to membership.
(f) A credit union authorized to engage in business under
this subtitle may accept as a member any other credit union
organized or chartered under the laws of this or another state or of
the United States. Those credit union members are not entitled to
any voting privileges.
SECTION 15. Section 122.052, Finance Code, is amended by
amending Subsections (b), (c), and (d) and adding Subsection (e) to
read as follows:
(b) At an election or other forum used in [In] determining a
question requiring action by the members, each member may cast only
one vote, regardless of the number of shares the member holds.
(c) The board may authorize voting by mail or by electronic
means. Mail and electronic balloting shall be conducted in
accordance with commission rules.
(d) A member that is not an organization may not vote by
proxy. A member that is an organization may be represented by and
vote through a designated representative [one of its members or
shareholders] who is authorized, in writing, by the organization's
governing body to represent the organization.
(e) The credit union's bylaws may establish a minimum age
requirement to vote at a meeting of the members.
SECTION 16. Section 122.053, Finance Code, is amended by
amending Subsections (b) and (c) and adding Subsections (e) and (f)
to read as follows:
(b) The membership of the credit union shall elect the board
at an annual membership meeting, from the membership, and in the
manner provided by the bylaws. A board member shall hold office
until a successor is qualified and elected or appointed.
(c) A director shall take and subscribe to an oath or
affirmation that the director:
(1) will diligently and honestly perform the
director's duties in administering the credit union's affairs;
(2) although the director may delegate the performance
of those duties, remains responsible for the performance of the
duties; [and]
(3) will not knowingly violate or willingly permit the
violation of an applicable law; and
(4) will exercise the care and diligence reasonable
and necessary to administer the affairs of the credit union in a
safe and sound manner.
(e) The board shall meet at least once each month.
(f) If and to the extent provided in the bylaws, a director
may participate in and act at any meeting of the board by means of
electronic communications equipment through which all persons
participating in the meeting can communicate with each other.
Participation in a meeting in the manner authorized by this
subsection constitutes attendance at a meeting.
SECTION 17. Section 122.054, Finance Code, is amended to
read as follows:
Sec. 122.054. QUALIFICATION OF DIRECTORS. (a) The
commission by rule shall establish qualifications for a director.
The rules must provide that a person may not serve as director if
the person:
(1) has been convicted of a criminal offense involving
dishonesty or breach of trust;
(2) is not eligible for coverage under the blanket
bond required by Section 122.063 and rules adopted under this
subtitle; or
(3) has defaulted on payment of a voluntary obligation
to the credit union or has otherwise caused the credit union to
incur a financial loss.
(b) The president or an employee of a credit union may not
serve as director of the credit union unless permitted by the credit
union's bylaws. If the bylaws permit the president or an employee
to serve on the board, the bylaws must allow other persons to serve
on the board so that the president and employees of the credit union
never constitute a majority of the board.
SECTION 18. Section 122.055(a), Finance Code, is amended to
read as follows:
(a) The office of a director becomes vacant if the director
dies, resigns, is removed, has been absent from more meetings than
the total number of absences permitted by commission rule, or does
not possess or maintain the qualifications required to serve on the
board.
SECTION 19. Section 122.057, Finance Code, is amended by
amending Subsections (a) and (c) and adding Subsection (d) to read
as follows:
(a) At the annual organizational meeting, the [The] board
shall elect from its membership a chairman, vice chairman,
treasurer, and secretary. The offices of treasurer and secretary
may be held by the same individual.
(c) The board may appoint from its membership an executive
committee of at least three persons to exercise, between board
meetings, authority specifically delegated by the board under
conditions specified by the board. At each board meeting, the
executive committee shall report to the board regarding any meeting
held or action taken by the committee between board meetings.
(d) The bylaws may establish a minimum age requirement to
hold office in the credit union.
SECTION 20. Section 122.059, Finance Code, is amended to
read as follows:
Sec. 122.059. DELEGATION OF MANAGEMENT AND LOAN APPROVAL
AUTHORITY. (a) Without written approval of the commissioner, a
credit union may not delegate the authority to manage the credit
union to an individual who is not an officer, director, or employee
of the credit union or to an organization.
(b) The board may delegate all or part of its power to
approve or disapprove a loan to a credit committee, one or more
other committees, or one or more individuals.
SECTION 21. Section 122.060, Finance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) The board chairman and the secretary:
(1) shall execute a certificate of election that
states the name and address of each officer, director, and
committee member elected or appointed; and
(2) not later than the 30th day after the date of the
annual organizational meeting or of the election or appointment of
any interim officer, director, or committee member, shall file a
copy of the certificate of election with the department.
(c) The commissioner may accept a form prescribed by an
insuring organization that contains substantially similar
information as the certificate of election in lieu of the
certificate. The acceptance of such a form does not limit the
commissioner's power to require additional information concerning
a newly elected or appointed officer, director, or committee
member.
SECTION 22. Section 122.101(a), Finance Code, is amended to
read as follows:
(a) A credit union shall submit to the department on a
quarterly [semiannual] basis a call report, on a form supplied by
the department, that states the credit union's financial condition.
The commissioner may require a credit union to file additional
financial [call] reports.
SECTION 23. Section 122.103, Finance Code, is amended to
read as follows:
Sec. 122.103. EQUITY CAPITAL. A credit union's equity
capital consists of:
(1) retained earnings [the aggregate amount of the
share accounts of its members];
(2) appropriated retained earnings, including net
worth and other [all its] reserves; [and]
(3) [all its] undivided earnings; and
(4) other forms of capital approved by the
commissioner.
SECTION 24. Section 122.104, Finance Code, is amended to
read as follows:
Sec. 122.104. NET WORTH RESERVE ALLOCATIONS. (a) The
commission by rule shall require a credit union to contribute to and
maintain net worth reserves necessary to protect the interests of
its members. The rule may:
(1) prescribe the purposes for which the net worth
reserves may be used; and
(2) authorize the commissioner to approve other uses.
(b) The credit union's board may establish reserves in
addition to the required net worth reserves.
SECTION 25. The heading to Section 122.105, Finance Code,
is amended to read as follows:
Sec. 122.105. MEMBERSHIP SHARE REDUCTION.
SECTION 26. The heading to Subchapter D, Chapter 122,
Finance Code, is amended to read as follows:
SUBCHAPTER D. MERGER, [OR] CONSOLIDATION, OR PURCHASE OF ASSETS
SECTION 27. Subchapter D, Chapter 122, Finance Code, is
amended by adding Section 122.1511 to read as follows:
Sec. 122.1511. AUTHORITY TO PURCHASE ASSETS OF ANOTHER
FINANCIAL INSTITUTION. (a) A credit union with the prior written
approval of the commissioner may purchase all or substantially all
of the assets of another financial institution.
(b) Except as otherwise expressly provided by another
statute, the purchase of all or part of the assets of the selling
institution does not make the purchasing credit union responsible
for any liability or obligation of the selling institution that the
purchasing credit union does not expressly assume.
(c) Except as otherwise provided by this subtitle, this
section does not authorize or prohibit the purchase by a credit
union of all or part of the assets of a corporation or other entity
that is not a financial institution.
SECTION 28. Section 122.152(a), Finance Code, is amended to
read as follows:
(a) After agreement by the directors and approval by the
members, if applicable, of each credit union or federal credit
union, the chairman [president] and secretary of each credit union
or federal credit union shall execute a certificate of merger or
consolidation that:
(1) includes a copy of the resolution or other action
by which the board agreed to the merger or consolidation plan; and
(2) states:
(A) the time and place of the board meeting at
which the board agreed to the merger or consolidation plan;
(B) the board's vote for and against adoption of
the plan;
(C) the time and place of the meeting at which the
members approved the plan, if applicable;
(D) the membership's vote for and against
approval of the plan, if applicable; and
(E) the name of the surviving credit union.
SECTION 29. The heading to Section 122.255, Finance Code,
is amended to read as follows:
Sec. 122.255. DETERMINATION OF MISCONDUCT [BY
COMMISSIONER].
SECTION 30. Section 122.256, Finance Code, is amended to
read as follows:
Sec. 122.256. DETERMINATION [DEMAND] LETTER; BOARD
MEETING. (a) If the commissioner determines from examination or
other credible evidence that a credit union is in a condition that
may warrant the issuance of an order under this chapter or Chapter
126 [makes a finding listed in Section 122.255], the commissioner
may notify [shall issue a demand letter giving written notice to]
the credit union in writing of the commissioner's determination,
the requirements the credit union must satisfy to abate the
determination, and the time by which the requirements must be
satisfied to avert further administrative action. The
determination letter must be delivered in person or sent by
registered or certified mail, return receipt requested [and each
offending person and stating each violation or practice found].
(b) If considered necessary, the [The] commissioner may
[promptly shall] call a meeting of the credit union's board. The
directors shall attend the meeting. The commissioner shall present
to the board the findings stated in the determination [demand]
letter and shall demand the discontinuance of any violation or
unsafe or unsound practice found.
SECTION 31. Section 122.257(a), Finance Code, is amended to
read as follows:
(a) If the commissioner makes a finding listed in Section
122.255 and determines that an order to cease and desist is
necessary and in the best interest of the credit union involved and
its depositors, creditors, and members, the commissioner may serve
on the credit union, its board, and each offending person an order
to cease and desist from a violation or practice specified in the
order and to take affirmative action that the commissioner
considers necessary to correct a condition resulting from a
violation or unsafe or unsound practice found.
SECTION 32. Sections 122.258(a) and (c), Finance Code, are
amended to read as follows:
(a) The commissioner by order may remove or prohibit a
person who is a current or former officer, director, manager, or
employee of a credit union from office, [or] employment, or further
participation in the affairs of a credit union if the commissioner
by examination or other credible evidence:
(1) finds that:
(A) the person has continued a violation or
practice previously charged and found by the commissioner after
issuance of a determination letter [notice and demand] under
Section 122.256 or a cease and desist order under Section 122.257;
and
(B) removal or prohibition is necessary and in
the best interest of the credit union and its depositors,
creditors, and members; or
(2) makes a finding listed in Section 122.255 and
determines that removal or prohibition of the person is immediately
necessary because the person has committed or is about to commit:
(A) a fraudulent or criminal act involving the
conduct of the business of the credit union;
(B) an act that may cause the credit union to
become insolvent or to be placed in imminent danger of insolvency;
or
(C) an act that otherwise threatens immediate and
irreparable harm to the public or the credit union or its members,
depositors, or creditors.
(c) On issuance of the order, the person has no right, duty,
or authority of office or employment in the credit union. After the
order becomes final, the person removed or prohibited may not hold
office in, be employed by, or participate in the affairs of any
[the] credit union without the prior written approval of the
commissioner. The order is final as of the date of issuance unless
the person removed or the credit union, as evidenced by a certified
copy of the board resolution, files written notice of appeal with
the commissioner not later than the 10th day after the day the
removal order is served.
SECTION 33. Section 122.260, Finance Code, is amended by
amending Subsection (c) and adding Subsection (d) to read as
follows:
(c) The commissioner may bring suit for injunction or to
collect the administrative penalty in a district court of Travis
County. In the suit, a certificate by the commissioner showing a
failure to pay an administrative penalty is prima facie evidence
of:
(1) the imposition of the penalty or the delinquency
of the stated penalty amount; and
(2) compliance by the department with the law relating
to the computation and imposition of the penalty.
(d) The attorney general is entitled to recover reasonable
attorney's fees from the credit union or the designated person, or
both, if the attorney general prevails in a judicial action
necessary for collection of the administrative penalty.
SECTION 34. Section 122.261, Finance Code, is amended to
read as follows:
Sec. 122.261. CONFIDENTIALITY. (a) A determination
letter, a cease and desist order, a removal order, [and] each copy
of a notice or [,] correspondence, and all [or] other documents or
records [record] relating to an order or determination letter
issued under this subchapter [concerning a violation or unsound
practice] are confidential and are not subject to public disclosure
except in an action authorized by this subtitle or other authority.
(b) The commissioner may release [disclose the] information
regarding the existence of a final order to the public [described by
Subsection (a) to a share and deposit guaranty corporation or
credit union or to a department, agency, or instrumentality of this
state, another state, or the United States] if the commissioner
concludes that [determines] the release of the information would
enhance effective [disclosure is necessary or proper for the]
enforcement of the order [laws of this state or the United States].
SECTION 35. Section 123.003, Finance Code, is amended to
read as follows:
Sec. 123.003. ENLARGEMENT OF POWERS. (a) A credit union
may engage in any activity in which it could engage, exercise any
power it could exercise, or make any loan or investment it could
make, if it were operating as a federal credit union.
(b) Notwithstanding any other law, and in addition to the
powers conferred under Subsection (a), a credit union has the
powers of a foreign credit union operating a branch in this state if
the commissioner finds that exercise of those powers is convenient
for and affords an advantage to the credit union's members and
maintains the fairness of competition and parity between the credit
union and any foreign credit union. A credit union does not have
the field of membership powers of a foreign credit union operating a
branch in this state.
SECTION 36. Section 123.101, Finance Code, is amended to
read as follows:
Sec. 123.101. CONTRACTS. (a) A credit union may enter into
[make] contracts as provided by this section.
(b) Without prior written approval of the commissioner, a
credit union may not contract with an individual who is not an
officer, director, or employee of the credit union or with an
organization.
SECTION 37. Section 123.106, Finance Code, is amended to
read as follows:
Sec. 123.106. CHANGE OF LOCATION. A [On written notice to
the commissioner, a] credit union may change its principal place of
business or a subsidiary place of business to another location by
notifying the commissioner in writing of the new address and the
effective date of the change [in this state].
SECTION 38. Subchapter B, Chapter 123, Finance Code, is
amended by adding Section 123.111 to read as follows:
Sec. 123.111. RIGHT TO ACT TO MITIGATE OR AVOID LOSS. This
subtitle does not prohibit a credit union from investing its money,
operating a business, managing or dealing in property, or taking
any other action at any time that is reasonably necessary to avoid
or mitigate a loss on a loan or on an investment made or obligation
created in good faith and in the usual course of the credit union's
business, as authorized by this subtitle or a rule adopted by the
commission.
SECTION 39. Subchapter C, Chapter 123, Finance Code, is
amended by adding Section 123.211 to read as follows:
Sec. 123.211. CERTIFICATES OF INDEBTEDNESS. The commission
by rule may authorize a credit union to issue certificates of
indebtedness that are subordinated to all other claims of credit
union creditors.
SECTION 40. Section 124.201, Finance Code, is amended to
read as follows:
Sec. 124.201. AUTHORIZATION. In accordance with
limitations imposed by [Subject to] Section 124.202, a credit union
may make a loan or extend a line of credit to:
(1) a director, senior management employee, or member
of the credit committee; or
(2) the immediate family of the director, senior
management employee, or member of the credit committee.
SECTION 41. Section 124.203, Finance Code, is amended to
read as follows:
Sec. 124.203. AUTHORIZATION TO ACT AS COMAKER, GUARANTOR,
OR ENDORSER. A [Subject to Section 124.204, a] credit union may
permit a director, senior management employee, or member of the
credit committee to act as comaker, guarantor, or endorser of a loan
to a member only in accordance with limitations imposed by Section
124.204.
SECTION 42. Section 124.204, Finance Code, is amended to
read as follows:
Sec. 124.204. PRIOR APPROVAL REQUIRED. The board must give
its approval before the credit union permits a director, senior
management employee, or member of the credit committee to act as
comaker, guarantor, or endorser of a loan to a member if the amount
of the loan or aggregate of outstanding loans to the comaker,
guarantor, or endorser is greater than the sum of:
(1) $10,000 or a higher amount established by
commission rule; and
(2) the amount of the shares and deposits pledged for
the loan.
SECTION 43. Section 125.002, Finance Code, is amended to
read as follows:
Sec. 125.002. MEMBER'S SHARES; SHARE ACCOUNT. (a) Shares
and membership shares shall be subscribed to and paid for in the
manner prescribed by the bylaws. A credit union may limit the
number of shares that may be owned by a member, but any such
limitation must be applied equally to all members.
(b) A credit union may require credit union members to
subscribe to and make [A share account consists of] payments on [a
member's shares, including] membership shares. Membership shares
may not be pledged as security on any loan.
(c) The board of directors may establish [The shares may be:
[(1) of] different [types or] classes of share
accounts classified in relation to different rights, restrictions,
[; and
[(2) with or without] par value, and dividend rates.
(d) A joint account may hold more than one membership share,
supporting membership for more than one member of the credit union
[as determined by the board].
SECTION 44. Section 125.003, Finance Code, is amended to
read as follows:
Sec. 125.003. DEPOSIT ACCOUNT. A deposit account consists
of payments made under an agreement between the credit union and a
depositor, including a draft account, checking account, savings
account, certificate of deposit, individual development account,
or other similar account or arrangement.
SECTION 45. Subchapter D, Chapter 125, Finance Code, is
amended by adding Section 125.309 to read as follows:
Sec. 125.309. TRUST ACCOUNT WITH LIMITED DOCUMENTATION.
(a) For a trust account that is purported to be opened under a
written trust agreement, the trustee may provide the credit union
with a certificate of trust to evidence the trust relationship. The
certificate must be an affidavit of the trustee and must include:
(1) the effective date of the trust;
(2) the name of the trustee;
(3) the name of or method for choosing a successor
trustee;
(4) the name and address of each beneficiary;
(5) the authority granted to the trustee;
(6) an indemnification of the credit union; and
(7) any other information required by the credit
union.
(b) The credit union may accept and administer the trust
account, in accordance with the certificate of trust, without
requiring a copy of the trust agreement. The credit union is not
liable for administering the account as provided by the certificate
of trust, even if the certificate of trust is contrary to the terms
of the trust agreement.
(c) On the death of the trustee or the last survivor of two
or more trustees and notwithstanding Section 125.308, the credit
union may pay all or part of the proceeds of the trust account as
provided by the certificate of trust. If the trustee did not
provide a certificate of trust, the credit union's right to treat
the account as owned by a trustee ceases on the death of the
trustee. On the death of the trustee or the last survivor of two or
more trustees, the credit union, unless the certificate of trust
provides otherwise, shall pay the proceeds of the account in equal
shares to each person who survives the trustee, is named as a
beneficiary in the certificate of trust, and can be located by the
credit union from the credit union's records. If there is no
certificate of trust, payment of the withdrawal value and interest
shall be made as provided by Section 125.308. Payment made under
this section for all or part of the withdrawal value and interest
discharges any liability of the credit union to the extent of the
payment. The credit union may pay all or part of the proceeds of an
account in the manner provided by this section, regardless of
whether it has knowledge of a competing claim, unless the credit
union receives actual knowledge that payment has been restrained by
court order.
(d) This section does not require a credit union to accept
an account from a trustee or to search for the location of a named
beneficiary that is not named in its records.
(e) This section does not affect a contractual provision to
the contrary that otherwise complies with the laws of this state.
SECTION 46. Section 125.401, Finance Code, is amended to
read as follows:
Sec. 125.401. THIRD-PARTY CLAIM. (a) In this section:
(1) "Credit union" includes:
(A) a credit union organized under the laws of
this state;
(B) a foreign credit union; and
(C) a federal credit union.
(2) "Out-of-state credit union" means a credit union
that:
(A) is not organized under the laws of this
state; and
(B) has its main or principal office in another
state or country.
(3) "Texas credit union" means a credit union that:
(A) is organized under the laws of this state or
federal law; and
(B) has its main or principal office in this
state.
(b) A credit union [or federal credit union] doing business
in this state must be served with citation or other appropriate
process issued from a court in connection with a suit instituted by
a third party to recover or establish an interest in a deposit or
share account before the credit union [or federal credit union] is
required to:
(1) recognize the third party's claim;
(2) withhold payment of the account to any party to the
account; or
(3) withhold payment to the order of any party to the
account.
(c) A claim against a depositor, joint account owner, or
member of a credit union shall be delivered or otherwise served as
required or permitted by law at the address of the registered agent
of the credit union as designated in a registration filed under
Section 201.102 or 201.103, as applicable.
(d) A claim against a member of an out-of-state credit union
that files a registration statement under Section 201.102 or a
Texas credit union that files a registration statement under
Section 201.103 is not effective with respect to the credit union if
the claim is served or delivered to an address other than the
address of the credit union's registered agent as provided in the
registration.
(e) To prevent or limit a credit union's compliance with or
response to a claim subject to this section, the depositor, joint
account owner, or member may seek an appropriate remedy, including
a restraining order, injunction, or protective order, to prevent or
suspend the credit union's response to a claim against the member.
(f) A credit union that does not register with the secretary
of state under Section 201.102 or 201.103 is subject to service or
delivery of all claims against depositors, joint account owners, or
members of the credit union or against the credit union itself by
serving the president or vice president of the credit union or as
otherwise provided by law.
SECTION 47. Section 126.002, Finance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (e) and (f)
to read as follows:
(a) Except as provided by Subsections (b) and (c),
information obtained directly or indirectly by the department in
any manner, including by application or examination, concerning
[that relates to] the financial condition or business affairs of a
credit union and the files and records of the department relating to
that information, except a statement intended for publication, are
confidential.
(b) Confidential information may not be disclosed to a
member of the commission, and a member of the commission may not be
given access to the files or records of the department, except that
the [The] commissioner may disclose to the commission information,
files, and records pertinent to a hearing or matter pending before
the commission or the commissioner.
(e) Confidential information that is provided by the
department to a credit union, organization, or service provider of
a credit union, whether in the form of a report of examination or
otherwise, is the confidential property of the department. The
recipient or an officer, director, employee, or agent of the
recipient may not make the information public and may not disclose
the information to a person not officially connected to the
recipient as an officer, director, employee, attorney, auditor, or
independent auditor, except as authorized by rules adopted under
this subtitle.
(f) Discovery of confidential information from a person
subject to this subtitle or Chapter 15 under subpoena or other legal
process must comply with rules adopted under this subtitle, Chapter
15, and any other applicable law. The rules may:
(1) restrict release of confidential information to
the portion directly relevant to the legal dispute at issue; and
(2) require that a protective order, in form and under
circumstances specified by the rules, be issued by a court before
release of the confidential information.
SECTION 48. Section 126.051, Finance Code, is amended to
read as follows:
Sec. 126.051. EXAMINATIONS. (a) The department, through
examiners it appoints and in accordance with commission rules,
shall periodically examine the books and records of each credit
union.
(b) In lieu of an examination under this section, the
commissioner may accept:
(1) the examination report of a regulator authorized
to examine a credit union, foreign credit union, federal credit
union, or other financial institution; or
(2) the audit report of an accountant, satisfactory to
the commissioner, who has made and submitted a report of the
condition of the affairs of a credit union, foreign credit union,
federal credit union, or other financial institution.
(c) The commissioner may accept all or part of a report in
lieu of all or part of an examination. An accepted portion of the
report has the same validity as an examination under this section.
SECTION 49. Section 126.053, Finance Code, is amended to
read as follows:
Sec. 126.053. WITNESSES; PRODUCTION OF DOCUMENTS. (a) In
an examination conducted under this subchapter, the commissioner or
the commissioner's designee [an examiner] may:
(1) subpoena [summon] witnesses;
(2) administer an oath or affirmation to a person,
including any [an] officer, director, agent, or employee of a
credit union, and examine the person under oath or affirmation on
any subject the commissioner considers pertinent to the financial
condition or the safety and soundness of the activities of a credit
union; or
(3) require and compel by subpoena [court order] the
production of documents that are not voluntarily produced,
including books, papers, securities, and records.
(b) The commissioner may apply to a district court in Travis
County for an order requiring a person to obey a subpoena, to
appear, or to answer questions in connection with the examination
or investigation.
(c) The court shall issue an order under Subsection (b) if
the court finds good cause to issue the subpoena or to take
testimony.
SECTION 50. Section 126.108, Finance Code, is amended to
read as follows:
Sec. 126.108. CONFIDENTIALITY; DISCLOSURE. A
conservatorship order and a copy of a notice, [or] correspondence,
transcript, pleading, or other document relating to the order are
[is] confidential and may be disclosed only in a related legal
proceeding or as otherwise authorized by law. The commissioner may
release to the public information regarding the existence of an
order if the commissioner concludes that release of the information
would enhance effective enforcement of the order.
SECTION 51. Section 126.159, Finance Code, is amended to
read as follows:
Sec. 126.159. COST OF CONSERVATORSHIP. (a) The
commissioner shall determine and approve any reasonable expenses
attributable to the service of a conservator, including costs
incurred by the department and the compensation and expenses of the
conservator and any professional employees appointed to represent
or assist the conservator. The commissioner or an employee of the
department may not receive compensation in addition to salary for
serving as conservator, but the department may receive
reimbursement for the fully allocated personnel cost associated
with the service of the commissioner or the employee as conservator
[the cost of the conservatorship].
(b) All approved expenses [The cost of conservatorship]
shall be paid by [from] the credit union [union's assets as the
commissioner directs]. The department has a lien against the
assets and money of the credit union to secure payment of approved
expenses. The lien has a higher priority than any other lien
against the credit union.
(c) Notwithstanding this subchapter, the credit union may
retain attorneys and hire other persons to assist the credit union
in contesting or satisfying the requirements of an order of
conservatorship. The commissioner shall authorize the payment of
reasonable fees and expenses for the attorneys and other persons as
expenses of the conservatorship.
(d) The commissioner may waive or defer collection of
assessment or examination fees by the department from the credit
union during a period of conservatorship if the waiver or deferral
would appear to benefit the prospects for rehabilitation. As a
condition of release from conservatorship, the commissioner may
require the rehabilitated credit union to pay or develop a
reasonable plan for payment of any deferred fees.
SECTION 52. Section 126.160(a), Finance Code, is amended to
read as follows:
(a) A suit filed against a credit union [or its conservator]
while the credit union is under [a] conservatorship, or against a
person in connection with an action taken or decision made by that
person as a conservator of a credit union, [order is in effect] must
be brought in Travis County regardless of whether the credit union
remains under conservatorship.
SECTION 53. Subchapter E, Chapter 126, Finance Code, is
amended by adding Section 126.206 to read as follows:
Sec. 126.206. NATIONAL CREDIT UNION ADMINISTRATION AS
LIQUIDATING AGENT. (a) The commissioner may tender a credit union
that has been closed for liquidation to the National Credit Union
Administration or its successor as liquidating agent if the shares
and deposits of the credit union were insured by the National Credit
Union Share Insurance Fund or its successor on the date of closing.
(b) After acceptance of tender of the credit union, the
National Credit Union Administration or its successor, as
liquidating agent of the credit union, shall perform the acts and
duties that it considers necessary or desirable and that are
permitted or required by federal law or this chapter. The National
Credit Union Administration, as liquidating agent, is not subject
to commission control.
(c) If the National Credit Union Share Insurance Fund pays
the insured share and deposit liabilities of a credit union that is
being liquidated under this subchapter, the National Credit Union
Administration is subrogated, to the extent of the payment, to all
rights that the owners of the share or deposit accounts have against
the credit union.
SECTION 54. Section 126.454, Finance Code, is amended to
read as follows:
Sec. 126.454. CREDIT UNION OPERATIONS BEFORE AND AFTER
VOTE. Immediately after notice under Section 126.453 is mailed,
the commissioner may restrict control or give direction with
respect to the continued business of the credit union pending
consideration of voluntary liquidation by the members. During that
period, no member shall withdraw an aggregate amount in excess of
the share insurance covered by [shall cease to operate except to
accept loan payments or other obligations due] the credit union. No
new extensions of credit shall be financed during the period
between the board of directors' adoption of the resolution
recommending voluntary liquidation and the membership meeting
called to consider voluntary liquidation, except for the issuance
of loans fully secured by a pledge of shares and the financing of
outstanding loan commitments approved before adoption of the
resolution. If the vote to dissolve and liquidate the credit union
is affirmative, the credit union may conduct only business
incidental to liquidation.
SECTION 55. Section 126.455, Finance Code, is amended to
read as follows:
Sec. 126.455. VOTE ON VOLUNTARY LIQUIDATION. At a special
meeting called to consider the proposed liquidation, a majority of
the credit union members, but not less than a quorum, may vote to
dissolve and liquidate the credit union. Those members casting
votes by mail or at the meeting constitute a quorum for the
transaction of business at the special meeting, notwithstanding a
bylaw provision to the contrary.
SECTION 56. Section 126.457, Finance Code, is amended to
read as follows:
Sec. 126.457. APPOINTMENT OF LIQUIDATING AGENT. (a) If the
members approve the liquidation, the board shall appoint a
liquidating agent to:
(1) conserve and collect the credit union's assets;
(2) wind up the credit union's affairs;
(3) discharge the credit union's debts;
(4) distribute the credit union's assets; and
(5) take any other action necessary and incidental to
liquidating the credit union.
(b) The National Credit Union Administration or other
insuring organization has the right of first refusal to be
appointed as liquidating agent of any credit union that it insures.
SECTION 57. Subchapter J, Chapter 126, Finance Code, is
amended by adding Section 126.458 to read as follows:
Sec. 126.458. APPLICATION OF LAW TO CREDIT UNION IN
VOLUNTARY LIQUIDATION. A credit union in the process of voluntary
dissolution and liquidation remains subject to this subtitle and
Chapter 15, including provisions for examination by the
commissioner, and the credit union shall furnish reports as
required by the commissioner.
SECTION 58. (a) This Act takes effect September 1, 2003.
(b) The change in law made by this Act by the amendment of
Section 125.401, Finance Code, applies only to a claim that arises
on or after the effective date of this Act. A claim that arose
before the effective date of this Act is governed by the law as it
existed immediately before that date, and the former law is
continued in effect for that purpose.