RULES FOR CREDIT UNIONS
adopted by the
CREDIT UNION COMMISSION
Manuel “Manny” Cavazos -- Chair
Austin, Texas
Beckie Stockstill Cobb -- Member Yusuf E. Farran -- Member
Deer Park, Texas El Paso, Texas
Steven “Steve” Gilman -- Member Sherri Brannon Merket – Member
Katy, Texas Midland, Texas
Allyson “Missy” Morrow – Vice Chair Gary D. Tuma -- Member
San Benito, Texas Sugar Land, Texas
Kay Stewart -- Member Vik Vad -- Member
Lone Star, Texas Austin, Texas
As Amended by
Change 42
Effective November 2015
DISCLAIMER
Please be advised that although we strive to present totally accurate information
and offer this material to assist you, you are solely responsible for any use of it that
you might make.
The official version of the Texas Administrative Code - Title 7, Part 6 may be
accessed at the following link: Office of the Texas Secretary of State
Series Rule No. Topic Page
91.100 A. GENERAL RULES
91.101 Definitions and Interpretations 2
91.103 Public Notice of Department Decisions 6
91.104 Public Notice and Comment on Certain
Applications 6
91.105 Acceptance of Other Application Forms 7
91.110 Protest Procedures for Applications 7
91.115 Safety at Unmanned Teller Machines 7
91.120 Posting of Notice Regarding Certain
Loan Agreements 9
91.121 Complaint Notification 9
91.125 Accuracy of Advertising 10
91.200 B. ORGANIZATION PROCEDURES
91.201 Incorporation Procedures 11
91.202 Bylaw and Articles of Incorporation Amendments 12
91.203 Share and Deposit Insurance Requirements 13
91.205 Use of Credit Union Name 13
91.206 Underserved Area Credit Unions – Secondary
Capital Accounts 13
91.208 Notice of Known or Suspected Criminal
Violations 15
91.209 Call Reports and Other Information Requests 15
91.210 Foreign Credit Unions 16
91.300 C. MEMBERS
91.301 Field of Membership 18
91.302 Election or Other Membership Vote by Electronic
Balloting, Early Voting, Absentee Voting, or Mail
Balloting 20
91.310 Annual Report to Membership 21
91.315 Members’ Access to Credit Union Documents 21
91.400 D. POWERS OF CREDIT UNIONS
91.401 Credit Union Ownership of Property 22
91.402 Insurance for Members 23
91.403 Debt Cancellation Products; Federal Parity 24
91.404 Purchasing Assets and Assuming Deposits and
Liabilities of another Financial Institution 25
91.405 Records Retention and Preservation 25
91.406 Credit Union Service Contracts 27
91.407 Electronic Notification 27
91.408 User Fee for Shared Electronic Terminal 27
Series Rule No. Topic Page
91.500 E. DIRECTION OF AFFAIRS
91.501 Director Eligibility and Disqualification 28
91.502 Director/Committee Member Fees, Insurance,
Reimbursable Expenses, and Other Authorized
Expenditures 29
91.503 Change in Credit Union President 31
91.510 Bond and Insurance Requirements 31
91.515 Financial Reporting 32
91.516 Audits and Verifications 32
91.600 F. ACCOUNTS AND SERVICES
91.601 Share and Deposit Accounts 33
91.602 Solicitation and Acceptance of
Brokered Deposits 33
91.608 Confidentiality of Member Records 34
91.610 Safe Deposit Box Facilities 35
91.700 G. LENDING POWERS
91.701 Lending Powers 38
91.703 Interest Rates 39
91.704 Real Estate Lending 39
91.705 Home Improvement Loans 42
91.706 Home Equity Loans 42
91.707 Reverse Mortgages 42
91.708 Real Estate Appraisals or Evaluations 43
91.709 Member Business Loans 44
91.710 Overdraft Protection 48
91.711 Purchase and Sale of Member Loans 49
91.712 Plastic Cards 51
91.713 Indirect Lending 51
91.714 Leasing 52
91.715 Exceptions to the General Lending
Policies 54
91.716 Prohibited Fees 55
91.717 More Stringent Restrictions 55
91.718 Charging Off or Setting Up Reserves 55
91.719 Loans to Officials and Senior Management
Employees 55
91.720 Small-Dollar, Short-Term Credit 56
Series Rule No. Topic Page
91.800 H. INVESTMENTS
91.801 Investments in Credit Union Service Organizations 57
91.802 Other Investments 61
91.803 Investment Limits and Prohibitions 66
91.804 Custody and Safekeeping 69
91.805 Loan Participation Investments 69
91.808 Reporting Investment Activities
to the Board of Directors 70
91.900 I. RESERVES AND DIVIDENDS
91.901 Reserve Requirements 71
91.902 Dividends 73
91.1000 J. CHANGES IN CORPORATE
STATUS
91.1003 Mergers/Consolidations 73
91.1005 Conversion to a Texas Credit Union 76
91.1006 Conversions to a Federal or Out-of-State
Credit Unions 76
91.1007 Conversion to a Mutual Savings Institution 77
91.1008 Conversion Voting Procedures and Restrictions;
Filing Requirements 79
91.2000 K. CREDIT UNION DEVELOPMENT
DISTRICTS
91.2000 Purpose and Scope 80
91.2001 Definitions 80
91.2002 Application Requirements to Establish a District 80
91.2003 Submission and Processing of Application 81
91.2004 Criteria for Approval of a District by the 82
Commission
91.2005 Monitoring 82
91.2006 Rulemaking and Amendment for this Subchapter 82
91.3000 L. SUBMISSION OF COMMENTS
BY INTERESTED PARTIES
91.3001 Opportunity to Submit Comments on
Certain Applications 82
91.3002 Conduct of Meetings to Receive
Comments 83
Series Rule No. Topic Page
91.4000 M. ELECTRONIC OPERATIONS
91.4001 Authority to Conduct Electronic
Operations 83
91.4002 Transactional Web Site Notice Requirement; 84
and Security Review
91.5000 N. EMERGENCY OR PERMANENT
CLOSING OF OFFICE OR OPERATION
91.5001 Emergency Closing 85
91.5002 Effect of Closing 86
91.5005 Permanent Closing of an Office 86
91.6000 O. TRUST POWERS
91.6001 Fiduciary Duties 86
91.6002 Fiduciary Capacities 86
91.6003 Notice Requirements 87
91.6004 Exercise of Fiduciary Powers 87
91.6005 Exemption from Notice 88
91.6006 Policies and Procedures 88
91.6007 Review of Fiduciary Accounts 89
91.6008 Recordkeeping 89
91.6009 Audit 89
91.6010 Custody of Fiduciary Assets 89
91.6011 Trust Funds 90
91.6012 Compensation, Gifts, and Bequests 90
91.6013 Bond Coverage 90
91.6014 Errors and Omissions Insurance 91
91.6015 Litigation File 91
91.7000 P. OTHER FORMS OF EQUITY CAPITAL
91.7000 Certificates of Indebtedness 91
91.8000 Q. ACCESS TO CONFIDENTIAL INFORMATION
91.8000 Discovery of Confidential Information 95
Series Rule No. Topic Page
93.100 A. COMMON TERMS
93.101 Scope; Definitions; Severability 97
93.200 B. GENERAL RULES
93.201 Party Status 97
93.202 Computation of Time 98
93.203 Ex Parte Communications 98
93.204 Contested Case Hearing; Informal Disposition 98
93.205 Notice of Hearing 98
93.206 Default 99
93.207 Service of Documentation on Parties 100
93.208 Delegation of Authority 100
93.209 Subpoenas 100
93.210 Discovery; Protective Orders; Motions to Compel 101
93.211 Administrative Record 101
93.212 Proposal for Decision 101
93.213 Appearances and Representation 102
93.214 Recovery of Department Costs 102
93.300 C. APPEALS OF PRELIMINARY
DETERMINATIONS ON
APPLICATIONS
93.301 Finality of Decision; Request for SOAH Hearing; 102
Waiver of Appeal
93.302 Referral to ADR 103
93.303 Hearings on Applications 103
93.305 Appeals of All Other Applications for
Which No Specific Procedure is Provided
by this Title 103
93.400 D. APPEALS OF CEASE AND
DESIST ORDERS AND
ORDERS OF REMOVAL
93.401 Appeals of Cease and Desist Orders and
Orders of Removal 104
93.402 Stays 104
93.500 E. APPEALS OF ORDERS OF
CONSERVATION
93.501 Appeals of Orders of Conservation 104
93.502 Retention of Attorney 105
Series Rule No. Topic Page
93.600 F. APPEAL OF COMMISSIONER’S
FINAL DETERMINATION TO
THE COMMISSION
93.601 Appeal to the Commission 105
93.602 Decision by the Commission 106
93.603 Oral Arguments Before the Commission 106
93.604 Motion for Rehearing 106
93.605 Final Decisions and Appeals 106
Series Rule No. Topic Page
95.100 A. INSURANCE REQUIREMENTS
95.100 Definitions 109
95.101 Share and Depositor Insurance Protection 109
95.102 Qualifications for an Insuring Organization 110
95.103 General Powers and Duties of an Insuring
Organization 110
95.104 Notices 111
95.105 Reporting 111
95.106 Amount of Insurance Protection 112
95.107 Sharing Confidential Information 112
95.108 Examinations 112
95.109 Fees and Charges 112
95.110 Enforcement; Penalty; and Appeal 113
95.200 B. LIQUIDATING AGENTS
95.200 Notice of Taking Possession; Appointment of
Liquidating Agent; Subordination of Rights 113
95.205 State Not Liable for any Deficiency 114
95.300 C. GUARANTY CREDIT UNION
95.300 Share and Deposit Guaranty Credit Union 114
95.301 Authority for a Guaranty Credit Union 115
95.302 Powers 115
95.303 Subordination of Right, Title, or Interest 117
95.304 Accounting for Membership Investment
Shares 117
95.305 Audited Financial Statements; Accounting
Procedures; Reports 117
95.310 Fees and Charges 118
95.400 D. DISCLOSURE FOR NON-FEDERALLY
INSURED CREDIT UNIONS
95.400 Requirements of Participating Credit Unions 118
Series Rule No. Topic Page
97.100 A. GENERAL PROVISIONS
97.101 Meetings 121
97.102 Delegation of Duties 121
97.103 Recusal or Disqualification of
Commission Members 121
97.104 Petitions for Adoption or Amendment of Rules 122
97.105 Frequency of Examination 122
97.107 Related Entities 122
B. FEES
97.113 Fees and Charges 123
97.114 Charges for Public Records 126
97.115 Reimbursement of Legal Expenses 126
97.116 Recovery of Costs for Extraordinary Services
Not Related to an Examination 127
97.200 C. DEPARTMENT OPERATIONS
97.200 Employee Training Program 127
97.205 Use of Historically Underutilized
Businesses 129
97.206 Posting of Certain Contracts: Enhanced
Contracts and Performance Monitoring 129
97.207 Contracts for Professional or Personal Service 130
97.300 D. GIFTS AND BEQUESTS
97.300 Gifts of Money or Property 131
97.400 E. ADVISORY COMMITTEES
97.401 General Requirements 131
Series Rule No. Topic Page
151.000 HOME EQUITY LENDING PROCEDURES
151.1 Application for Interpretation 134
151.2 Review of Request 134
151.3 Initiation of Interpretation Procedure 135
151.4 Notice of Proposed Interpretation 135
151.5 Public Comment 135
151.6 Action on Proposed Interpretation 136
151.7 Adoption of Interpretation 135
151.8 Savings Clause and Severability 136
Series Rule No. Topic Page
152.000 REPAIR, RENOVATION, AND
NEW CONSTRUCTION ON
HOMESTEAD PROPERTY
152.1 Definitions 138
152.3 Requirements for Construction of New Improvements:
Section 50(a)(5) 139
152.5 Requirements for Work and Material Used to Repair
or Renovate: Section 50(a)(5)(A)-(D) 139
152.7 Consent of Spouses in the Case of Family Homestead:
Section 50(a)(5)(A) 139
152.9 Five Day Waiting Period for a Contract Before
Executing Work and Materials for Repairs or
Renovation 139
152.11 Three Day Right to Rescind Contract for Work
and Materials for Repairs or Renovation 140
152.13 Health or Safety Reasons for Waiving the Five
Day Waiting Period and the Three Day Right
to Rescind 140
152.15 Place for Execution of Contract for Work and
Material: Section 50(a)(5)(D) 140
Series Rule No. Topic Page
153.000 HOME EQUITY LENDING
153.1 Definitions 142
153.2 Voluntary Lien: Section 50(a)(6)(A) 143
153.3 Limitation on Equity Loan Amount:
Section 50(a)(6)(B) 143
153.4 Nonrecourse: Section 50(a)(6)(C) 144
153.5 Three Percent Fee Limitation:
Section 50(a)(6)(E) 144
153.7 Prohibition on Prepayment Penalties:
Section 50(a)(6)(G) 146
153.8 Security of the Equity Loan:
Section 50(a)(6)(H) 146
153.9 Acceleration: Section 50(a)(6)(J) 147
153.10 Number of Loans: Section 50(a)(6)(K) 147
153.11 Repayment Schedule: Section 50(a)(L)(i) 148
153.12 Closing Date: Section 50(a)(6)(M)(i) 148
153.13 Preclosing Disclosure: Section 50(a)(6)(M)(ii) 149
153.14 One Year Prohibition: Section 50(a)(M)(iii) 150
153.15 Location of Closing: Section 50(a)(6)(N) 151
153.16 Rate of Interest: Section 50(a)(6)(O) 152
153.17 Authorized Lenders: Section 50(a)(6)(P) 152
153.18 Limitation on Application of Proceeds:
Section 50(a)(6)(Q)(i) 153
153.20 No Blanks in Any Instrument: Section 50(a)(6)(Q)(iii) 153
153.22 Copies of Documents: Section 50(a)(6)(Q)(v) 154
153.24 Release of Lien: Section 50(a)(6)(Q)(vii) 154
153.25 Right of Rescission: Section 50(a)(6)(Q)(viii) 154
153.41 Refinance of a Debt Secured by a Homestead:
Section 50(e) 155
153.51 Consumer Disclosure: Section 50(g) 155
153.82 Owner Requests for HELOC Advance 156
153.84 Restrictions on Devices and Methods to Obtain a
HELOC Advance 156
153.85 Time the Extension of Credit is Established 157
153.86 Maximum Principal Amount Extended under a
HELOC 157
153.87 Maximum Principal Amount of Additional
Advances under a HELOC 157
153.88 Repayment Terms of a HELOC 158
153.91 Adequate Notice of Failure to Comply 158
153.92 Counting the 60-Day Cure Period 159
153.93 Methods of Notification 159
153.94 Methods of Curing a Violation Under
Section 50(a)(6)(Q)(x)(a)-(e) 159
153.95 Cure a Violation Under Section 50(a)(6)(Q)(x) 160
153.96 Correcting Failures Under Section 50(a)(6)(Q)(x)(f) 160
1
Title 7
Part VI. Credit Union Department
Chapter 91
CHARTERING, OPERATIONS, MERGERS,
LIQUIDATIONS
2
CHAPTER 91
Subchapter A. General Rules
§91.101. Definitions and Interpretations.
(a) Words and terms used in this chapter that are defined in Finance Code §121.002, have the
same meanings as defined in the Finance Code. The following words and terms, when used in
this chapter, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Act--the Texas Credit Union Act (Texas Finance Code, Subtitle D).
(2) Allowance for loan and lease losses (ALLL)--a general valuation allowance that
has been established through charges against earnings to absorb losses on loans and lease
financing receivables. An ALLL excludes the regular reserve and special reserves.
(3) Applicant--an individual or credit union that has submitted an application to the
commissioner.
(4) Application--a written request filed by an applicant with the department seeking
approval to engage in various credit union activities, transactions, and operations or to obtain
other relief for which the commission is authorized by the act to issue a final decision or order
subject to judicial review.
(5) Appraisal--a written statement independently and impartially prepared by a
qualified appraiser setting forth an opinion as to the market value of a specifically described
asset as of a specific date, supported by the presentation and analysis of relevant market
information.
(6) Automated teller machine (ATM)--an automated, unstaffed credit union facility
owned by or operated exclusively for the credit union at which deposits are received, cash
dispensed, or money lent.
(7) Catastrophic act—any natural or man-made disaster such as a flood, tornado,
earthquake, major fire or other disaster resulting in physical destruction or damage.
(8) Community of interest--a unifying factor among persons that by virtue of its
existence, facilitates the successful organization of a new credit union or promotes economic
viability of an existing credit union. The types of community of interest currently recognized
are:
(A) Occupational--based on an employment relationship that may be
established by:
(i) employment (or a long term contractual relationship equivalent to
employment) by a single employer, affiliated employers or employers under common ownership
with at least a 10% ownership interest;
(ii) employment or attendance at a school; or
(iii) employment in the same trade, industry or profession (TIP) with a
close nexus and narrow commonality of interest, which is geographically limited.
(B) Associational--based on groups consisting primarily of natural persons
whose members participate in activities developing common loyalties, mutual benefits, or mutual
interests. In determining whether a group has an associational community of interest, the
commissioner shall consider the totality of the circumstances, which include:
(i) whether the members pay dues,
(ii) whether the members participate in furtherance of the goals of the
association,
(iii) whether the members have voting rights,
(iv) whether there is a membership list,
(v) whether the association sponsors activities,
(vi) what the association's membership eligibility requirements are, and
3
(vii) the frequency of meetings. Associations formed primarily to
qualify for credit union membership and associations based on client or customer relationships,
do not have a sufficient associational community of interest.
(C) Geographic--based on a clearly defined and specific geographic area
where persons have common interests and/or interact. More than one credit union may share the
same geographic community of interest. There are currently four types of affinity on which a
geographic community of interest can be based: persons, who
(i) live in,
(ii) worship in,
(iii) attend school in, or
(iv) work in that community. The geographic community of interest
requirements are met if the area to be served is in a recognized single political jurisdiction, e.g., a
city or a county, or a portion thereof.
(D) Other--The commissioner may authorize other types of community of
interest, if the commissioner determines that either a credit union or foreign credit union has
sufficiently demonstrated that a proposed factor creates an identifiable affinity among the
persons within the proposed group. Such a factor shall be well-defined, have a geographic
definition, and may not circumvent any limitation or restriction imposed on one of the other
enumerated types.
(9) Construction or development loan--a financing arrangement for acquiring
property or rights to property, including land or structures, with the intent of converting the
property into income-producing property such as residential housing for rental or sale;
commercial use; industrial use; or similar use. Construction or development loan includes a
financing arrangement for the major renovation or development of property already owned by
the borrower that will convert the property to income-producing property or convert the use of
income-producing property to a different or expanded use from its former use. Construction or
development loan does not include loans to finance maintenance, repairs, or improvements to an
existing income-producing property that do not change its use.
(10) Day--whenever periods of time are specified in this title in days, calendar days are
intended. When the day, or the last day fixed by statute or under this title for taking any action
falls on Saturday, Sunday, or a state holiday, the action may be taken on the next succeeding day
which is not a Saturday, Sunday, or a state holiday.
(11) Department newsletter--the monthly publication that serves as an official notice of
all applications, and by which procedures to protest applications are described.
(12) Field of membership (FOM)--refers to the totality of persons a credit union may
accept as members. The FOM may consist of one group, several groups with a related
community of interest, or several unrelated groups with each having its own community of
interest.
(13) Finance Code or Texas Finance Code--the codification of the Texas statutes
governing financial institutions, financial businesses, and related financial services, including the
regulations and supervision of credit unions.
(14) Imminent danger of insolvency--a circumstance or condition in which a credit
union is unable or lacks the means to meet its current obligations as they come due in the regular
and ordinary course of business, even if the value of its assets exceeds its liabilities; or the credit
union has a positive net worth ratio equal to two percent or less of its assets.
(15) Improved residential property--real property consisting of a residential dwelling
having one to four dwelling units, at least one of which is occupied by the owner of the property.
This term shall also include a one to four unit dwelling occupied in whole or in part by the owner
on a seasonal basis.
4
(16) Indirect financing--a program in which a credit union makes the credit decision in
a transaction where the credit is extended by the vendor and assigned to the credit union or a loan
transaction that generally involves substantial participation in and origination of the transaction
by a vendor.
(17) Loan-to-value ratio--the aggregate amount of all sums borrowed including
outstanding balances plus any unfunded commitment or line of credit from all sources on an item
of collateral divided by the market value of the collateral used to secure the loan.
(18) Loan and extension of credit--a direct or indirect advance of funds to a member,
or on that member's behalf, that is conditioned upon the repayment of the funds by the member
or the application of collateral. The terminology also includes the purchase of a member's loan
or other obligation, a lease financing transaction, a credit sale, a line of credit or loan
commitment under which the credit union is contractually obligated to advance funds to or on
behalf of a member, an advance of funds to honor a check or share draft drawn on the credit
union by a member, or any other indebtedness not classified as an investment security.
(19) Manufactured home--a HUD-code manufactured home as defined by the Texas
Manufactured Housing Standards Act. The terminology may also include a mobile home, house
trailer, or similar recreational vehicle if the unit will be used as the member’s residence and the
loan is secured by a first lien on the unit, and the unit meets the requirements for the home
mortgage interest deduction under the Internal Revenue Code (26 U.S.C. Section 163(a),
(h)(2)(D)).
(20) Market Value--the most probable price which an asset should bring in a
competitive and open market under an arm’s-length sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit
in this definition is the consummation of a sale as of a specified date and the passing of
ownership from seller to buyer where:
(A) Buyer and seller are typically motivated;
(B) Both parties are well informed or well advised, and acting in their own
best interests;
(C) A reasonable time is allowed for exposure in the open market;
(D) Payment is made in cash in U.S. dollars or in terms of financial
arrangements comparable thereto; and
(E) The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions granted by anyone associated
with the sale.
(21) Metropolitan Statistical Area (MSA)--a geographic area as defined by the director
of the U. S. Office of Management and Budget.
(22) Mobile office--a branch office that does not have a single, permanent site,
including a vehicle that travels to various public locations to enable members to conduct their
credit union business.
(23) Office--includes any service facility or place of business established by a credit
union at which deposits are received, checks or share drafts paid, or money lent. This definition
includes a credit union owned branch, a mobile branch, an office operated on a regularly
scheduled weekly basis, a credit union owned ATM, or a credit union owned electronic facility
that meets, at a minimum, these requirements; however, it does not include the credit union's
Internet website. This definition also includes a shared branch or a shared branch network if
either:
(A) the credit union has an ownership interest in the service facility either
directly or through a CUSO or similar organization; or
(B) the service facility is local to the credit union and the credit union is an
authorized participant in the service center.
5
(24) Overlap--the situation which exists when a group of persons is eligible for
membership in two or more state, foreign, or federal credit unions doing business in this state.
Notwithstanding this provision, no overlap exists if eligibility for credit union membership
results solely from a family relationship.
(25) Pecuniary interest --the opportunity, directly or indirectly, to make money on or
share in any profit or benefit derived from a transaction.
(26) Person--an individual, partnership, corporation, association, government,
governmental subdivision or agency, business trust, estate, trust, or any other public or private
entity.
(27) Principal office--the home office of a credit union.
(28) Protestant--a credit union that opposes or objects to the relief requested by an
applicant.
(29) Real estate or real property—an identified parcel or tract of land. The term
includes improvements, easements, rights of way, undivided or future interest and similar rights
in a tract of land, but does not include mineral rights, timber rights, growing crops, water rights
and similar interests severable from the land when the transaction does not involve the associated
parcel or tract of land.
(30) Remote service facility--an automated, unstaffed credit union facility owned or
operated by, or operated for, the credit union, such as an automated teller machine, cash
dispensing machine, point-of-sale terminal, or other remote electronic facility, at which deposits
are received, cash dispensed, or money lent.
(31) Reserves--allocations of retained earnings including regular and special reserves,
except for any allowances for loan, lease or investment losses.
(32) Resident of this state--a person physically located in, living in or employed in the
state of Texas.
(33) Respondent--a credit union or other person against whom a disciplinary
proceeding is directed by the department.
(34) Shared service center--a facility which is connected electronically with two or
more credit unions so as to permit the facility, through personnel at the facility and the electronic
connection, to provide a credit union member at the facility the same credit union services that
the credit union member could lawfully obtain at the principal office of the member's credit
union.
(35) Secured credit--a loan made or extension of credit given upon an assignment of an
interest in collateral pursuant to applicable state laws so as to make the enforcement or promise
more certain than the mere personal obligation of the debtor or promisor. Any assignment may
include an interest in personal property or real property or a combination thereof.
(36) TAC--an acronym for the Texas Administrative Code, a compilation of all state
agency rules in Texas.
(37) Title or 7 TAC--Title 7, Part VI of the Texas Administrative Code [(TAC)],
Banking and Securities, which contains all of the department's rules.
(38) Underserved area--a geographic area, which could be described as one or more
contiguous metropolitan statistical areas (MSA) or one or more contiguous political subdivisions,
including counties, cities, and towns, that satisfy any one of the following criteria:
(A) A majority of the residents earn less than 80 percent of the average for all
wage earners as established by the U. S. Bureau of Labor Statistics;
(B) The annual household income for a majority of the residents falls at or
below 80 percent of the median household income for the State of Texas, or the nation,
whichever is higher; or
6
(C) The commission makes a determination that the lack of available or
adequate financial services has adversely effected economic development within the specified
area.
(39) Uninsured membership share--funds paid into a credit union by a member that
constitute uninsured capital under conditions established by the credit union and agreed to by the
member including possible reduction under §122.105 of the act, risk of loss through operations,
or other forfeiture. Such funds shall be considered an interest in the capital of the credit union
upon liquidation, merger, or conversion.
(40) Unsecured credit--a loan or extension of credit based solely upon the general
credit financial standing of the borrower. The term shall include loans or other extensions of
credit supported by the signature of a co-maker, guarantor, or endorser.
(b) The same rules of construction that apply to interpretation of Texas statutes and codes,
the definitions in the Act and in Government Code §2001.003, and the definitions in subsection
(a) of this section govern the interpretation of this title. If any section of this title is found to
conflict with an applicable and controlling provision of other state or federal law, the section
involved shall be void to the extent of the conflict without affecting the validity of the rest of this
title.
Source: The provisions of this §91.101 adopted to be effective November 13, 2000, 25 TexReg 11277; amended to
be effective January 7, 2004, 29 TexReg 81; amended to be effective November 14, 2004, 29 TexReg 10253;
amended to be effective November 16, 2005, 30 TexReg 7432; reviewed and amended to be effective November 8,
2009, 34 TexReg 7620; reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.103. Public Notice of Department Decisions.
The commissioner shall cause notice of final actions taken by the department on certain activities
to be published in the Texas Register and the department newsletter. Notice shall be published in
both publications within 30 days of the action becoming final. The activities covered by this
requirement are:
(1) an application for incorporation under Texas Finance Code §122.001;
(2) a request for an amendment to a credit union’s articles of incorporation under
Texas Finance Code §122.011;
(3) a request for an amendment to a credit union’s bylaws for the expansion of its
field of membership under Texas Finance Code §122.011;
(4) an application for merger or consolidation under Texas Finance Code §122.152;
(5) a request by a foreign credit union to do business in Texas under Texas Finance
Code §122.013; and
(6) an application for conversion of a credit union’s certificate of incorporation under
Texas Finance Code §§122.201, 122.202, 122.203, or 91.1007 of this chapter (relating to
conversion to a Mutual Savings Institution).
Source: The provisions of this §91.103 adopted to be effective May 10, 1998, 23 TexReg 4567; readopted to be
effective November 19, 2001, 26 TexReg 9934; readopted to be effective June 20, 2005, 30 TexReg 3882; amended
to be effective November 8, 2009, 34 TexReg 7623; reviewed and readopted to be effective June 24, 2013, 38
TexReg 4392.
§91.104. Public Notice and Comment on Certain Applications.
(a) Upon receipt of a complete application for authorization to be granted by the department,
the commissioner shall cause notice of such application to be published in the Texas Register and
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the department newsletter. Notice shall be published in both publications at least 30 days prior
to taking action on the request. The activities covered by this requirement are:
(1) an application for incorporation under Texas Finance Code §122.001;
(2) a request for an amendment to a credit union’s articles of incorporation under
Texas Finance Code §122.011;
(3) a request for an amendment to a credit union’s bylaws for an expansion of its field
of membership under Texas Finance Code §122.011;
(4) an application for merger or consolidation under Texas Finance Code §122.152;
(5) an application for conversion of a credit union’s certificate of incorporation under
Section 91.1007 of this chapter (relating to conversion to a mutual savings institution); and
(6) a request by a foreign credit union to do business in Texas under Texas Finance
Code §122.013.
(b) The commissioner may waive or delay notice of applications under subsection (a) of this
section when a waiver or delay is in the public interest. The commissioner shall consider the
welfare and stability of the affected credit union(s) in determining the public interest. If the
commissioner determines that delaying public notice is in the public interest, the notice of
application shall be published in each publication at the earliest feasible time.
Source: The provisions on this §91.104 adopted to be effective May 11, 2000, 25 TexReg 3943; readopted to be
effective November 19, 2001, 26 TexReg 9934; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and amended to be effective November 8, 2009, 34 TexReg 7623; reviewed and readopted to be effective June 24,
2013, 38 TexReg 4392.
§91.105. Acceptance of Other Application Forms.
Notwithstanding other requirements of this chapter, if another state or federal regulator’s
application and forms provide all the information required by Texas law, the commissioner may
accept those forms. This does not limit the commissioner’s power to require additional
information necessary to complete an application or other form.
Source: The provisions on this §91.105 adopted to be effective May 11, 2000, 25 TexReg 3943; readopted to be
effective December 18, 2003, 29 TexReg. 235; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and amended to be effective November 8, 2009, 34 TexReg 7624; reviewed and readopted to be effective June 24,
2013, 38 TexReg 4392.
§91.110. Protest Procedures for Applications.
A protestant to an application for authorization to be granted by the commissioner must file a
written notice of protest, in such form as the commissioner may prescribe, within 30 days of the
date that notice of the application is published in either the Texas Register or the department
newsletter, whichever is later. The notice of protest must provide all information that the
protestant wishes the commissioner to consider in evaluating the application.
Source: The provisions on this §91.110 adopted to be effective May 11, 2000, 25 TexReg 3943; readopted to be
effective December 18, 2003, 29 TexReg 235; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013,
38 TexReg 4392.
§91.115. Safety at Unmanned Teller Machines.
(a) Definitions. Words and terms used in this subchapter that are defined in the Finance Code
§59.307, have the same meanings as defined in the Finance Code.
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(b) Measurement of candle foot power. For the purposes of measuring compliance with the
Finance Code §59.307, candle foot power should be determined under normal, dry weather
conditions, without complicating factors such as fog, rain, snow, sand, or dust storm, or other
similar condition.
(c) Safety evaluations.
(1) The credit union owner or operator of an unmanned teller machine shall evaluate
the safety of each machine on a basis no less frequently than annually, unless the machine is
exempted under the Finance Code §59.302.
(2) The safety evaluation shall consider at the least the factors identified in the
Finance Code, §59.308.
(3) The credit union owner or operator of the unmanned teller machine may provide
the landlord or owner of the property with a copy of the safety evaluation if an access area or
defined parking area for an unmanned teller machine is not controlled by the credit union owner
or operator of the machine.
(d) Notice. A credit union issuer of access devices shall furnish its members with a notice of
basic safety precautions that each member should employ while using an unmanned teller
machine.
(1) Access devices. The notice shall be delivered personally or mailed to each
member, whose mailing address is in this state, when an access device is issued, renewed or
replaced.
(2) Content. The notice of basic safety precautions required by this section must be
provided in written form which can be retained by the member and may include
recommendations or advice regarding:
(A) security at walk-up or drive-up unmanned teller machines;
(B) protection of code or personal identification numbers;
(C) procedures for lost or stolen access devices;
(D) reaction to suspicious circumstances;
(E) safekeeping and disposition of unmanned teller machine receipts, such as
the inadvisability of leaving an unmanned teller machine receipt near the unmanned teller
machine;
(F) the inadvisability of surrendering information about the member's access
device over the telephone;
(G) safeguarding and protecting the member's access device, such as a
recommendation that the member treat the access device as if it was cash;
(H) protection against unmanned teller machine fraud, such as a
recommendation that the member compare unmanned teller machine receipts against the
member's monthly statement; and
(I) other recommendations that the credit union reasonably believes are
appropriate to facilitate the security of its unmanned teller machine users.
(e) Leased premises.
(1) Noncompliance by landlord. Pursuant to the Finance Code, §59.306, the landlord
or owner of property is required to comply with the safety procedures of the Finance Code,
Chapter 59, Subchapter D, if an access area or defined parking area for an unmanned teller
machine is not controlled by the owner or operator of the unmanned teller machine. If a credit
union owner or operator of an unmanned teller machine on leased premises is unable to obtain
compliance with safety procedures from the landlord or owner of the property, the credit union
shall notify the landlord in writing of the requirements of the Finance Code, Chapter 59,
Subchapter D, and of those provisions for which the landlord is in noncompliance.
(2) Enforcement. Noncompliance with safety procedures required by the Finance
Code, Chapter 59, Subchapter D, by a landlord or owner of property after receipt of written
9
notification from the owner or operator constitutes a violation of the Finance Code, Chapter 59,
Subchapter D, which may be enforced by the Texas Attorney General.
(f) Video surveillance equipment. Video surveillance equipment is not required to be
installed at all unmanned teller machines. The credit union owner or operator must determine
whether video surveillance or unconnected video surveillance equipment should be installed at a
particular unmanned teller machine site, based on the safety evaluation required under the
Finance Code, §59.308. If a credit union owner or operator determines that video surveillance
equipment should be installed, the credit union must provide for selecting, testing, operating, and
maintaining appropriate equipment.
Source: The provisions on this §91.115 adopted to be effective May 11, 2000, 25 TexReg 3944; readopted to be
effective December 18, 2003, 29 TexReg 235; amended to be effective November 16, 2005, 30 TexReg 7432;
reviewed and readopted to be effective June 22, 2009, 34 TexReg 4549;reviewed and amended to be effective
November 10, 2013, 38 TexReg 7704.
§91.120. Posting of Notice Regarding Certain Loan Agreements.
(a) As required by the Business and Commerce Code §26.02, all credit unions are required to
conspicuously post notices informing members of the requirements that certain loan agreements
must be in writing. The notice must include the language and be in the format prescribed by the
Finance Commission of Texas in §3.34 of this title (relating to Posting of Notice in All Financial
Institutions).
(b) Each credit union shall post the notice required by subsection (a) in the lobby of each of
its offices other than off-premises electronic deposit facilities.
Source: The provisions on this §91.120 adopted to be effective May 11, 2000, 25 TexReg 3944; readopted to be
effective December 18, 2003, 29 TexReg 235; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013,
38 TexReg 4392.
§91.121. Complaint Notification.
(a) Definitions.
(1) “Privacy notice” means any notice which a credit union gives regarding a
member’s right to privacy, as required by a state or federal law.
(2) For purposes of subsection (b) of this section and unless the context reads
otherwise, “notice” means a complaint notification in the form set forth in subsection (b)(1) of
this section.
(b) Required Notice.
(1) Credit unions must provide their members with the following notice describing
the process for filing complaints:
“If you have a problem with the services provided by this credit union, please contact us
at:
(Your Name) Credit Union
Mailing Address
Telephone Number or e-mail address
The credit union is incorporated under the laws of the State of Texas and under state law
is subject to regulatory oversight by the Texas Credit Union Department. If any dispute is
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not resolved to your satisfaction, you may also file a complaint against the credit union
by contacting the Texas Credit Union Department at 914 East Anderson Lane, Austin,
Texas 78752-1699, Telephone Number: (512) 837-9236, Website: www.cud.texas.gov.”
(2) The title of this notice shall be “COMPLAINT NOTICE” and must be in all
capital letters and boldface type.
(3) The credit union must provide the notice as follows:
(A) In each office where a credit union typically conducts business on a face-
to-face basis, the notice, in the form specified in paragraph (1) of this subsection, must be
conspicuously posted. A notice is deemed to be conspicuously posted if a member with 20/20
vision can read it from the place where he or she would typically conduct business or if it is
included in plain view on a bulletin board on which required communications to the membership
(such as equal housing posters) are posted.
(B) If a credit union maintains a website, it must include the notice or a link to
the notice in a reasonably conspicuous place on the website.
(C) If a credit union distributes a newsletter, it must include the notice on
approximately the same date at least once during each calendar year in any newsletter distributed
to its members.
(D) If a credit union does not have an Internet website or does not distribute a
newsletter, the notice must be included with any privacy notice the credit union is required to
give or send its members.
Source: The provisions on this §91.121 adopted to be effective March 4, 2009, 34 TexReg 1399; amended to be
effective March 14, 2010, 35 TexReg 1977; amended to be effective November 13, 2011, 36 TexReg 7540; reviewed
and readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.125. Accuracy of Advertising.
(a) As used in this rule, an advertisement is any informational communication, including
oral, written, electronic, broadcast or any other type of communication, made to members,
prospective members, or to the public at large in any manner designed to attract attention to the
business of a credit union.
(b) No credit union shall disseminate or cause the dissemination of any advertisement that is
in any way intentionally or negligently false, deceptive, or misleading. An advertisement shall
be deemed by the Commissioner to be intentionally or negligently false, deceptive, or misleading
if it:
(1) contains materially false claims or misrepresentations of material facts;
(2) contains materially implied false claims or implied misrepresentations of material
fact;
(3) omits material facts;
(4) makes a representation likely to create an unjustified expectation about credit
union products or services;
(5) states that the credit union’s services are superior to or of a higher quality than
that of another financial institution unless the credit union can factually substantiate the
statement;
(6) states that a service is free when it is not, or contains intentionally untruthful or
deceptive claims regarding costs and fees; and
(7) fails to disclose that membership is required to participate in or enjoy the
advantage of the product or service (does not apply to advertisement to current members).
(c) Prior to placing an advertisement, a credit union must possess credible information
which, when produced, substantiates the truthfulness of any assertion, representation or omission
of material fact set forth in the advertisement.
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(d) If the Commissioner notifies a credit union that an advertisement is deemed to be false,
deceptive or misleading, the credit union will have ten days following the credit union’s receipt
of the notification to provide the Commissioner with information substantiating the truthfulness
of the advertisement. If the credit union does not provide this information or the Commissioner,
after receipt of the information, still deems the advertisement to be false, deceptive or
misleading, the Commissioner may issue a cease and desist order to the credit union to stop the
use of the advertisement.
Source: The provisions on this §91.125 adopted to be effective November 16, 2005, 30 TexReg 7432; reviewed and
readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013, 38
TexReg 4392.
Subchapter B. Organization Procedures
§91.201. Incorporation Procedures.
(a) An application to incorporate a credit union shall be in writing and supported by such
information and data as the commissioner may require to make the findings necessary for the
issuance of a certificate of incorporation.
(b) Business Plan. The application must include a business plan that covers three years and
provides detailed explanations of actions that are proposed to accomplish the primary functions
of the credit union. The description should provide enough detail to demonstrate that the
institution has a reasonable chance for success, will operate in a safe and sound manner, and will
maintain adequate capital to support its operations. Specifically the plan must:
(1) Describe the credit union’s business, including the products, member services,
and other activities;
(2) Provide quarterly pro forma financial information for the three years of operation,
including annual totals for the Income Statement;
(3) Describe in detail all of the assumptions used to prepare the projected financial
information;
(4) Discuss the capital goals and the means to achieve them;
(5) Discuss the overall marketing/advertising strategy to reach potential members;
(6) Discuss the credit union’s strategy for obtaining required share and deposit
insurance protection for its members’ accounts; and
(7) Describe the economic forecast for the three years of the plan.
(c) The commissioner shall determine whether or not an application is complete within thirty
days of its receipt and provide written notice of the determination. If the application is deemed
incomplete, the notice shall provide with reasonable specificity the deficiencies in the
application.
(d) Upon the determination that an application is complete, the commissioner shall make or
cause to be made an investigation and examination of the facts concerning the applicant. It is
essential that the investigation and examination confirm to the satisfaction of the commissioner
that the proposed institution will have a reasonable opportunity to succeed.
(e) Proposed credit unions must investigate the possibility of an overlap with existing state or
federal credit unions doing business in this state prior to submitting an application. When an
overlap situation does arise, officials of the involved entities must attempt to resolve the overlap
issue. Typically, an overlap will not be considered adverse to the overlapped credit union if:
(1) the group has fewer than 3000 primary potential members or the overlap is
otherwise incidental in nature;
(2) the overlapped credit union does not object to the overlap;
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(3) there is limited participation by members or employees of the group in the
original credit union after the expiration of a reasonable period of time; or
(4) a single occupational or associational based credit union overlaps a community
chartered credit union.
(f) When the applicant and a credit union agree and/or the commissioner has determined that
overlap protection is appropriate, an exclusionary clause will be included in the proposed field of
membership for a period of 24 months from the date the proposed credit union commences
business. The commissioner, for good cause shown, may extend this period for an additional 24
months.
(g) The commissioner may approve the application conditioned upon specific requirements
being met, but the certificate of incorporation shall not be issued unless such conditions have
been met within the time specified in the approval order or any extension as set forth in Finance
Code §122.006.
Source: The provisions of this §91.201 adopted to be effective May 11, 2000, 25 TexReg 3945; adopted to be
effective January 7, 2004, 29 TexReg 82; amended to be effective November 14, 2004, 29 TexReg 10253; readopted
to be effective June 20, 2005, 30 TexReg 3882; reviewed and amended to be effective November 8, 2009, 34 TexReg
7624; reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.202. Bylaw and Articles of Incorporation Amendments.
(a) The Standard Bylaws for State Chartered Credit Unions ("Standard Bylaws"), approved
by the commission on February 20, 2004, or as subsequently revised or amended, constitute the
bylaws which shall be used by credit union incorporators.
(b) The commissioner is expressly authorized to approve deviations from and amendments to
the standard bylaws, unless the deviation or amendment violates applicable law.
(c) Credit unions desiring to amend articles of incorporation or bylaws must submit a written
application, in such form as the commissioner may prescribe. The application shall include the
text of the amendment, the date that the board of directors adopted the amendment, a brief
statement explaining the purpose of the amendment, information regarding the financial impact
on the credit union if the amendment is approved, and any other information the commissioner
may require to make a decision on the amendment.
(d) The commissioner shall determine whether or not an application is complete within thirty
day of its receipt and provide written notice of the determination. If the application is deemed
incomplete, the notice shall provide with reasonable specificity the deficiencies in the
application.
(e) The commissioner does not need to provide notice as prescribed in §91.103 (relating to
Public Notice of Department Decisions and §91.104 (relating to Public Notice and Comment on
Certain Applications) for applications that apply for standard optional field of membership
provisions (1), (2), (3), and (4) as contained in the Standard Bylaws “Appendix A”.
(f) A credit union's board of directors may amend its bylaws to adopt any standard bylaw
without approval by the commissioner provided: (1) the wording of the amendment is identical
to the Standard Bylaws; and (2) the credit union submits a completed, fully executed
Certification of Resolution of Amendment to Credit Union Bylaws ("Certification") to the
commissioner. The commissioner will promptly acknowledge receipt of the Certification. The
amendment will be effective as of the date the commissioner acknowledges receipt of the
Certification.
Source: The provisions of this §91.202 adopted to be effective May 11, 2000, 25 TexReg 3945; amended to be effective March
14, 2004, 29 TexReg 2305, amended to be effective November 16, 2005, 30 TexReg 7433; reviewed and amended to be effective
November 8, 2009, 34 TexReg 7624; reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
13
§91.203. Share and Deposit Insurance Requirements.
(a) All credit unions in the State of Texas shall obtain share insurance protection as provided
in Chapter 95 of this title (pertaining to Share and Depositor Insurance Protection).
(b) With the approval of the commissioner, and if recognized by its insuring organization, a
credit union may, from time to time as determined by its board of directors, issue uninsured
membership shares which are subordinate to all other claims, including creditors, shareholders,
and the insuring organization. The commissioner may approve the issuance of such accounts
conditioned upon specific requirements being met.
Source: The provisions of this §91.203 adopted to be effective November 8, 2009, 34 TexReg 7624; reviewed and
readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.205. Credit Union Name.
(a) Unless a name change has been approved by the commissioner in accordance with the
Act and these rules, a credit union shall do business under the name in which its certificate of
incorporation was issued.
(b) Subject to the requirements of this rule, a credit union may adopt an assumed name. The
credit union’s official name, however, must be used in all official or legal communications or
documents, which includes account and membership agreements, loan contracts, title
documents(except for vehicle titles, which may also be under the credit union’s assumed name),
account statements, checks, drafts, and correspondence with the Department or the National
Credit Union Administration. The assumed name may also be used in those materials so long as
it is identified as such (e.g. Generic Credit Union dba GCU). Further, a credit union using an
assumed name shall clearly disclose the credit union’s official name when the assumed name is
used on any signs, advertising, mailings, or similar materials.
(c) A credit union shall not use any name other than its official name until it has received a
certificate of authority to use an assumed business name from the commissioner and has
registered the designation with the Secretary of State and the appropriate county clerk.
(d) The commissioner shall not issue a certificate of authority to use an assumed business
name if the designation might confuse or mislead the public, or if it is not readily distinguishable
from, or is deceptively similar to, a name of another credit union lawfully doing business with an
office in this state.
(e) Credit union officials are responsible for complying with state and federal law applicable
to corporate and assumed names.
(f) Before using an assumed name, a credit union shall take reasonable steps to ensure that
use of the name will not cause a reasonable person to believe the credit union’s different
facilities are different credit unions or to believe that shares or deposits in one facility are
separately insured from those of another facility.
Source: The provisions of this §91.205 adopted to be effective May 11, 2000, 25 TexReg 3947; readopted to be
effective December 18, 2003, 29 TexReg 235; amended to be effective November 16, 2005, 30 TexReg 7433;
reviewed and amended to be effective November 8, 2009, 34 TexReg 7626; reviewed and readopted to be effective
June 24, 2013, 38 TexReg 4392.
§91.206. Underserved Area Credit Unions – Secondary Capital Accounts.
A credit union that has been approved for a designation as a Underserved Area Credit Union
pursuant to Section 122.014, Finance Code may issue secondary capital accounts to members or
nonmembers of the credit union on the following conditions:
14
(1) Prior to offering secondary capital accounts, the credit union shall file an
application for approval with the commissioner. The application shall be supported by a written
plan for use of the funds in the secondary capital accounts and subsequent liquidity needs to meet
repayment requirements upon maturity of the accounts, along with such other information and
data as the commissioner may require.
(2) The secondary capital account must be established as an uninsured secondary
capital account or other form of non-share account, and shall not be insured by the National
Credit Union Share Insurance Fund or any governmental or private entity.
(3) The secondary capital account must mature no earlier than five years.
(4) The secondary capital account shall not be redeemable prior to maturity.
(5) The secondary capital account holder’s claim against the credit union must be
subordinated to all other claims, including those of shareholders, creditors and the credit union’s
insuring organization.
(6) Funds deposited into the secondary capital account, including interest accrued and
paid into the capital account, must be available to cover the credit union’s realized operating
losses that exceed its net available reserves and undivided earnings (i.e., reserves and undivided
earnings exclusive of allowance accounts for loan losses), and to the extent funds are so used, the
credit union shall not restore or replenish the account. The credit union may, in lieu of paying
interest into the secondary capital account, pay interest accrued on the secondary capital account
directly to the secondary capital account holder or into a separate account from which the
secondary capital account holder may make withdrawals. Losses realized shall be distributed
pro-rata among all secondary capital accounts held by the credit union at the time the losses are
realized.
(7) The secondary capital account may not be pledged or provided by the account
holder as security on a loan or other obligation with the credit union or any other party.
(8) In the event of merger or other voluntary dissolution of the credit union, other
than merger into another Underserved Area designated credit union, the secondary capital
accounts will, to the extent they are not needed to cover losses at the time of merger or
dissolution, be closed and paid out to the account holder.
(9) A secondary capital account contract agreement must be executed by an
authorized representative of the account holder and the credit union. The agreement must set
forth all of the terms and conditions of this section and contains a disclosure and
acknowledgement by the account holder that the secondary capital account is not redeemable,
will not be insured, may be used to cover operating losses of the credit union and not be replaced
or replenished, and is subordinate to all other claims on the assets of the credit union, including
claims of member shareholders, creditors and the credit union’s insuring organization. All such
contract agreements must be retained by the credit union for the term of the agreement.
(10) In the event the credit union is classified as “critically undercapitalized”, “marginally
capitalized”, “minimally capitalized”, “moderately capitalized” or “uncapitalized”, or the credit
union has failed to undertake any mandatory supervisory action, the commissioner or any entity
insuring the accounts of the credit union, may prohibit payment of principal, dividends or interest
on the credit union’s secondary capital accounts in accordance with powers and procedures
granted under state or federal laws, as applicable. Any such unpaid dividends or interest shall
continue to accrue under the terms of the account to the extent permitted by law.
(11) Credit unions with secondary capital accounts shall record the funds on its balance sheet
in an equity account entitled “uninsured secondary capital accounts”. The capital value of the
accounts shall be kept in accordance with generally accepted accounting principles.
Source: The provisions of this §91.206 adopted to be effective March 14, 2004, 29 TexReg 2305; readopted to be
effective June 20, 2005, 30 TexReg 3882; reviewed and amended to be effective November 8, 2009, 34 TexReg 7625;
reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
15
§91.208. Notice of Known or Suspected Criminal Violations.
(a) Each credit union shall exercise reasonable due diligence to discover, investigate, and
report theft, embezzlement, and other types of criminal activity affecting the credit union. The
credit union shall provide written notice to the Department within 30 calendar days for any of the
following known or suspected criminal violations:
(1) Insider abuse involving any amount,
(2) Other transactions, including potential money laundering or violations of the
Bank Secrecy Act, aggregating $5,000 or more,
(3) Losses resulting from robbery or burglary.
(b) When applicable, a credit union may meet the reporting requirements of this section by
providing the Department a copy of a Suspicious Activity Report prepared in accordance with
the NCUA Rules and Regulations 12 C.F.R. §748.1(c). The timeframe for reporting the activity
to the Department in this manner may be extended up to 60 days when authorized by the
regulation.
Source: The provisions of this §91.208 adopted to be effective July 12, 2009, 34 TexReg 4512; reviewed and
readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.209. Call Reports and Other Information Requests.
(a) Each credit union shall file a quarterly financial and statistical report with the Department
no later than 22 days after the end of each calendar quarter. Unless the commissioner orders
otherwise, call reports (Form 5300) timely filed with the National Credit Union Administration
will comply with the reporting requirements of this subsection. If a credit union fails to file the
quarterly report on time, the commissioner may charge the credit union a penalty of $100 for
each day or fraction of a day the report is in arrears.
(b) Any credit union that makes, files, or submits a false or misleading financial and
statistical report required by subsection (a) of this section, is subject to an enforcement action
pursuant to the Finance Code, Chapter 122, Subchapter F.
(c) A credit union shall prepare and forward to the Department any supplemental report or
other document that the Commissioner may, from time to time require, and must comply with all
instructions relating to completing and submitting the supplemental report or document. For the
purposes of this section, the Commissioner’s request may be directed to all credit unions or to a
group of credit unions affected by the same or similar issue, shall be in writing, and must
specifically advise the credit union that the provisions of this section apply to the request. If a
credit union fails to file a supplemental report or provide a requested document within the
timeframe specified in the instruction, after notice of non-receipt, the commissioner may levy a
penalty $50 for each day or fraction of a day such report or document is in arrears.
(d) If a credit union fails to file any report or provide the requested information within the
specified time, the commissioner, or any person designated by the commissioner, may examine
the books, accounts, and records of the credit union, prepare the report or gather the information,
and charge the credit union a supplemental examination fee as prescribed in §97.113 of this title
(relating to Fees and Charges). The credit union shall pay the fee to the department within thirty
days of the assessment.
(e) Any penalty levied under this section shall be paid within 30 days of the levy. Penalties
received after the due date will be subject to a monthly 10% fee unless waived by the
commissioner for good cause shown.
(f) The Department may, in lieu of imposing the penalty authorized by subsection (a) of this
section, order a credit union to pay an amount, fixed by the Commissioner, that is minimally
16
sufficient to negate the credit union being assessed a civil money penalty under Section 202 of
the Federal Credit Union Act (12 U.S.C. § 1782) for late or false/misleading filing of a quarterly
call report (Form 5300). This penalty shall be abated in part if the National Credit Union
Administration exercises its authority to impose a civil money penalty for the same late or
false/misleading filing. The penalty, however, shall not be decreased below the amount
authorized to be levied under subsection (a).
Source: The provisions of this §91.209 adopted to be effective August 9, 1998, 23 TexReg 7767; amended to be
effective April 7, 2002, 27 TexReg 2434; amended to be effective November 16, 2005, 30 TexReg 7434; amended to
be effective July 12, 2009, 34 TexReg 4512; reviewed and amended to be effective July 11, 2010, 35 TexReg 1898;
reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392; reviewed and amended to be effective
November 9, 2014, 39 TexReg 8572.
§91.210. Foreign Credit Unions.
(a) Definitions. (1) Foreign credit union -- a credit union that is not chartered or otherwise
organized under the laws of this state or the United States. (2) Local service area – an area that
is within reasonable proximity of a foreign credit union’s office, allowing members to be
realistically served from that office.
(b) Application. Prior to commencing business in this state, a foreign credit union is required
to file a written application supported by such information and data as the commissioner may
require to make the findings necessary for the issuance of a certificate of authority pursuant to
Finance Code §122.013.
(c) Approval. The application shall not be approved unless the commissioner finds that the
applicant:
(1) is acting in good faith and the application does not contain a material
misrepresentation;
(2) is financially sound and has no supervisory problems;
(3) will conduct its operations in the State of Texas in accordance with the intent and
purpose of the Act and Commission rules;
(4) has provided evidence of compliance with the Finance Code, §201.102
concerning registering with the secretary of state to do business in Texas;
(5) has share and deposit insurance equivalent to that required for credit unions
organized under the Act;
(6) has paid a permit fee of $500 for each and every branch office proposed to be
established in the State of Texas;
(7) has fidelity bond coverage satisfactory to the commissioner; and
(8) has provided all other information the commissioner may require.
(d) Compliance with Texas law. A credit union chartered by another state shall comply with
all applicable Texas laws, including those laws regarding home equity lending, loan interest
rates, and consumer protection, to the same extent that those laws apply to a Texas credit union.
(e) Federal treaties. If a treaty or agreement exists between the United States and a foreign
country which requires the commissioner to permit a foreign credit union to operate a branch in
this state and the commissioner determines that the applicant has substantially the same
characteristics as a credit union organized under the Act, then the applicant must comply with all
provisions of the Act and commission rules, unless otherwise permitted by this section.
(f) Financial statements. Each foreign credit union that is operating a branch office within
the State of Texas shall furnish to the commissioner a copy of its annual audited financial
statements, if any, or other statements of financial conditions as the commissioner may require.
(g) Examinations. The commissioner is authorized to examine the books and records of any
branch office operated in the State of Texas by a foreign credit union. The costs of examination,
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as prescribed in §97.113(d) of this title (relating to Supplemental Examinations), must be fully
borne by the foreign credit union. The supplemental examination fee may be waived or reduced
at the discretion of the commissioner.
(h) Agreements with other regulators. The commissioner shall enter into supervisory
agreements with the foreign credit union regulators and, as necessary, the foreign credit unions,
as authorized by Finance Code §15.411, to resolve any conflict of laws and to specify the manner
in which the examination, supervision, and application processes will be coordinated with the
regulators. The agreement may also prescribe the applicable laws governing the powers and
authorities of the foreign branch and may address, but are not limited to, corporate governance
and operational matters. The agreement, however, shall not limit the jurisdiction or authority of
the commissioner to examine, supervise and regulate a foreign credit union that is operating or
seeking to operate a branch in this state or to take any action or issue any order with respect to
that branch.
(i) Field of membership. A certificate of authority to do business in this state is specifically
issued to allow a foreign credit union to provide services to its existing field of membership.
However, the commissioner may approve a foreign credit union’s request to expand its field of
membership to include groups with a community of interest that are within the foreign credit
union’s local service area if it is organized in a state or country that allows a credit union
organized under the act to expand its field of membership to at least the same extent. After being
satisfied that the group is within the foreign credit union local service area, the commissioner
shall use the same criteria and the same procedures as used when a Texas credit union seeks to
expand its field of membership. The commissioner shall make a reasonable effort to coordinate
this determination with the foreign credit union’s primary regulator to assure that each agency’s
material interests, authorities and responsibilities are fulfilled.
(j) Location of Group. For the purposes of a field of membership expansion, the group as a
whole will be considered to be within the local service area when:
(1) A majority of the persons in the group live, work, or gather regularly within the
local service area;
(2) The group’s headquarters is located within the local service area; or
(3) The group’s “paid from” or “supervised from” location is within the local service
area.
(k) Prohibition against share/deposit production offices. A foreign credit union may not
use its certificate of authority primarily for the purpose of deposit production. The foreign credit
union is expected to reasonably help meet the credit needs of the groups in Texas that are served
by the credit union. If the Commissioner determines that the foreign credit union’s level of
lending in Texas relative to the deposits from Texas members is less than half the average of
total loans relative to total deposits for all credit unions domiciled in Texas, the credit union will
not be permitted to further expand its field of membership nor open additional offices in Texas.
(l) Enforcement; penalty. The commissioner has grounds to issue a cease and desist order to
an officer, employee, director, and/or the foreign credit union itself, if the commissioner
determines from examination or other credible evidence that the credit union has violated or is
violating any applicable Texas law or rules of the commission. If the foreign credit union does
not comply with an order, the commissioner may assess an administrative penalty as authorized
by §122.260, Finance Code, as well as suspend or revoke the certificate of authority.
Source: The provisions of this §91.210 adopted to be effective February 8, 2001, 26 TexReg 1131; amended to be
effective June 8, 2003, 28 TexReg 4410; readopted to be effective December 18, 2003, 29 TexReg 235; readopted to
be effective June 20, 2005, 30 TexReg 3882; reviewed and readopted to be effective June 22, 2009, 34 TexReg 4549;
reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
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Subchapter C. Members
§91.301. Field of Membership.
(a) General. Membership in a credit union shall be limited to one or more groups, each of
which (the Group) has its own community of interest and is within the credit union’s local
service area. In this section, local service area shall mean an area that is within reasonable
proximity of a credit union’s office, and allows members to be realistically served from that
office. For purposes of field of membership, the Group as a whole will be considered to be
within the local service area when:
(1) A majority of the persons in the Group live, work, or gather regularly within the
local service area;
(2) The Group’s headquarters is located within the local service area; or
(3) The persons in the Group are “paid from” or “supervised from” an office or
facility located within the local service area.
The commissioner may impose a geographical limitation on any Group if the commissioner
reasonably determines that the applicant credit union does not have the facilities and staffing to
serve a larger group or there are other operational or management concerns.
(b) Other persons eligible for membership. A number of persons by virtue of their close
relationship to a Group may be included in the field of membership at the option of the applicant
credit union. These include:
(1) members of the family or household of a member of the Group;
(2) volunteers performing services for or on behalf of the Group;
(3) organizations owned or controlled by a member or members of the Group, and
any employees and members of those organizations;
(4) spouses of persons who died while in the Group;
(5) employees of the credit union;
(6) subsidiaries of the credit union and their employees; and businesses and other
organizations whose employees or members are within the Group.
(c) Multiple-groups.
(1) The commissioner may approve a credit union’s original articles of incorporation
and bylaws or a request for approval of an amendment to a credit union’s bylaws to serve one or
more communities of interest or a combination of types of communities of interest.
(2) In addition to general requirements, special requirements pertaining to multiple-
Group applications may be required before the commissioner will grant such a certificate or approve
such an amendment.
(A) Each Group to be included in the proposed field of membership of the credit
union must have its own community of interest.
(B) Each associational or occupational Group must individually request
inclusion in the proposed credit union's field of membership.
(d) Overlap protection.
(1) The commissioner will only consider the financial effect of an overlap proposed by
an application to expand a credit union's field of membership or when a charter application proposes
an overlap for a Group of 3,000 members or more.
(2) The commissioner will weigh the information in support of the application and any
information provided by a protesting or affected credit union. If the applicant has the financial
capacity to serve the financial needs of the proposed members, demonstrates economic feasibility,
complies with the requirements of this rule, and no protestant reasonably establishes a basis for
denying the request, it shall be approved.
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(3) If a finding is made that overlap protection is warranted, the commissioner shall
reject the application or require the applicant to limit or eliminate the overlap by adding
exclusionary language to the text of the amendment, e.g., "excluding persons eligible for primary
membership in any occupation or association based credit union that has an office within a specified
proximity of the applicant credit union at the time membership is sought." Exclusionary clauses are
rarely appropriate for inclusion on a geographic community of interest.
(4) Generally, if the overlapped credit union does not submit a notice of protest form,
and the department determines that there is no safety and soundness problem, an overlap will be
permitted. If, however, a notice of protest is filed, the commissioner will consider the following
in performing an overlap analysis:
(A) whether the overlap is incidental in nature, i.e., the group(s) in question is
so small as to have no material effect on the overlapped credit union;
(B) whether there is limited participation by members of the group(s) in the
overlapped credit union after the expiration of a reasonable period of time;
(C) whether the overlapped credit union provides requested service;
(D) the financial effect on the overlapped credit union;
(E) the desires of the group(s); and
(F) the best interests of the affected group(s) and the credit union members
involved.
(5) Where a sponsor organization expands its operations internally, by acquisition or
otherwise, the credit union may serve these new entrants to its field of membership if they are
part of the community of interest described in the credit union’s bylaws. Where acquisitions are
made which add a new subsidiary or affiliate, the group cannot be served until the entity is
included in the field of membership through the application process.
(6) Credit unions affected by the organizational restructuring or merger of a group
within its field of membership must apply for a modification of their fields of membership to
reflect the group to be served.
(e) Underserved communities.
(1) All credit unions may include underserved areas in their fields of membership,
without regard to location. More than one credit union can serve the same underserved area.
(2) Once an underserved area has been added to a credit union’s field of membership,
the credit union must establish and maintain an office or facility in the community. For the
purposes of this subsection, service facility is defined as a place where shares are accepted for
members’ accounts, loan applications are accepted and loan proceeds are disbursed. This
definition includes a credit union owned branch, a shared branch, a mobile branch, and an office
operated on a regularly scheduled weekly basis, or a credit union owned electronic facility that
meets, at a minimum, these requirements. This definition does not include an ATM or a credit
union’s Internet website.
(3) A credit union desiring to add an underserved area must document that the
community meets the definition. In addition, the credit union must develop a business plan
specifying how it will serve the community. The business plan, at a minimum, must identify the
credit and depository needs of the community and detail how the credit union plans to serve
those needs. The credit union will be expected to regularly review the business plan to
determine if the community is being adequately served. The commissioner may require periodic
service status reports from a credit union pertaining to the underserved area to ensure that the
needs of the area are being met, as well as requiring such reports before allowing a credit union
to add an additional underserved area.
(f) Parity with Federal Credit Unions.
Credit unions will be allowed to have, at a minimum, at least as much flexibility as federal credit
unions have in field of membership regulation. If a credit union proposes a type of Group that the
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National Credit Union Administration has previously determined meets the Federal requirements,
the commissioner shall approve the application unless the commissioner finds that the credit union
has not demonstrated sufficient managerial and financial capacity to safely and soundly serve such
expanded membership.
(g) Application.
In order to request the approval of the commissioner to add a Group to its bylaws, a credit union
must submit a written application to the Department. The applicant credit union shall have the
burden to show to the Department such facts and data that support the requirements and
considerations in this rule. In reviewing such application, the commissioner shall consider:
(1) Whether the Group has adequate unifying characteristics or a mutual interest such
that the safety and soundness of the credit union is maintained;
(2) The ability of credit unions to maintain parity and to compete fairly with their
counterparts;
(3) Service by the credit union that is responsive to the convenience and needs of
prospective members;
(4) Protection for the interest of current and future members of the credit union; and
(5) The encouragement of economic progress in this State by allowing opportunity to
expand services and facilities.
Source: The provisions of this §91.301 adopted to be effective February 11, 2001, 26 TexReg 1132; adopted to be effective
January 7, 2004, 29 TexReg 82; readopted to be effective June 22, 2004, 29 TexReg 6423; reviewed and amended to be effective
July 13, 2008, 33 TexReg 5294; reviewed and readopted to be effective February 17, 2012, 37 TexReg 1518.
§91.302. Election or Other Membership Vote By Electronic Balloting, Early Voting,
Absentee Voting, or Mail Balloting.
(a) All credit unions should actively promote member participation in elections and other
membership votes as long as the costs are reasonable and the integrity of the vote is not
compromised. Any credit union instituting alternative procedures or systems to benefit members
who find it difficult or inconvenient to vote at annual or special meetings must ensure that the
alternative is thoroughly explained and publicized so that all members will be able to take
advantage of those procedures or systems.
(b) The board of directors, before holding an election or other membership vote that uses
electronic balloting, early voting, absentee voting, or mail balloting, shall establish written
election rules, including procedures to: control, tabulate and retain ballots; identify invalid
ballots; and handle disputed election results and tie votes.
(c) Any elections or other membership vote using electronic balloting, early voting, absentee
voting, or mail balloting are subject to the following conditions:
(1) The election tellers shall be appointed by the board of directors;
(2) At least 30 days prior to the annual or special meeting, the board of directors will
cause either a printed ballot or notice of a ballot, along with appropriate instructions, to be mailed to
all members eligible to vote;
(3) Completed electronic or mail ballots cast during early or absentee voting must be
received prior to convening the annual or special meeting;
(4) The votes will be tallied by the tellers and the results of the vote will be made public
at the annual or special meeting.
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(d) In the event of a malfunction of the electronic balloting system, the board of directors may
in its discretion order elections or other vote to be held by mail ballot only. The board may make
reasonable adjustments to the voting time frames in subsection (c) of this section, or postpone the
annual or special meeting if necessary, to complete the elections prior to the annual or special
meeting.
Source: The provisions of this §91.302 adopted to be effective November 13, 2000, 25 TexReg 11278; amended to
be effective November 14, 2004, 29 TexReg 10253, reviewed and amended to be effective July 13, 2008, 33 TexReg
5295; reviewed and readopted to be effective February 17, 2012, 37 TexReg 1518.
§91.310. Annual Report to Membership.
(a) Every credit union shall provide to its membership an annual written report, as prescribed
below. The report must be updated before the credit union’s annual meeting and shall be
available on the credit union’s website throughout the year. Any credit union that does not
maintain a website shall distribute the report at its annual meeting and must notify members at
least annually that copies of the report are available upon request.
(b) The annual report shall cover the credit union’s operations during the preceding calendar
year and shall contain, at a minimum, the following information:
(1) the names and dates of expiration of the terms of office for each director on the
credit union’s board;
(2) the names of any honorary or advisory directors appointed by the board;
(3) a brief description of any changes, since the last report, to the credit union’s:
A. senior management staff;
B. bylaws or articles of incorporation;
C. financial condition and operating results;
D. membership size and services offered; and
(4) the credit union’s yearend balance sheet and income/expense statement.
(c) For purposes of this rule, senior management staff shall include the chief executive
officer, any assistant chief executive officers, including any vice-presidents and above, and the
chief financial officer.
Source: The provisions of this §91.310 adopted to be effective November 8, 2009, 34 TexReg 7625; reviewed and
readopted to be effective February 17, 2012, 37 TexReg 1518.
§91.315. Members’ Access to Credit Union Documents.
(a) Required Notice. Every credit union shall provide notice to its membership of the
availability of certain documents related to the credit union’s finances and management.
(b) Delivery of Required Notice. A credit union shall post a copy of the required notice on
its website throughout the year. The notice required by this section shall be published in the
credit union’s newsletter twice a year. If a credit union does not maintain a website and
distribute a newsletter at least semiannually, the credit union shall provide the notice at least
semiannually with each member’s account statement.
(c) Documents Available to Members. Upon request, a member is entitled to review or
receive a copy of the most recent version of the following credit union documents:
1. balance sheet and income statement (the non-confidential pages of the latest call
report may be given to meet this requirement);
2. a summary of the most recent annual audit completed in accordance with §91.516
of this chapter (relating to Audits and Verifications);
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3. written board policy regarding access to the articles of incorporation, bylaws,
rules, guidelines, board policies, and copies thereof; and
4. Internal Revenue Service Form 990.
Source: The provisions of this §91.315 adopted to be effective November 8, 2009, 34 TexReg 7627; reviewed and
readopted to be effective February 17, 2012, 37 TexReg 1518.
Subchapter D. Powers of Credit Unions
§91.401. Credit Union Ownership of Property.
(a) Definitions. The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Equipment includes all movable furniture, fixtures, and equipment of the credit
union, its branch offices, and consolidated credit union service organizations, including
automobiles and other vehicles, and any lien on the above.
(2) Immediate family member--a spouse or other family member living in the same
household.
(3) Premises include the cost less accumulated depreciation, of land and buildings
actually owned and occupied (or to be occupied) by the credit union, its branch offices, and
consolidated credit union service organizations. This includes vaults, fixed machinery, parking
facilities, and real estate acquired and intended, in good faith, for future expansion. It also
includes capitalized leases, leasehold improvements, and remodeling costs to existing premises.
(4) Senior Management Employee--the chief executive officer, any assistant chief
executive officers (e.g. vice presidents and above) and the chief financial officer.
(b) Investment Limitations on Premises. Without the prior written consent of the Department, a
credit union may not directly or indirectly invest an amount in excess of its net worth in premises.
(c) Restrictions on Ownership of Property. A credit union shall not acquire premises for the
principal purpose of engaging in real estate rentals or speculation.
(d) Transactions with insiders. Without the prior approval of a disinterested majority of the
board of directors recorded in the minutes or, if a disinterested majority cannot be obtained, the
prior written approval of the commissioner, a credit union may not directly or indirectly:
(1) sell or lease an asset of the credit union to a director, committee member, or
senior management employee, or immediate family members of such individual; or
(2) purchase or lease an asset in which a director, committee member, senior
management employee, or immediate family members of such individual has an interest.
(e) Use requirement for premises. If real property or leasehold interest is acquired and
intended, in good faith, for use in future expansion, the credit union must partially satisfy the
“primarily for its own use in conducting business” requirement within five years after the credit
union makes the investment.
(f) Consent to Exceed Limitation. Generally, a credit union need not obtain the
Department's approval to invest in premises. However, prior approval is required if the total
aggregate investment in premises will exceed the credit union's net worth. A credit union shall
submit such statements and reports as the Department may require in support of the higher
investment limit.
(1) When analyzing an application for an additional investment in credit union premises,
the Department will consider:
(A) Consistency with safe and sound credit union practices;
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(B) The reasonableness of the amount of credit union premises and the annual
expenditures required to carry them relative to the credit union's net worth and the nature and
volume of operations; and
(C) The effect of the investment on future earnings.
(2) The Department will consider denying a request for an additional investment in
credit union premises when:
(A) The additional investment would have a material negative effect on the credit
union's earnings, capital, or liquidity; or
(B) The credit union has not demonstrated a reasonable need for the additional
investment.
(3) The Department may impose appropriate special conditions for an approval of an
additional credit union premises investment, if it determines that they are necessary or appropriate
to protect the safety and soundness of the credit union or to further other supervisory or policy
considerations.
Source: The provisions of this §91.401 adopted to be effective March 14, 2004, 29 TexReg 2306;
readopted to be effective October 27, 2005, 30 TexReg 7505; reviewed and amended to be effective
March 14, 2010, 35 TexReg 1978; reviewed and amended to be effective March 16, 2014, 39 TexReg
1703; reviewed and amended to be effective November 8, 2015, 40 TexReg 7663.
§91.402. Insurance for Members.
(a) Authority. A credit union may make insurance products available to its members,
including insurance products at the individual member’s expense, subject to the following
conditions:
(1) Except as provided in paragraphs (2) and (3) of this subsection, the purchase of
any type of insurance coverage by a member must be voluntary, and a copy of the signed and
dated written election to purchase the insurance must be on file at the credit union.
(2) Insurance may be required on a loan if the coverage and the charges for the
insurance bear a reasonable relationship to:
(A) the value of the collateral;
(B) the existing hazards or risk of loss, damage, or destruction; and
(C) the amount, term, and conditions of the loan.
(3) if the insurance is a condition of a loan, the credit union shall give the member
written notice that clearly and conspicuously states;
(A) that insurance is required in connection with the loan; and
(B) that the member may purchase or provide the insurance from a carrier of
the member’s choice, or the member [who is borrowing] may assign any existing insurance
coverage.
(4) An officer, director, employee, or committee member of a credit union may not
accept anything of value from an insurance agent, insurance company, or other insurance
provider offered to induce the credit union to sell or offer to sell insurance or other related
products or services to the members of the credit union.
(5) If a credit union replaces an existing loan or renews a loan and sells the member
new credit life or disability insurance, the credit union shall cancel the prior insurance and
provide the member with a refund or credit of the unearned premium or identifiable charge
before selling the new insurance to the member.
(6) The person selling or offering for sale any insurance product in any part of a
credit union’s office or on its behalf must be at all times appropriately qualified and licensed
under applicable State insurance licensing standards with regard to the specific products
being sold or recommended.
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(b) Unsafe and Unsound Practice. It is an unsafe and unsound practice for any director,
officer, or employee of a credit union, who is involved in the sale of insurance products to
members, to take advantage of that business opportunity for personal profit.
Recommendations to members to buy insurance should be based on the benefits of the
policy, not the compensation received from the sale.
(c) Prohibited Practices. A director, officer, or employee of a credit union may not engage in
any practice that would lead a member to believe that a loan or extension of credit is
conditional upon either:
(1) The purchase of an insurance product from the credit union of or any of its
affiliates; or
(2) An agreement by the member not to obtain, or a prohibition on the member from
obtaining, an insurance product from an unaffiliated entity.
Source: The provisions of this §91.402 adopted to be effective March 14, 2004, 29 TexReg 2306; amended to be
effective March 13, 2006, 31 TexReg 1647; reviewed and amended to be effective March 14, 2010, 35 TexReg 1978;
reviewed and readopted to be effective October 21, 2013; 38 TexReg 7735.
§91.403. Debt Cancellation Products; Federal Parity.
(a) Authority. Provided it complies with this section, a credit union may offer any debt
cancellation product a federal credit union is permitted to offer. For the purposes of this section,
a debt cancellation product is a two-party agreement between the credit union and the member
under which the credit union agrees to waive, suspend, defer, or cancel all or part of a member’s
obligation to pay an indebtedness under a lease, loan, or other extension of credit upon the
occurrence of a specified event. Debt cancellation products are considered loan products, not
insurance products and, consequently, are not regulated by the Texas Department of Insurance.
The credit union may offer debt cancellation products for a fee. If the debt cancellation product
is offered for a fee basis, then the member’s participation must be optional.
(b) Anti-tying and Refund Rules. For any debt cancellation product offered by a credit
union:
(1) The credit union may not extend credit nor alter the terms or conditions of an
extension of credit conditioned upon the member entering into a debt cancellation product with
the credit union; and
(2) The debt cancellation product must provide for refunding or crediting to the
member any unearned fees resulting from termination of the member’s participation in the
product, whether by prepayment of the extension of credit or otherwise. Any unearned fees must
be calculated using a method that produces a result at least as favorable to the member as the
actuarial method. Before the member purchases the debt cancellation product, the credit union
must state in writing that the purchase of the debt cancellation product is optional, the conditions
for and method of calculating any refund of the debt cancellation fee, including when fees are
considered earned by the credit union, and that the member should carefully review all of the
terms and conditions of the debt cancellation agreement prior to signing the agreement.
(c) Notice to Department. A credit union must notify the commissioner in writing of its
intent to offer any type of debt cancellation product at least 30 days prior to the product being
offered to members. The notice must contain a statement describing the type(s) of debt
cancellation product(s) that the credit union will offer to its membership.
(d) Risk Management and Controls. Before offering any debt cancellation products, each
credit union’s board of directors, shall adopt written policies that establish and maintain effective
risk management and control processes for these products. Such processes include appropriate
recognition and financial reporting of income, expenses, assets and liabilities, and appropriate
treatment of all expected and unexpected losses associated with the products. A credit union
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should also assess the adequacy of its internal control and risk mitigation activities in view of the
nature and scope of its debt cancellation program. In addition, the policies shall establish
reasonable fees, if any, that will be charged, the appropriate disclosures that will be given, and
the claims processing procedures that will be utilized.
(e) For purposes of this section “actuarial method” means the method of allocating payments
made on a debt between the amount financed and the finance charge pursuant to which a
payment is applied first to the accumulated finance charge and any remainder is subtracted from,
or any deficiency is added to, the unpaid balance of the amount financed.
Source: The provisions of this §91.403 adopted to be effective May 13, 1999, 24 TexReg 3473; readopted to be
effective August 2, 2002, 27 TexReg 6874; amended to be effective June 8, 2003, 28 TexReg 4411; amended to be
effective March 6, 2005, 30 TexReg 1064; readopted to be effective October 27, 2005, 30 TexReg 7505; reviewed
and amended to be effective March 14, 2010, 35 TexReg 1979; reviewed and readopted to be effective October 21,
2013; 38 TexReg 7735.
§91.404. Purchasing Assets and Assuming Deposits and Liabilities of another Financial
Institution.
(a) Scope. A credit union must obtain the approval of the Department before purchasing all
or substantially all of the assets and/or assuming certain deposits and other liabilities of another
financial institution. This section does not apply to purchases of assets that occur as a result of a
credit union’s ordinary and ongoing business of acquiring obligations of its members.
(b) Approval Requirement.
(1) A credit union must file an application and obtain the written approval of the
Department before entering into any type of purchase and assumption agreement.
(2) In determining whether to approve an application under this section, the
Department will consider the purpose of the transaction, its impact on the safety and soundness
of the credit union, and any effect on the credit union’s existing members. The Department may
deny the application if the transaction would have a negative effect on any of those factors.
Source: The provisions of this §91.404 adopted to be effective March 14, 2010, 35 TexReg 1980; reviewed and
readopted to be effective October 21, 2013; 38 TexReg 7735.
§91.405. Records Retention and Preservation.
(a) General. Every credit union shall keep records of its transactions in sufficient detail to
permit examination, audit and verification of financial statements, schedules, and reports it is
required to file with the Department or which it issues to its members. Credit union accounts,
books and other records shall be maintained in appropriate form and for the minimum periods
prescribed by this section. The retention period for each record starts from the last entry or final
action date and not from the inception of the record.
(b) Manner of maintenance. Records may be maintained in whatever manner, or format a
credit union deems appropriate; provided, however, the records must clearly and accurately
reflect the information required, provide an adequate basis for the examination and audit of the
information, and be retrievable easily and in a readable and useable format. A credit union may
contract with third party service providers to maintain records required under this part.
(c) Permanent retention. It is recommended that the following records be retained permanently
in their original form:
(1) charter, bylaws, articles of incorporation, and amendments thereto; and
(2) currently effective certificates or licenses to operate under programs of various
government agencies.
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(d) Ten year retention. Records which are significant to the continuing operation of the credit
union must be retained until the expiration of ten years following the making of the record or the
last entry thereon or the expiration of the applicable statute of limitations, whichever is later. The
records are:
(1) minutes of meetings of the members, the board of directors, and board
committees;
(2) journal and cash record;
(3) general ledger and subsidiary ledgers;
(4) for active accounts, one copy of each individual share and loan ledger or its
equivalent;
(5) comprehensive annual audit reports including evidence of account verification; and
(6) examination reports and official correspondence from the department or any other
government agency acting in a regulatory capacity.
(e) Five year retention. The following records must be retained until the expiration of five years
following the making of the record or the last entry thereon or the expiration of the applicable
statute of limitations, whichever is later:
(1) records related to closed accounts including membership applications, joint
membership agreements, payable on death agreements, signature cards, share draft agreements,
and any other account agreements; loan agreements; and
(2) for an active account, any account agreement which is no longer in effect.
(f) Other records. Subject to applicable law, any other type of document not specifically
delineated in this rule may be destroyed after five years or upon expiration of an applicable statute
of limitations, whichever is longer.
(g) Data processing records. Provisions of this section apply to records produced by a data
processing system. Output reports that substitute for standard conventional records or that provide
the only support for entries in the journal and cash record should be retained for the minimum
period specified in this rule.
(h) Protection and storage of records. A credit union shall provide reasonable protection from
damage by fire, flood and other hazards for records required by this section to be preserved and, in
selection of storage space, safeguard such records from unnecessary exposure to deterioration from
excessive humidity, dryness, or lack of proper ventilation.
(i) Records destruction. The board of directors shall adopt a written policy authorizing the
destruction of specified records on a continuing basis upon expiration of specified retention
periods.
(j) Records preservation. All state chartered credit unions are required to maintain a records
preservation program to identify and store vital records in order that they may be reconstructed in
the event the credit union's records are destroyed. Storage of vital records is the responsibility of the
board but may be delegated to the responsible person(s). A vital records storage center should be
established at some location that is far enough from the credit union office to avoid the simultaneous
loss of both sets of records in the event of a disaster. Records must be stored every calendar quarter
within 30 days following quarter-end at which time records stored for the previous quarter may be
destroyed. Stored records may be in any form which can be used to reconstruct the credit union's
records. This includes machine copies, microfilm, or any other usable copy. The records to be stored
shall be for the most recent month-end and are:
(1) a list of all shares and/or deposits and loan balances for each member's account.
Each balance on the list is to be identified by an account name or number. Multiple balances of
either shares or loans to one account shall be listed separately;
(2) a financial statement/statement of financial condition which lists all the credit
union's assets and liability accounts;
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(3) a listing of the credit union's banks, insurance policies and investments. This
information may be marked "permanent" and updated only when changes are made.
(k) Records preservation compliance. Credit unions that have some or all of their records
maintained by an off-site data processor are considered to be in compliance so long as the processor
meets the minimum requirements of this section. Credit unions that have in-house capabilities shall
make the necessary provisions to safeguard the backup of data on a continuing basis.
(l) Reproduction of records. A credit union shall furnish promptly, at its own expense, legible,
true and complete copies of any record required to be kept by this section as requested by the
department.
Source: The provisions of this §91.405 adopted to be effective May 11, 2000, 25 TexReg 3950; readopted to be
effective December 18, 2003, 29 TexReg 235, amended to be effective March 13, 2006, 31 TexReg 1647; amended to
be effective November 16, 2008, 33 TexReg 9073; reviewed and readopted to be effective October 19, 2009, 34
TexReg 7657; reviewed and amended to be effective March 16, 2014, 39 TexReg 1704.
§91.406. Credit Union Service Contracts.
A credit union may enter into contractual agreements with one or more credit unions or other
organizations for the purpose of engaging in authorized activities that relate to electronic data
processing, electronic fund transfers, or other member services on behalf of the credit union.
Agreements must be in writing and shall advise all parties that the activities and services may be
subject to commission rules and examination by the commissioner to the extent permitted by
law.
Source: The provisions of this §91.406 adopted to be effective March 14, 2004, 29 TexReg 2635; readopted to be
effective October 27, 2005, 30 TexReg 7505; reviewed and readopted to be effective October 19, 2009 34 TexReg
7657; reviewed and readopted to be effective October 21, 2013, 38 TexReg 7735.
§91.407. Electronic Notification.
A credit union may, in accordance with written board policy, satisfy any “written” member
notification requirement of the Act, commission rules, or the credit union’s bylaws by electronic
means provided:
(1) the member agrees in writing or electronically to use electronic instead of hard-
copy notifications;
(2) the member has the ability to print or download the notification;
(3) evidence of the electronic notification is retained in accordance with §91.405
(relating to Records Retention); and
(4) both the credit union and the member have the capacity to receive electronic
messages.
Source: The provisions of this §91.407 adopted to be effective March 14, 2004, 29 TexReg 2636; readopted to be
effective October 27, 2005, 30 TexReg 7505; reviewed and readopted to be effective October 19, 2009, 34 TexReg
7657; reviewed and readopted to be effective October 21, 2013, 38 TexReg 7735.
§91.408. User Fee for Shared Electronic Terminal.
A credit union that owns an electronic terminal that is connected to a shared network may
impose a fee on a non-member for the use of that terminal if imposition of the fee is disclosed in
compliance with applicable federal law.
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Source: The provisions of this §91.408 adopted to be effective March 14, 2004, 29 TexReg 2636, readopted to be
effective October 27, 2005, 30 TexReg 7505; reviewed and readopted to be effective October 19, 2009, 34 TexReg
7657; reviewed and readopted to be effective October 21, 2013; 38 TexReg 7735.
Subchapter E. Direction of Affairs
§91.501. Director Eligibility and Disqualification.
(a) Board Representation. The credit union’s bylaws shall govern board selection and
election procedures. No credit union shall adopt or amend its articles of incorporation or bylaws
to designate or reserve one or more places on the board of directors for any classification that
results in a restriction or infringement upon the equal rights of all members to vote for, or seek
any position on, the board of directors of the credit union. In addition, each credit union shall
adopt policies and procedures that are designed to assure that the elections of directors are
conducted in an impartial manner.
(b) Qualifications. A member may not serve as director of a credit union if that member:
(1) has been convicted of any criminal offense involving dishonesty or breach of
trust;
(2) is not eligible for coverage by the blanket bond required under the provisions of
the Act, or §91.510 of this title (relating to Bond and Insurance Requirements);
(3) has had a final judgment entered against him/her in a civil action upon the
grounds of fraud, deceit, or misrepresentation;
(4) has a payment on a voluntary obligation to the credit union that is more than 90
days delinquent or has otherwise caused the credit union to suffer a financial loss;
(5) has been removed from office by any regulatory or government agency as an
officer, agent, employee, consultant or representative of any financial institution;
(6) has been personally made subject to an operating directive for cause while serving
as an officer, director, or senior executive management person of a financial institution; or has
caused or participated in a prohibited activity or an unsafe or unsound condition at a financial
institution which resulted in the suspension or revocation of the financial institution’s certificate
of incorporation, or authority or license to do business;
(7) has failed to complete and return a director application in accordance with
subsection (c) of this section; or
(8) refuses to take and subscribe to the prescribed oath or affirmation of office.
(c) Director application. Any member nominated for, or seeking election to, the board of
directors shall submit a written application in such form as the credit union may prescribe. The
application shall be submitted either to the nominating committee prior to its selection of
nominees; or to the board chair within 30 days following the election of a member who was not
nominated by the nominating committee or who was appointed by the board to fill a vacancy.
The applications of the elected/appointed directors shall be incorporated into and made part of
the minutes of the first board meeting following the election/appointment of those directors.
Applications of unsuccessful candidates shall be destroyed or returned upon request. The
commissioner may review and require that changes be made to any application form, which is
deemed inadequate or unfairly discriminates against certain classes of members.
(d) Director continuing education. Directors must develop and maintain a fundamental,
ongoing knowledge of the regulations and issues affecting credit union operations to assure a
safe and sound institution. A credit union shall, by written board policy, establish appropriate
continuing education requirements and provide sufficient resources for directors to achieve and
maintain professional competence. The policy shall include a provision requiring the credit union
to prepare, on an annual basis, a continuing education plan for its Directors that is appropriate to
the size and financial condition of the credit union and the nature and scope of its operations.
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(e) Prohibited conduct. A director shall not:
(1) Divulge or make use of, except in the performance of office duties, any fact,
information, or document not generally available to the membership that is acquired by virtue of
serving on the board of the credit union.
(2) Use the director’s position to obtain or attempt to obtain special advantage or
favoritism for the director, any relative of the director, or any person residing in the director’s
household.
(3) Accept, directly or indirectly, any gift, fee, or other present that is offered or could
be reasonably be viewed as being offered to influence official action or to obtain information that
the director has access to by reason of serving on the board of the credit union.
(f) Recall of director(s).
(1) Petition. Under procedures set out in the credit union’s bylaws, members may
request a special membership meeting to consider removing the entire board or individual
directors for cause relating to serious mismanagement or a breach of fiduciary duties. The board
shall conduct any resulting special meeting as prescribed in the credit union’s bylaws.
(2) Membership Vote. The members of a credit union may remove a director by a
vote of two-thirds of those members voting at the special meeting; provided, however, that:
(A) a separate vote is conducted for each director sought to be recalled;
(B) the members voting shall constitute not less than 10% of the membership
eligible to vote in the recall election;
(C) all members are given at least 30 days notice of the meeting which shall
state the reasons why the meeting has been called; and
(D) the affected director(s) is afforded an opportunity to be heard at such
meeting prior to a vote on removal.
(3) Vacancy on the Board. If a vacancy occurs as a result of a recall, the vacancy
shall be filled by the affirmative vote of a majority of the remaining directors. If the entire board
is removed as a result of the recall, the members shall fill the vacancies at the recall meeting.
Directors elected to fill a recall vacancy shall hold office only until the next annual meeting
when any unexpired terms shall be filled by vote of the members.
(g) Absences. Any director who fails to attend three (3) consecutive regularly scheduled
meetings without an excuse approved by a majority vote of the board, or who fails to attend six
(6) regularly scheduled meetings during any twelve-month period following the director’s
election or appointment is automatically removed from office. A new person shall be appointed
to fill any vacancies resulting from poor attendance within sixty days of the date of the meeting
that led to the automatic removal. The commissioner in the exercise of discretion may extend the
deadline for filling the vacancy.
Source: The provisions of this §91.501 adopted to be effective May 11, 2000, 25 TexReg 3951; amended to be effective March
14, 2004, 29 TexReg 2636; amended to be effective July 8, 2007, 32 TexReg 3978; reviewed and amended to be effective July 10,
2011, 36 TexReg 4110; reviewed and amended to be effective July 13, 2014, 39 TexReg 5147, reviewed and readopted to be
effective February 23, 2015, 40 TexReg 1112.
§91.502. Director/Committee Member Fees, Insurance, Reimbursable Expenses, and
Other Authorized Expenditures.
(a) Expense reimbursement. A credit union may reimburse out-of-pocket travel and related
expenses that are reasonable and appropriate for the business activity undertaken. A credit union
shall adopt a written board policy to administer and control travel expenses paid or incurred in
connection with directors or committee members carrying out official credit union business.
(b) Payment of fees. Subject to the provisions of this rule, a credit union may pay a
reasonable meeting fee to any of its directors, honorary directors, advisory directors,(hereafter
30
referred to as directors) or committee members for attending duly called meetings at which
appropriate credit union business is conducted. Any credit union electing to pay any type of
meeting fee shall annually disclose to the membership the fees paid in the prior calendar year and
scheduled to be paid in the current calendar year. This disclosure may be provided to the
members as part of the credit union’s annual report as prescribed in §91.310 of this title (relating
to annual report to membership). A credit union, however, may not pay any meeting fees to a
director or committee member if the credit union is operating under a Net Worth Restoration
Plan; or an order issued under Finance Code §122.257 or §122.258.
(c) Enforcement Authority; Prohibition. The commissioner may prohibit or otherwise limit
or restrict the payment of meeting fees to directors or committee members if, in the opinion of
the commissioner, the credit union has paid, is paying, or is about to pay meeting fees that are
excessive as defined in §91.502(f).
(d) Use of credit union equipment. A credit union may provide personal computers, access to
electronic mail, and other electronic conveniences to directors during their terms of office
provided:
(1) the board of directors determines that the equipment and the electronic means are
necessary and appropriate for the directors to fulfill their duties and responsibilities;
(2) the board of directors develops and maintains written policies and procedures regarding
this matter; and
(3) the arrangement ceases immediately upon the person’s leaving office.
(e) Insurance. A credit union may, in accordance with written board policy, provide health,
life, accident, liability, or similar personal insurance protection for directors and committee
members. The kind and amount of these insurance protections must be reasonable given the
credit union’s size, financial condition, and the duties of the director or committee member. The
insurance protection must cease upon the director or committee member’s leaving office, without
providing residual benefits beyond those earned during the individual’s term on the board or
committee.
(f) Review by board. A credit union shall implement and maintain appropriate controls and
other safeguards to prevent the payment of fees or expenses that are excessive or that could lead
to material financial loss to the institution. At least annually, the board, in good faith, shall
review the director/committee member fees and director/committee member-related expenses
incurred, paid or reimbursed by the credit union and determine whether its policy continues to be
in the best interest of the credit union. The Board’s review shall be included as part of the
minutes of the meeting at which the policy and the fees and expenses were studied. Fees and
expenses shall be considered excessive when amounts paid are disproportionate to the services
performed by a director or committee member, or unreasonable considering the financial
condition of the institution and similar practices at credit unions of a comparable asset size,
geographic location, and/or operational complexity.
(g) Guest travel. A credit union’s board may authorize the payment of travel expenses that
are reasonable in relation to the credit union’s financial condition and resources for one guest
accompanying a director or committee member to an approved conference or educational
program. The payment will not be considered compensation for purposes of Finance Code
§122.062 if:
(1) it is determined by the board to be necessary or appropriate in order to carry out the
official business of the credit union; and
(2) it is in accordance with written board policies and procedures.
Source: The provisions of this §91.502 adopted to be effective August 14, 2000, 25 TexReg 7632; amended to be
effective July 11, 2004, 29 TexReg 6628; amended to be effective July 8, 2007, 32 TexReg 3979; reviewed and
amended to be effective July 10, 2011, 36 TexReg 4110; reviewed and amended to be effective November 9, 2014, 39
TexReg 8572; reviewed and readopted to be effective February 23, 2015, 40 TexReg 1112.
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§91.503. Change in Credit Union President
The board of directors, in executing its fiduciary responsibilities, may find it necessary to replace
the credit union’s president. The board shall submit written notification to the commissioner
within ten days of any such personnel change. For purposes of this section, the term president
refers to the individual responsible for the day-to-day operation of the credit union, irrespective
of the actual title given to such individual.
Source: The provisions of this §91.503 adopted to be effective January 7, 2004, 29 TexReg 82; readopted to be
effective March 2, 2007, 32 TexReg 1101; reviewed and readopted to be effective February 18, 2011, 36 TexReg
1569; reviewed and readopted to be effective February 23, 2015, 40 TexReg 1112.
§91.510. Bond and Insurance Requirements.
(a) Fidelity bond. Each credit union shall purchase and maintain a blanket fidelity bond
covering the officers, directors, employees, committee members, and its agents, against loss
caused by dishonesty, burglary, robbery, larceny, theft, holdup, forgery or alteration of
instruments, misplacement or mysterious disappearance. All carriers writing credit union
blanket bonds must be authorized by the Insurance Commissioner for the state of Texas as an
acceptable fidelity on bonds in this state.
(1) Subject to approval by the credit union’s board of directors, the amount of
coverage to be required for each credit union shall be determined by the credit union, based on
its assessment of the level that would be safe and sound in view of the credit union’s potential
exposure to risk.
(2) Each credit union may maintain bond coverage in addition to that provided by the
insurance underwriter industry’s standard forms, through the use of endorsements, riders, or
other forms of supplemental coverage, if, in the judgment of the credit union’s board of directors,
additional coverage is warranted.
(3) The commissioner may require additional coverage of any credit union when, in
his opinion, the fidelity bond in force is insufficient to provide adequate fidelity coverage. It
shall be the duty of the board of directors to obtain the additional coverage within 30 days after
the date of written notice of the findings by the commissioner.
(b) Cancellation. A fidelity bond must include a provision requiring written notification by
the fidelity to the commissioner prior to cancellation of any or all coverages set out in the bond
which includes a brief statement of cause for termination.
(c) Other insurance. Each credit union shall, subject to approval by the board, purchase
appropriate insurance coverages to insure the credit union and its assets against loss or damage
by fire, liability, casualty or any other insurance risks.
(d) Board review. The board of directors of each credit union shall formally approve the
credit union’s bond and insurance coverages. In deciding whether to approve the coverages, the
board shall review the adequacy of the standard coverage and the need for supplemental
coverage. Documentation of the board’s approval shall be included as part of the minutes of the
meeting at which the board approves coverages. Additionally, the board of directors shall review
the credit union’s bond and insurance coverages at least annually to assess the continuing
adequacy of coverage.
(e) Review by fidelity company. Credit unions which are analyzed by a fidelity company
shall notify the commissioner of the analysis within 30 days of the review commencement. The
report of the review is to be provided to the commissioner upon request. The confidentiality of
the report shall be preserved in the same manner afforded a report of examination conducted by
the department.
32
(f) Insuring organization’s bond requirements. A credit union shall also comply with all
bond requirements imposed by an insuring organization as a condition to maintain insurance on
share and deposit accounts. Any credit union that fails to meet the minimum fidelity bond
specifications contained within Part 741.201 of the NCUA Rules and Regulations may be
deemed to be engaged in an unsafe practice pursuant to Finance Code §122.255.
Source: The provisions of this §91.510 adopted to be effective August 14, 2000, 25 TexReg 7633; amended to be
effective on July 11, 2004; amended to be effective July 8, 2007, 32 TexReg 3980; reviewed and readopted to be
effective February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February 23, 2015, 40 TexReg
1112.
§91.515. Financial Reporting.
(a) Each credit union having assets of $5 million or greater shall:
(1) prepare and maintain, on an accrual basis, accurate and complete records of its
business transactions in accordance with generally accepted accounting principles, except as
otherwise directed by regulatory requirements; and
(2) prepare its financial statements and reports, including reports to the members,
board of directors, management and the department, in accordance with generally accepted
accounting principles, except as otherwise directed by regulatory requirements.
(b) Credit unions having assets of less than $5 million may use another comprehensive basis
of accounting.
(c) In addition to the quarterly report to the department as prescribed by the Act, the
commissioner may require from all credit unions or from selected categories of credit unions
other financial and statistical reports relating to financial condition and accounting practices.
Source: The provisions of this §91.515 adopted to be effective May 11, 2000, 25 TexReg 3952; amended to be
effective March 14, 2004, 29 TexReg 2637; readopted to be effective March 2, 2007, 32 TexReg 1101; reviewed and
readopted to be effective February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February 23,
2015, 40 TexReg 1112.
§91.516. Audits and Verifications.
(a) Audit requirements. At least once every calendar year, the board of directors shall obtain
or cause to be performed an annual audit of the credit union which must cover the period elapsed
since the last audit period. A summary of the audit must be reported to the members at the next
membership meeting. The audit must be conducted in accordance with generally accepted
auditing standards by a licensee of the Texas State Board of Public Accountancy or as permitted
under the provisions of §741.202(a) of the National Credit Union Administration’s Rules and
Regulations (12 CFR, Chapter VII, Part 741).
(b) Definitions.
(1) A record-keeping deficiency is serious if the commissioner reasonably believes
that the board of directors and management of the credit union have not timely met financial
reporting objectives and established practices and procedures sufficient to safeguard members’
assets.
(2) A serious recordkeeping deficiency is persistent when it continues beyond a usual,
expected or reasonable period of time.
(c) Verification obligation. The board of directors shall, at least once every two years, cause
the share, deposit, and loan accounts to be verified against the records of the credit union as
prescribed in §741.202(b) of the National Credit Union Administration’s Rules and Regulations
(12 CFR, Chapter VII, Part 741).
33
(d) Remedies. The commissioner may compel a credit union to obtain an audit and/or a
verification of members’ accounts, performed by an independent person, for any year in which
any one of the following conditions is present:
(1) the credit union has not obtained an annual audit or caused an audit/verification to
be performed;
(2) the credit union has obtained an audit/verification or performed an
audit/verification which does not meet the specified requirements; or
(3) the credit union has experienced serious and persistent recordkeeping
deficiencies.
(e) Opinion audit required. The commissioner may compel a credit union to obtain an
opinion audit performed in accordance with Generally Accepted Auditing Standards by an
independent person who is licensed by the state for any year in which the credit union has
experienced persistent serious recordkeeping deficiencies. The objective of such an audit is to
obtain an unqualified opinion on the credit union’s financial statements.
Source: The provisions of this §91.516 adopted to be effective May 11, 2000, 25 TexReg 3952; readopted to be effective
December 18, 2003, 29 TexReg 235; amended to be effective July 8, 2007, 32 TexReg 3981; reviewed and amended to be
effective on July 10, 2011, 36 TexReg 4110; reviewed and readopted to be effective February 23, 2015, 40 TexReg 1112.
Subchapter F. Accounts and Services
§91.601. Share and Deposit Accounts.
(a) Accounts. A credit union may offer any type of share or deposit accounts and prescribe
the terms and conditions relating to the accounts as established by written policies approved by
the board of directors.
(b) Policies and procedures. Each credit union, before accepting any funds for any share or
deposit accounts, shall adopt, implement and maintain appropriate policies and procedures which
address, at a minimum, asset liability management and adequate liquidity levels.
(c) Limitation on deposit accounts. Acceptance of funds from a depositor authorized by the
Act that is not within the credit union’s field of membership is subject to the limitations
prescribed by §123.201(b) of the Act. This restriction does not apply to a credit union accepting
for deposit the money of:
(1) the United States or any agent or instrumentality of the United States;
(2) this or another state; or
(3) a political subdivision of this or another state.
(d) Nonmember deposit. The written documentation evidencing a deposit under subsection
(c) of this section shall clearly and conspicuously disclose that the funds are not insured. This
section does not apply to insured deposits from other credit unions or deposits received by a
credit union with a low-income designation.
Source: The provisions of this §91.601 adopted to be effective August 14, 2000, 25 TexReg 7633; readopted to be
effective February 24, 2004, 29 TexReg 2393; readopted to be effective March 2, 2007, 32 TexReg 1101; reviewed
and readopted to be effective February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February
23, 2015, 40 TexReg 1112.
§91.602. Solicitation and Acceptance of Brokered Deposits.
(a) Definitions.
(1) Brokered deposit means any deposit that is obtained, directly or indirectly, from
or through the mediation or assistance of a deposit broker.
34
(2) Deposit broker means a person engaged in the business of placing deposits, or
facilitating the placement of deposits, of third parties with financial institutions; or the business
of placing funds with financial institutions for the purpose of selling interests in the deposit to
third parties.
(b) Limitation. A credit union that has a net worth ratio of less than six percent as defined in
§91.901 of this title (relating to Reserve Requirements) or is not deemed adequately capitalized
by its insuring organization may not accept, renew or roll over any brokered deposit unless it has
been granted a waiver by the commissioner.
(c) Risk management and due diligence. Credit unions utilizing brokered deposits shall
ensure that proper risk management practices are in place, including appropriate written
asset/liability management policies, business strategies, concentration limits, monitoring
procedures, and contingency funding plans. In addition, credit unions must implement adequate
due diligence procedures before entering into a business relationship with a deposit broker.
Source: The provisions of this §91.602 adopted to be effective August 14, 2000, 25 TexReg 7634; amended to be
effective July 11, 2004, 29 TexReg 6629; readopted to be effective March 2, 2007, 32 TexReg 1101; reviewed and
readopted to be effective February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February 23,
2015, 40 TexReg 1112.
§91.608. Confidentiality of Member Records.
(a) Confidentiality of members' accounts. No credit union officer, director, committee
member or employee may disclose to any person, other than the member, or to any company or
governmental body the individual savings, shares, or loan records of any credit union member,
contained in any document or system, by any means unless specifically authorized to do so in
writing by such members, except as follows:
(1) reporting credit experience to a bona fide credit reporting agency, another credit
union, or any other bona fide credit-granting business and/or merchants information exchange,
provided that applicable state and federal laws and regulations pertaining to credit collection and
reporting are followed;
(2) furnishing information in response to a valid request from a duly constituted
government agency or taxing authority, or any subdivision thereof, including law enforcement
agencies;
(3) furnishing information, orally or in written form, in response to the order of a court
of competent jurisdiction or pursuant to other processes of discovery duly issuing from a court of
competent jurisdiction;
(4) furnishing reports of loan balances to co-borrowers, co-makers, and guarantors of
loans of a member and of share or deposit account balances, signature card information, and related
transactions to joint account holders;
(5) furnishing information to and receiving information from check and draft
reporting, clearing, cashing and authorization services relative to past history of a member's draft
and checking accounts at the credit union; or
(6) as otherwise authorized by law, including access by examiners of the Department.
(b) Non-disclosure statement. Nothing in this rule shall prohibit the credit union from
releasing the name and address of members to assist the credit union in its marketing efforts or
sale of third party products, provided, however, that the credit union obtains a written non-
disclosure statement providing assurances that the information will be used exclusively for the
benefit of the credit union and no other.
(c) Privacy policy. Each credit union shall develop, implement and maintain a written policy
on the protection of nonpublic personal information of individual members in its possession.
35
This policy shall be consistent with the disclosure and reporting requirements applicable to
federally insured credit unions as addressed in Part 716 of NCUA Rules and Regulations.
(d) Relation to federal laws. This section shall not be construed as altering or affecting any
applicable federal statute, regulation, or interpretation that affords a member greater protection
than provided under this section.
Source: The provisions of this §91.608 adopted to be effective August 14, 2000, 25 TexReg 7634; amended to be effective July
11, 2004, 29 TexReg 6630; readopted to be effective March 2, 2007, 32 TexReg 1101; reviewed and readopted to be effective
February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February 23, 2015, 40 TexReg 1112.
§91.610. Safe Deposit Box Facilities.
(a) Purpose. Finance Code §59.110 requires credit unions to imprint keys issued to safe
deposit boxes with the institution’s routing number. In addition, it requires a report to the
Department of Public Safety if the routing number is altered or defaced so that the correct
routing number is illegible. The purpose of this section is to clarify the requirements of the noted
section of the Finance Code.
(b) Definitions. The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Credit union — This term includes all state or federal credit unions that have been
assigned a routing number unique to that institution.
(2) Routing number — The number printed on the face of a share draft or check in
fractional form or in nine-digit form that identifies a paying financial institution.
(c) Imprinting requirements. A credit union which has been issued a routing number shall
imprint that routing number on safe deposit box keys on either the head of the key or the shank
of the key if there is adequate room. The typical locations to be used are indicated in the
following instructions and diagram. The imprint can be made anywhere on the key that has the
required space available. When positioning the die on the key, be careful to place the die on the
key where it will imprint on a flat surface and not in the area of the key cuts or on any of the
shank ridges or grooves. Imprinting in these areas may interfere with the proper working of the
key in the lock and may cause damage. In the event these standard areas for the location of the
imprint are unavailable, either because of grooves on the key shank or the fact that the head of
the key already has names and other numbers imprinted on it, then the credit union may attach to
the key a tag imprinted with the routing number. The tag used must be of such a nature as to be
secure. Thus, a paper or cardboard tag or a tag affixed with string will not be acceptable.
However, any other medium such as plastic or metal which can retain an imprint of a number
shall be acceptable. The tag may be attached in any way to assure its affixation to the key.
Typically, this will mean inserting the tag or a device to affix the tag through the hole in the head
of the key normally used for placing keys on key chains. The tag method shall not be used if
there is adequate room on the key itself for imprinting the numbers. There are four standard
areas for the location of the imprinted routing number. These include: the head of the key, the
shank of the key, and either place on the reverse side of the key. The standard imprint areas are
shown as follows.
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(d) Branch designation. A credit union may, but is not required to, add a three-digit branch
designation to its routing number. Thus, the main credit union facility should receive the
designation "001" and branch facilities should receive numbers consecutively beginning with
"002" with successive numbers as needed. However, the credit union may control the branch
numbering system used provided that the credit union maintains a master list of branch
designations used for this purpose. The master list should be maintained at the main office of the
credit union and shall include the three-digit branch designation and address of facility. The
credit union then may imprint safe deposit box keys or tags with the routing number plus three-
digit branch designation for full identification of the facility.
(e) Report of defaced or altered key. Within 10 days after an officer or employee of a credit
union observes that a key used to access a safe deposit box has had the routing number altered or
defaced or the tag removed, a report shall be prepared of such incident. The report shall be on a
form promulgated by the Credit Union Department in the form of the attached Exhibit A. The
report should be submitted to the Department of Public Safety, Attention: Criminal Law
Enforcement, Box 4087, Austin, Texas 78773-0001. The report should be mailed no later than
ten days after the incident. The credit union should retain one copy of the incident report for a
period of three years. Nothing in this rule nor in the Finance Code §59.110 shall require a credit
union to inspect routing numbers imprinted on a key or an attached tag to determine if the
number has been altered or defaced.
(f) Effective date; applicability to existing keys. A credit union must imprint all safe deposit
box keys on or after September 1, 1992. Additionally, the imprinting requirement applies to all
keys issued prior to September 1, 1992. However, keys for boxes rented prior to September 1,
1992, need not be imprinted with the routing number unless and until a member presents a safe
deposit box key at a credit union for access to a box. Nothing in this rule or the Finance Code
§59.110 shall be construed to require a credit union to provide notice to its safe deposit box users
or to otherwise require such members to present their keys for imprinting. However, on the first
date after September 1, 1992, that a member presents a key which has not been imprinted, the
credit union shall imprint the key with the routing numbers as required by Finance Code
§59.110.
(g) Effect of change in routing number. In the event a credit union's routing number is
changed as a result of a merger, acquisition, or other change, safe deposit box keys need not be
replaced with a new routing number provided that the credit union maintains a master list of the
routing numbers used to imprint keys.
Source: The provisions of this §91.610 adopted to be effective August 14, 2000, 25 TexReg 7635; readopted to be
effective February 24, 2004, 29 TexReg 2393; amended to be effective July 8, 2007, 32 TexReg 3981; reviewed and
readopted to be effective February 18, 2011, 36 TexReg 1569; reviewed and readopted to be effective February 23,
2015, 40 TexReg 1112.
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REPORT OF DEFACED OR ALTERED ROUTING NUMBER
ON SAFE DEPOSIT BOX KEY
INSTRUCTIONS: Complete the information below and submit the original report to Department of Public Safety, Attn:
Criminal Law Enforcement, Box 4087, Austin, Texas 78773-0001, no later than 10 days after the defaced or altered key is used
to access the box. Retain one copy for your files for a period of three years.
CREDIT UNION INFORMATION
Name of credit union ____________________________________________________________
Address of safe deposit box facility _________________________________________________
______________________________________________________________________________
Name and title of contact person at facility ___________________________________________
______________________________________________________________________________
Area code and phone number of facility _____________________________________________
Routing number and branch designation (if any) ______________________________________
INCIDENT INFORMATION
Member name _________________________________________________________________
Date member presented defaced or altered key ________________________________________
Description of problem with key ___________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Date of reports: _________________________
Exhibit A
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Subchapter G. Lending Powers
§91.701. Lending Powers.
(a) Authorization. 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) Written Policies. Before engaging in any lending activity, each credit union shall
establish written lending policies that set prudent credit underwriting and documentation
standards for each specific type of lending activity. 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 inception
and annually, thereafter;
(6) Address loan portfolio diversification standards to avoid undue concentrations of
risk;
(7) Address loan documentation and underwriting standards that are clear and
measurable;
(8) Address loan administration procedures for monitoring the loss exposure from the
loan portfolio;
(9) Address loan pricing guidelines to ensure that the rate of return is consistent with
the risk from the lending activity; and
(10) State the lending authority delegated to any individuals or committees by the
board of directors.
(c) Loan Documentation. The lending policies shall include loan documentation practices
that:
(1) Enable the credit union to make an informed lending decision and to assess risk,
as necessary, on an ongoing basis;
(2) Identify the purpose of a loan and the source of repayment, and assess the ability
of the borrower to repay the indebtedness in a timely manner; and
(3) Ensure that any claim against a member is legally enforceable.
(d) Credit Underwriting. A credit union shall establish and maintain prudent credit
underwriting practices that:
(1) Are commensurate with the types of loans the credit union will make and consider
the terms and conditions under which they will be made;
(2) Consider the nature of the markets in which loans will be made;
(3) Provide for consideration of the member’s overall financial condition and
resources, the financial responsibility of any guarantor, the nature and value of any underlying
collateral, and the member’s character and willingness to repay as agreed;
(4) Take adequate account of concentration of credit risk; and
(5) Are appropriate to the size of the credit union and the nature and scope of its
activities.
(e) Loan Maturity Limit. Except when a higher maturity date is provided for elsewhere in
this chapter, the maturity of any loan or extension of credit to a member may not exceed 15
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years. Minimum payments, on a line of credit balance must be sufficient to amortize the
outstanding balance over a reasonable period of time and not cause negative amortization.
(f) Liquidity. In addition to establishing controls for credit risks, credit unions shall establish
procedures and guidelines to monitor and limit the total volume of loans outstanding, to ensure
adequate liquidity. In setting such guidelines, the credit union shall consider various factors such
as credit demand, the volatility of shares and deposits, and availability of alternative funding
sources.
(g) Waivers. The commissioner in the exercise of discretion may grant a waiver in writing of
any lending requirement described in this chapter. A decision to deny a waiver, however, is not
subject to appeal. A waiver request must contain the following:
(1) The requirement to be waived, the higher limit or the ratio sought;
(2) An explanation of the need for the waiver or to raise the limit or ratio; and
(3) Documentation supporting the credit union’s ability to manage the additional risk
from this activity.
Source: The provisions of this §91.701 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6266; amended to be effective March 14, 2004, 29 TexReg 2637; amended to
be effective November 9, 2006, 31 TexReg 9017; reviewed and amended to be effective November 7, 2010, 35
TexReg 9716; reviewed and readopted to be effective June 23, 2014, 39 TexReg 5203.
§91.703. Interest Rates.
(a) Loans made by each credit union shall bear interest at a rate or rates as may be
determined by the credit union’s board of directors. A board may delegate all or part of its power
to determine the interest rates on any lending transactions. The board may also authorize a 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.
Source: The provisions of this §91.703 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003; 28 TexReg 2960; readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and
amended to be effective November 7, 2010, 35 TexReg 9717; reviewed and readopted to be effective June 23, 2014,
39 TexReg 5203.
§91.704. Real Estate Lending.
(a) Definitions. For the purposes of this section, the following words and terms shall have the
following meanings, unless the context clearly indicates otherwise.
(1) First lien means any mortgage that takes priority over any other lien or
encumbrance on the same property and that must be satisfied before other liens or encumbrances
may share in proceeds from the property’s sale.
(2) Home loan means a loan that is:
(A) made to one or more individuals for personal, family, or household
purposes; and
(B) secured in whole or part by:
(i) a manufactured home, as defined by Finance Code <*>347.002,
used or to be used as the borrower’s principal residence; or
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(ii) real property improved by a dwelling designed for occupancy by
four or fewer families and used or to be used as the borrower’s
principal residence.
(3) Improved residential real estate means residential real estate containing offsite
improvements, such as access to streets, curbs, and utility connections, sufficient to make the
property ready for residential construction, and real estate in the process of being improved by a
building.
(4) Other acceptable collateral means any collateral in which the credit union has a
perfected security interest, that has a quantifiable value, and is accepted by the credit union in
accordance with safe and sound lending practices.
(5) Owner-occupied means that the owner of the underlying real property occupies a
dwelling unit of the real property as a principal residence.
(6) Readily marketable collateral means insured deposits, financial instruments, and
bullion in which the credit union has a perfected interest. Financial instruments and bullion must
be saleable under ordinary circumstances with reasonable promptness at a fair market value
determined by quotations based on actual transactions, on an auction or similarly available daily
bid and ask price market.
(b) Written Policies. Before engaging in any real estate lending, a credit union shall adopt
and maintain written policies that are appropriate for the size of the credit union and the nature
and scope of its operation. When formulating the real estate lending policy, the credit union
should consider both internal and external factors, such as its size and condition, expertise of its
lending staff, avoidance of undue concentrations of risk, compliance with all real estate laws and
rules, and general market conditions. Each policy must be consistent with safe and sound lending
practices and establish appropriate limits and standards for extensions of credit that are secured
by liens on or interests in real estate, or that are made for the purpose of financing permanent
improvements to real estate. The policies shall, in addition to the general requirements of
§91.701(b) of this title (relating to Lending Powers), address the following, as applicable:
(1) Title insurance;
(2) Escrow administration;
(3) Loan payoffs;
(4) Collection and foreclosure; and
(5) Servicing and participation agreements.
(c) Loan to Value Limitations.
(1) The board of directors shall establish its 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) Construction and Development: commercial, multifamily, and other
nonresidential--Loan to value limit 75%
(C) Interim Construction: owner-occupied residential real estate--Loan to
value limit 90%
(D) Owner occupied residential real estate (other than home equity)--Loan to
value limit 95%
(E) Other residential real estate such as a second or vacation home--Loan to
value limit 90%
(F) Home equity--Loan to value limit 80%
(G) All Other--Loan to value limit 80%
(2) The regulatory loan-to-value limits should be applied to the underlying property
that collateralizes the loan. In determining the loan to-value ratio, a credit union shall include the
41
aggregate amount of all sums borrowed, including the outstanding balances, plus any unfunded
commitment or line of credit from all sources on an item of collateral, divided by the market
value of the collateral used to secure the loan.
(d) Maximum Maturities. Notwithstanding the general 15-year maturity limit on lending
transactions to members, credit unions engaged in real estate lending are expected to have loan
policies that establish prudent standards for loan structure including tenor and amortization that
are within the risk parameters approved by the board of directors and consistent with the
following regulatory limits:
(1) Improved residential real estate loans (principal residence, first lien)--40 years
(2) Improved residential real estate loans (secondary residence, first lien)--30 years
(3) Improved residential real estate loans (investment property, first lien)--20 years
(4) Interim construction loans--18 months
(5) Manufactured home (first lien)--20 years
(6) Home equity loans--20 years (second lien)--30 years (first lien)
(7) Home improvement loans--20 years
(8) A loan secured in part, by the insurance or guarantee of, or with an advance
commitment to purchase the loan, in full or in part, by the Federal Government or any agency of
the Federal Government, may be made for the maturity specified in the law, regulations or
program under which the insurance, guarantee or commitment is provided
(e) Mortgage Fraud Notice. A credit union must provide to each applicant for a home loan a
written notice at closing. The notice must be provided on a separate document, be in at least 14-
point type, and have the following or substantially similar language: “Warning: Intentionally or
knowingly making a materially false or misleading written statement to obtain property or credit,
including a mortgage loan, is a violation of §32.32, Texas Penal Code, and, depending on the
amount of the loan or value of the property, is punishable by imprisonment for a term of 2 years
to 99 years and a fine not to exceed $10,000. “I/we, the undersigned home loan applicant(s),
represent that I/we have received, read, and understand this notice of penalties for making a
materially false or misleading written statement to obtain a home loan.“I/we represent that all
statements and representations contained in my/our written home loan application, including
statements or representations regarding my/our identity, employment, annual income, and intent
to occupy the residential real property secured by the home loan, are true and correct as of the
date of loan closing.” On receipt of the notice, the applicant shall verify the information and
execute the notice. A credit union must keep the signed notice on file with the records required
under §91.701 of this title.
(f) Excluded Transactions. It is recognized that there are a number of lending situations in
which other factors significantly outweigh the need to apply the regulatory loan-to-value limits.
As a result, an exception to the loan-to-value limits is permissible for the following loan
categories:
(1) Loans that are covered through appropriate credit enhancements in the form of
readily marketable collateral or other acceptable collateral.
(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 guaranteed, insured, or otherwise backed by the full faith and credit of the
state, a municipality, a county government, or an agency thereof, provided that the amount of the
guaranty, insurance, or assurance is at least equal to the portion of the loan that exceeds the
regulatory loan-to-value limit.
(4) Loans that are to be sold promptly after origination, without recourse, to a
financially responsible third party.
42
(5) 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.
(6) Loans that facilitate the sale of real estate acquired by the credit union in the
ordinary course of collecting a debt previously contracted in good faith.
(g) Loans to 100% of Value. A credit union may make a loan in an amount up to 100% of the
value of real property security if that part of the loan that exceeds the regulatory loan-to-value
limit is guaranteed or insured by a private corporation, organization, or other entity. The board of
directors must ensure that the credit union exercises appropriate due diligence to ensure that any
such guarantor or insurer has the financial capacity and willingness to perform under the terms of
the guaranty or insurance agreement.
(h) Registration of residential mortgage loan originators. Title V of the Housing and
Economic Recovery Act of 2008 (Public Law 110-289) requires employees of a credit union
who engage in the business of a mortgage loan originator to register with the Nationwide
Mortgage Licensing System and Registry and to obtain a unique identifier. A credit union must
comply with the requirements imposed by Part 761 of the NCUA Rules and Regulations.
Source: The provisions of this §91.704 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6267; amended to be effective November 9, 2006, 31 TexReg 9018; amended
to be effective March 2, 2008, 33 TexReg 1515; amended to be effective March 4, 2009, 34 TexReg 1399; reviewed
and amended to be effective November 7, 2010, 35 TexReg 9718; reviewed and amended to be effective November 9,
2014, 39 TexReg 8572.
§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.
Source: The provisions of this §91.705 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003, 28 TexReg 2960; readopted to be effective June 12, 2006; 31 TexReg 5152; reviewed and
readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39
TexReg 5203.
§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.
Source: The provisions of this §91.706 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003, 28 TexReg 2960; readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and
readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39
TexReg 5203.
§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
43
irreconcilable conflict between any specific requirement contained in this section and a
constitutional provision, the constitutional requirement shall prevail.
Source: The provisions of this §91.707 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003, 28 TexReg 2960; readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and
readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39
TexReg 5203.
§91.708. Real Estate Appraisals or Evaluations.
(a) Policies and Procedures. A credit union’s board of directors is responsible for reviewing
and adopting policies and procedures that establish and maintain an effective, independent real
estate appraisal and evaluation program. A credit union’s selection criteria for individuals who
may perform appraisals or evaluations must provide for the independence of the individual
performing the evaluation. That is, the individual has neither a direct nor indirect interest,
financial or otherwise, in the property or transaction. The individual selected must also be
competent to perform the assignment based upon the individual’s qualifications, experience, and
educational background. An individual may be an employee of a credit union if the individual
qualifies under the conditions and requirements contained in Part 722 of the National Credit
Union Administration Rules and Regulations.
(b) Loans Over $250,000. For real estate loans in which the amount of the loan or extension
of credit exceeds $250,000, the credit union shall obtain a professional appraisal report by a state
certified or licensed appraiser. 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, in
Washington, D.C.
(c) Loans $250,000 or Less. For a real estate loans with an amount of the loan or extension
of credit of $250,000 or less, the services of a state certified or licensed appraiser is not
necessary; however, the credit union must obtain an appropriate evaluation of real property
collateral that is supported by a written estimate of market value either performed by a qualified
individual who has demonstrated competency in performing evaluations or from tax appraisal
data of a governmental entity.
(d) Right to Require an Appraisal. The commissioner may require an appraisal under this
section, at the expense of the credit union, when the commissioner has reasonable cause to
believe the value of the collateral is overstated.
(e) Existing Loans. In the case of renewal of a loan where there has been no obvious and
material change in market conditions or physical aspects of the property that threatens the
adequacy of the credit union’s real estate collateral protection after the transaction, even with the
advancement of additional funds, a written certification of current value by the original appraiser
or an acceptable substitute shall satisfy this section.
(f) Other Appraisal Requirements. A credit union shall also comply with applicable real
estate appraisal requirements contained within Part 722 of the National Credit Union
Administration Rules and Regulations.
Source: The provisions of this §91.708 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 11, 2002, 27 TexReg 6834; amended to be effective August 10, 2003, 28 TexReg 6267; amended to
be effective November 9, 2006, 31 TexReg 9018; reviewed and amended to be effective November 7, 2010, 35
TexReg 9720; reviewed and readopted to be effective June 23, 2014, 39 TexReg 5203.
44
§91.709. Member Business Loans.
(a) A member business loan is defined as any loan, line of credit, or letter of credit (including
any unfunded commitments), 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 fully 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) to a member or associated member which, when the net member business
loan balances are added together, are equal to 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) This section does not apply to loans made by a credit union to other credit unions and
credit union service organizations.
(c) Any interest a credit union obtains in a loan that was made by another lender to the credit
union’s member is a member business loan, for purposes of this section, to the same extent as if
made directly by the credit union to its member.
(d) Any interest a credit union obtains in a nonmember loan, pursuant to §91.805 (relating to
loan participation investments) shall be treated the same as a member business loan for purposes
of this section, except that the effect of such interest on a credit union’s aggregate member
business loan limit will be as set forth in subsection (f) of this rule.
(e) A credit union with a net worth ratio greater than 6% may make member business loans
subject to the conditions of this section. The aggregate limit on a credit union’s net member
business loan balances is the lesser of 1.75 times the credit union’s net worth or 12.25% of the
credit union’s total assets. Loans that are exempt from the definition of member business loans
are not counted for the purpose of the aggregate loan limit.
(f) If a credit union holds any nonmember loan participation investments that would
constitute a member business loan if made to a member, those loans will affect the credit union’s
aggregate limit on net member business loan balances as follows:
(1) The total of the credit union’s net member business loan balances and the
nonmember participation investments must not exceed the lesser of 1.75 times the credit union’s
net worth or 12.25% of the credit union’s total assets, unless the credit union has first received
approval from the commissioner.
(2) To request approval from the commissioner, a credit union must submit a letter
application that:
(A) Includes a current copy of the credit union’s member business loan
policies;
(B) Confirms that the credit union is in compliance with all other aspects of
this rule;
(C) States the credit union’s proposed limit on the total amount of nonmember
loan participation investments that the credit union may acquire if the application is granted; and
(D) Attests that the acquisition of nonmember loan participation investments is
not being used, in conjunction with one or more other credit unions, to have the effect of trading
member business loans that would otherwise exceed the aggregate limit.
(3) If the commissioner approves the request, the commissioner will promptly
forward the request to Region IV of the NCUA for decision under NCUA rules at 12 C.F.R
45
723.16. The commissioner’s approval is not effective until the regional director of the NCUA
approves it in accordance with NCUA Rule at 12 C.F.R. 723.16.
(4) The commissioner shall deny a request to exceed the aggregate limit on a credit
union’s net member business loan balances, or may revoke a previously approved increased
aggregate limit, if the commissioner determines that:
(A) the treatment of loan purchases or participations interest will or has
resulted in circumvention of the aggregate limit;
(B) the credit union’s level of capital is not commensurate with that needed to
support the additional risks that will be or has been incurred; or
(C) the performance of the activity by the credit union will or has adversely
affected the safety and soundness of the credit union, or poses a material risk to the share
insurance fund.
(g) The aggregate amount of net member business loan balances to any one member or group
of associated members shall not be more than 15% of the credit union’s net worth (less the
Allowance for Loan Losses account) or $100,000.00, whichever is higher.
(h) All member business loans must be secured by collateral in accordance with this section,
except the following:
(1) a credit card line of credit granted to non-natural persons that is limited to routine
purposes normally made available under such lines of credit; and
(2) a loan made by a credit union under the following conditions:
(A) the aggregate of the unsecured outstanding member business loans to any
one member or group of associated members does not exceed the lesser of one hundred thousand
dollars or 2.5% of the credit union’s net worth;
(B) the aggregate of all unsecured outstanding member business loans does
not exceed ten percent of the credit union’s net worth; and
(C) the credit union has a net worth of at least seven percent.
(i) The maximum loan-to-value (LTV) ratio for a member business loan may not exceed
eighty percent, except when:
(1) the loan is secured by collateral on which the credit union will have a first
mortgage lien, and the loan is covered by private mortgage or equivalent type insurance, or
insured, guaranteed, or subject to advance commitment to purchase, by any federal or state
agency or any political subdivision of this State, but in no case may the LTV ratio exceed ninety-
five percent; or
(2) the loan is to purchase a car, van, pickup truck, or sport utility vehicle and is not
part of a fleet of vehicles, but the LTV ratio and the term for this type of vehicle loan must be
consistent with the depreciation schedule of any vehicle used for a particular type of business.
(j) A credit union that engages in this type of lending shall adopt specific member business
loan policies and review them at least annually. In addition to the general lending provisions of
this subchapter, the member business loan policies, at a minimum, shall address all of the
following areas:
(1) Types of business loans to be made and collateral requirements for each type of
loan.
(2) The maximum amount of net member business loan balances relative to the credit
union’s net worth.
(3) The maximum amount of any given category or type of member business loan
relative to the credit union’s net worth.
(4) The maximum amount that will be loaned to any one member or group of
associated members, subject to subsection (g) of this section.
(5) The qualifications and experience requirements for personnel involved in making
and servicing business loans, subject to subsection (k).
46
(6) A requirement for analysis of the member’s initial and ongoing financial capacity
to repay the debt.
(7) Documentation sufficient to support each request for an extension of credit or an
increase in an existing loan or line of credit, except where the board of directors finds that the
required documentation is not reasonably available for a particular type of loan and states the
reasons for those findings in the credit union’s written policy. At a minimum, the standard
documentation must include the following:
(A) A balance sheet;
(B) An income statement;
(C) A cash flow analysis;
(D) Income tax data;
(E) Analysis of operating performance ratios, and comparison with industry
averages, when applicable; and
(F) Receipt and the periodic updating of financial statements, income tax data,
and other documentation necessary to support the borrower’s ongoing repayment ability.
(8) Collateral requirements which include all of the following:
(A) Loan-to-value (LTV) ratios;
(B) Appraisal, determination of ownership, and insurance requirements;
(C) Environment impact assessment, when applicable; and
(D) 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 which, at a minimum, shall include the
credit union’s chief executive officer, any assistant chief executive officers, the chief financial
officer, and any associated member or immediate family member of such persons.
(10) Guidelines for purchase and sale of member business loans and loan
participations, if the credit union engages in that activity.
(k) The board of directors must use the services of an individual with at least two years direct
experience with the type of lending the credit union will be engaging in. The experience must
provide the credit union sufficient expertise given the complexity and risk exposure of the loans
in which the credit union intends to engage. A credit union can meet the experience requirement
through various approaches, including the services of a credit union service organization
(CUSO), an employee of another credit union, an independent contractor, or other third parties.
However, the actual decision to grant a loan must reside with the credit union.
(l) Any third party used by a credit union to meet the requirements of subsection (k) must be
independent from the transaction and is prohibited from having a participation in the loan or an
interest in the collateral securing the loan that the third party is responsible for reviewing, with
the following exceptions:
(1) the third party may provide a service to the credit union related to the transaction,
such as loan servicing;
(2) the third party may provide the requisite experience to the credit union and
purchase a participation interest in a loan originated by the credit union that the third party
reviewed; or
(3) a credit union may use the services of a CUSO that otherwise meets the
requirements of subsection (k) even though the CUSO is not independent from the transaction,
provided the credit union has a controlling financial interest in the CUSO as determined under
generally accepted accounting principles.
(m) Loans granted for the construction or development of commercial or residential property
are subject to the following additional requirements:
(1) The aggregate of the net member business loan balances for all construction and
development loans must not exceed 15% of the credit union’s net worth. To determine the
47
aggregate balances for purposes of this limitation, a credit union may exclude any loan made to
finance the construction of a single-family residence if a prospective homeowner has contracted
to purchase the property and may also exclude a loan to finance the construction of one single-
family residence per member-borrower or group of associated member-borrowers, irrespective of
the existence of a contractual commitment from a prospective homeowner to purchase the
property;
(2) The member borrower on such loans must have a minimum of 25% equity interest
in the project being financed, the value of which is determined by the market value of the project
at the time the loan is made, except that this requirement will not apply in the case of a loan
made to finance the construction of a single-family residence if a prospective homeowner has
contracted to purchase the property and in the case of one loan to a member-borrower or group
of associated member-borrowers to finance the construction of a single-family residence,
irrespective of the existence of a contractual commitment from a prospective homeowner to
purchase the property. Instead the collateral requirements of subsection (i) will apply; and
(3) The funds may be released only after on-site, written inspections by qualified
personnel and according to a preapproved draw schedule and any other conditions as set forth in
the loan documentation.
(n) The commissioner, consistent with safety and soundness principles, may grant a waiver
of a requirement imposed by this Section only in the following areas:
(1) Aggregate construction or development loan limits under subsection (m);
(2) Minimum borrower equity requirements for construction or development loans
under subsection (m);
(3) LTV ratio requirements for member business loans under subsection (i);
(4) Maximum aggregate net member business loan balances to any one member or
group of associated members under subsection (g); and
(5) Maximum unsecured member business loan limits under subsection (h).
(o) A waiver request authorized under subsection (n) must contain the following:
(1) A copy of the credit union’s member business lending policy;
(2) The higher limit or ratio sought;
(3) An explanation of the need to raise the limit or ratio;
(4) Documentation supporting the credit union’s ability to manage this activity; and
(5) An analysis of the credit union’s prior experience making member business loans,
including as a minimum:
(A) the history of loan losses and loan delinquency;
(B) volume and cyclical or seasonal patterns;
(C) diversification;
(D) concentrations of credit to one borrower or group of associated borrowers
in excess of 15 percent of net worth;
(E) underwriting standards and practices;
(F) types of loans grouped by purpose and collateral; and
(G) the qualifications of personnel responsible for underwriting and
administering member business loans.
(p) In determining action on a waiver request made under subsection (n), the commissioner
will consider the credit union’s:
(1) Condition and management, including compliance with regulatory net worth
requirements. If significant weaknesses exist in these financial and managerial factors, the
waiver normally will be denied.
(2) Adequacy of policies, practices, and procedures. Correction of any deficiencies
may be included as conditions, as appropriate, if an approval decision is made.
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(3) Record of performance. If the member business loan record is less than
satisfactory or otherwise problematic, the waiver normally will be denied.
(4) Elevated level of risk. If the level of risk poses safety and soundness problems or
material risks to the insurance fund, the waiver normally will be denied.
(q) The commissioner will provide the NCUA regional director with a copy of each waiver
request made under subsection (n). The regional director will be consulted on all waiver
requests. The regional director will provide NCUA's views within 30 calendar days, or NCUA
will be deemed to have concurred with the commissioner's decision. The thirty days will begin
to run once the commissioner and the regional director agree that the waiver request is complete.
(r) A credit union may not grant a member business loan if any additional income received
by the credit union or senior management employees is tied to the profit or sale of the business or
commercial endeavor for which the loan is made.
(s) A credit union may not grant a member business loan to a compensated director unless
the board of directors approves granting the loan and the compensated director is recused from
the decision making process.
(t) If a credit union makes a member business loan as part of a Small Business
Administration guaranteed loan program with loan requirements that are less restrictive than
those required by Commission Rules, then the credit union may follow the loan requirements of
the relevant Small Business Administration guaranteed loan program.
(u) For the purposes of this section, the following words and terms, when used in this
section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) 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.
(2) Construction or development loan – a financing arrangement for acquiring
property or rights to property, including land or structures, with the intent of converting the
property into income-producing property such as residential housing for rental or sale;
commercial use; industrial use; or similar use.
(3) Loan-to-value ratio – the aggregate amount of all sums borrowed including
outstanding balances plus any unfunded commitment or line of credit from all sources on an item
of collateral divided by the market value of the collateral used to secure the loan.
(4) Net Member Business Loan Balance – means the outstanding loan balance plus
any unfunded commitments, reduced by any portion of the loan that is secured by shares or
deposits in the credit union, or by shares or deposits in other financial institutions, or by a lien in
the member’s primary residence, or insured or guaranteed by any agency of the federal
government, a state or any political subdivision of such state, or sold as a participation interest
without recourse and qualifying for true sales accounting under generally accepted accounting
principles.
(5) Net Worth – means retained earnings as defined under Section 702.2 of the
National Credit Union Administration’s Rules and Regulations (12 CFR, Chapter VII, Part 702).
Source: The provisions of this §91.709 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective February 23, 2003, 28 TexReg 1377; amended to be effective on March 6, 2005, 30 TexReg 1065;
readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and readopted to be effective June 21, 2010, 35
TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39 TexReg 5203.
§91.710. Overdraft Protection.
(a) Written Policy. A credit union may advance money to a member to cover an account
deficit without having a credit application from the borrower on file if the credit union has
49
written policies and procedures adequate to address the credit, operational, and other risks
associated with this type of program. The policy must:
1. Set a cap on the total dollar amount of all overdrafts the credit union will honor
consistent with the credit union’s ability to absorb losses;
2. Establish a time limit no later than 60 calendar days from the date first overdrawn
to charge off the overdraft balance if the member does not repay the overdraft balance, or does
not obtain an approved loan from the credit union;
3. Limit the dollar amount of overdrafts the credit union will honor per account;
4. Institute prudent practices related to suspension of overdraft protection services;
and
5. Establish the fee, if any, the credit union will charge members for honoring
overdrafts.
(b) Safety and Soundness Requirements. A credit union must manage the risks associated
with an overdraft protection program in accordance with safe and sound credit union principles.
Accordingly, a credit union must establish and maintain effective risk management and control
processes over its program. Such processes include appropriate recognition, treatment, and
financial reporting, in accordance with generally accepted accounting principles, of income,
expenses, assets, liabilities, and all expected and unexpected losses associated with the program.
A credit union also shall assess the adequacy of its internal control and risk mitigation activities
in view of the nature and scope of its overdraft protection program.
(c) Communications with Member. A credit union shall carefully review its overdraft
protection program to ensure that marketing and other communications concerning the program
do not mislead members to believe that the program is a traditional line of credit or that payment
of overdrafts is guaranteed. In addition, a credit union shall take reasonable precautions to make
sure members are not misled about the correct amount of their account balance, or the costs or
scope of the overdraft protection offered, and that it does not encourage irresponsible member
financial behavior that potentially may increase risk to the credit union.
(d) Other Requirements. A credit union shall also comply with the overdraft service
requirements contained within Part 205 of the Federal Reserve System Rules and Regulations
(Regulation E).
Source: The provisions of this §91.710 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6267; amended to be effective November 9, 2006, 31 TexReg 9019; reviewed
and amended to be effective November 7, 2010, 35 TexReg 9720; reviewed and readopted to be effective June 23,
2014, 39 TexReg 5203.
§91.711. Purchase and Sale of Member Loans.
(a) Policies. A credit union may sell or purchase all or part of a participation interest in a
member loan or pool of member loans in accordance with written policies adopted by the board
of directors that address the following matters:
(1) The type of entities to which the credit union is authorized to sell participation
interests in member loans;
(2) The types of member loans in which the credit union may purchase or sell a
participation interest and the types of participation interests which may be purchased or sold;
(3) The underwriting standards to be applied in the purchase of participation interests
in member loans;
(4) Limitations on the aggregate principal amount of participation interest in member
loans that the credit union may purchase from a single entity as necessary to diversify risk, and
limitations on the aggregate amount the credit union may purchase from all entities;
50
(5) Provision for the identification and reporting of member loans in which
participation interests are sold or purchased; and
(6) Requirements for providing and securing in a timely manner adequate credit and
other information needed to make an independent judgment.
(b) Purchase and Sale Agreements. The sale or purchase of a member loan or participation
interest must be based on a written agreement between the parties. Agreements to purchase or
sell a member loan or a participation interest shall, at a minimum:
(1) Identify the particular member loan(s) to be covered by the agreement;
(2) Provide for the transfer of credit and other borrower information on a timely and
continuing basis;
(3) Provide for sharing, dividing, or assigning collateral;
(4) Identify the nature of the participation interest(s) sold or purchased;
(5) Set forth the rights and obligations of the parties and the terms and conditions of
the sale; and
(6) Contain any terms necessary for the appropriate administration of the member
loan and the protection of the participation interests of the credit union.
(c) Member Loan Servicing. A credit union may sell to or purchase from any participant the
servicing of any member loan in which it owns a participation interest. If a party other than the
credit union will be servicing the member loan(s), the credit union shall ensure that all contracts
require the servicer to administer the member loan(s) in accordance with prudent industry
standards, and provide for a possible change of the servicer if performance is inadequate.
(d) Definition. For purposes of this section, a member loan means a loan or extension of
credit where the borrower(s) is a member of the credit union or a member of another
participating credit union.
(e) Independent Credit Judgment. A credit union that purchases a participation interest in a
member loan has the responsibility of conducting member loan underwriting procedures on the
member loan to determine that it complies with the policies of the credit union and meets the
credit union’s credit standards. The credit union shall make a judgment on the creditworthiness
of the borrower that is independent of the originating lender and any intermediary seller prior to
the purchase of the participation interest and prior to any servicing action that alters the terms of
the original agreement. This credit judgment may not be delegated to any person that is not an
employee or independent agent of the credit union. A credit union that purchases a participation
interest in a member loan may use information, such as appraisals or collateral inspections,
furnished by the originating lender, or any intermediary seller; however, the purchasing credit
union shall independently evaluate such information when exercising its independent credit
judgment. The independent credit judgment shall be documented by a credit analysis that
considers the underwriting, documentation, and compliance standards that would be required by
a prudent lender and shall include an evaluation of the capacity and reliability of the servicer.
(f) Other Requirements. A credit union purchasing a participation interest in a member loan
from a lender that is not a credit union insured by the National Credit Union Share Insurance
Fund, must also comply with applicable requirements contained within Part 741 of the National
Credit Union Administration Rules and Regulations.
(g) Sales with Recourse. When a member loan or participation interest is sold with recourse,
it shall be considered, to the extent of the recourse, an extension of credit by the purchaser to the
seller, as well as an extension of credit from the seller to the borrower(s).
Source: The provisions of this §91.711 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6268; amended to be effective November 9, 2006, 31 TexReg 9019; reviewed
and amended to be effective November 7, 2010, 35 TexReg 9720; reviewed and readopted to be effective June 23,
2014, 39 TexReg 5203.
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§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.
(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) Credit cards. 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) The amount of losses caused by theft and fraud;
(B) The loss prevention measures (and their adequacy) currently employed by
the credit union;
(C) The availability and possible implementation of other loss prevention
measures such as card activation, card security codes, neural networks, and other evolving
technology; and
(D) A cost benefit analysis of supplemental insurance coverage for theft and
fraud related losses.
(2) The review shall be documented in writing, with any approved changes to the
plastic card program being entered into the minutes of the board meeting.
Source: The provisions of this §91.712 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6268; amended to be effective November 9, 2006, 31, TexReg 9020; reviewed
and readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014,
39 TexReg 5203.
§91.713. Indirect Lending.
(a) Indirect Lending Program. Credit unions may implement a program of indirect financing
of motor vehicles and other tangible personal property. As used in this chapter, an indirect
financing is the credit union’s purchase of a member’s retail installment contract that is
originated by a seller to finance the purchase of the motor vehicle or other property.
(b) Contracts Treated as a Loan. 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 decision.
52
The seller may initially determine whether the prospective buyer is a member or eligible for
membership in the credit union, but the final determination of membership eligibility is the credit
union’s responsibility.
(c) Authorization. Credit unions may purchase or hold retail installment contracts when
authorized by applicable law. The retail installment contract must provide for a rate or amount of
time price differential that does not exceed a rate or amount authorized by applicable law.
(d) Written Policies. The board of directors shall establish, implement, and maintain prudent
and reasonable written policies that are appropriate for the size and complexity of the credit
union’s indirect lending program. The board must also ensure that the credit union has sufficient
staff with the expertise to purchase, service, and monitor the program and the contract portfolio
consistent with safe and sound credit union practices. The policies must be specific and detailed
enough to foster prudent and compliant credit practices.
(e) Third Party Providers. A credit union may rely on services provided by third parties to
support its indirect lending activities. The board of directors must ensure that the credit union
exercises appropriate due diligence before entering into third party arrangements, and maintains
effective oversight and control throughout the arrangement. This oversight and control should
include a periodic review of each material seller’s retail installment contract statistics to ensure
compliance with credit union credit criteria and to avoid undue concentrations of risk.
(f) Subprime Indirect Lending. If a credit union conducts a program that includes subprime
indirect lending, it must perform comprehensive due diligence before engaging in and during that
type of activity. At a minimum, due diligence shall focus on understanding the higher levels of
credit, compliance, reputation, and other risks involved, plus the likelihood that origination,
servicing, collections, operating, and capital costs will increase. The strategic decision to engage
in subprime indirect lending must also be supported by a sound business plan that establishes
measurable financial objectives as well as limitations on growth, volume, and concentrations.
For the purposes of this section, “subprime indirect lending” refers to programs that target
borrowers with weakened credit histories typically characterized by payment delinquencies,
previous charge-offs, judgments, or bankruptcies. Such programs may also target borrowers with
questionable repayment capacity evidenced by low credit scores or high debt-burden ratios.
Source: The provisions of this §91.713 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6268; amended to be effective November 12, 2006, 31 TexReg 9020; reviewed
and amended to be effective November 7, 2010, 35 TexReg 9721; reviewed and readopted to be effective June 23,
2014, 39 TexReg 5203.
§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
53
(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
54
(3) Include any provision in a lease, or make any additional agreements, to protect its
financial position or investment in the circumstances set forth in paragraphs (1) and (2) of this
subsection.
(f) Written Policies. A credit union engaged in lease underwriting must adopt written
policies and develop procedures that reflect lease practices that control risk and comply with
applicable laws. Any leasing activity must be consistent with the lending policies and
underwriting requirements in §91.701 of this title (relating to Lending Powers). Any credit
union engaged in making or buying leases also must adopt written policies and procedures that
address the additional risks associated with leasing.
(g) Insurance Requirements. A credit union must maintain a contingent liability insurance
policy with an endorsement for leasing or be named as the co-insured if the credit union does not
own the leased property. Contingent liability insurance protects the credit union if it is sued as
the owner of the leased property. A credit union must use an insurance company with a
nationally recognized industry rating of at least a B+. Credit union members must still carry the
normal liability and property insurance on the leased property and the credit union must be
named as an additional insured on the liability insurance policy and as the loss payee on the
property insurance policy.
(h) Holding Period. At the expiration of the lease (including any renewals or extensions with
the same lessee), or in the event of a default on a lease agreement prior to the expiration of the
lease term, a credit union shall either liquidate the off-lease property or re-lease it under a
conforming lease as soon as practicable. The credit union must value off-lease property at the
lower of current fair market value or book value promptly after the property becomes off-lease
property.
Source: The provisions of this §91.714 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003, 28 TexReg 2960; amended to be effective November 12, 2006, 31 TexReg 9021; reviewed
and readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014,
39 TexReg 5203.
§91.715. Exceptions to the General Lending Policies.
(a) 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 written standards for the review and approval of
exception loans.
(b) Each credit union establishing exceptions to its general lending policies shall 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 shall also 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 will be maintained as a part of
the permanent loan file. Each credit union shall monitor compliance with its lending policies and
individually report exception loans of a significant size to its board of directors.
(c) Exception loans shall be identified in the credit union’s records and their aggregate
amount reported at least annually to the board of directors. The aggregate amount of all such
loans shall not exceed 10 percent of the credit union’s net worth.
Source: The provisions of this §91.715 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6269; amended to be effective November 12, 2006, 31 TexReg 9021; reviewed
and readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014,
39 TexReg 5203.
55
§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.
Source: The provisions of this §91.716 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003, 28 TexReg 2960; readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and
readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39
TexReg 5203.
§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.
Source: The provisions of this §91.717 adopted to be effective August 9, 1999, 24 TexReg 6023; readopted to be
effective March 25, 2003; readopted to be effective June 12, 2006, 31 TexReg 5152; reviewed and readopted to be
effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014, 39 TexReg 5203.
§91.718. Charging Off or Setting Up Reserves.
(a) The commissioner, after a determination of value in accordance with generally accepted
accounting principles, 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) The Board of directors is responsible for ensuring that the credit union has controls in
place to consistently determine the allowance for loan and lease losses (ALLL) in accordance
with its written policies, generally accepted accounting principles, and relevant supervisory
guidance. Policies shall be appropriately tailored to the size and complexity of the credit union
and its loan and lease portfolio. As a minimum, a credit union shall develop, maintain, and
document the methodology used to determine the amounts of an appropriate ALLL and
provisions for loan and lease losses. Adjustments to the ALLL shall be made prior to the end of
each calendar quarter in order to accurately reflect the loss exposure on the quarterly call reports.
Source: The provisions of this §91.718 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective August 10, 2003, 28 TexReg 6269; amended to be effective November 12, 2006, 31 TexReg 9021; reviewed
and readopted to be effective June 21, 2010, 35 TexReg 5917; reviewed and readopted to be effective June 23, 2014,
39 TexReg 5203.
§91.719. Loans to Officials and Senior Management Employees.
(a) Prohibition on Preferential Rates, Terms, and Conditions. The rates, terms, conditions,
and availability of any loan or other extension of credit made to, or endorsed or guaranteed by, a
56
director, senior management 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) Approval of Governing Board. Before making a loan, extending credit, or becoming
contractually liable to make a loan or extend credit to a director, senior management 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
worth. 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) Definition. For purposes of this section, senior management employees shall include the
chief executive officer, any assistant chief executive officers (e.g. vice presidents and above),
and the chief financial officer; and immediate family members shall include a person’s spouse or
any other person living in the same household.
(d) Aggregate Limit on Insider Loans. The aggregate of all outstanding loans or extensions
of credit made to, or endorsed or guaranteed by, all directors, credit committee members, senior
management employees, 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) Reports to Governing Board. At least annually, the president shall make a report to the
board of directors on the outstanding indebtedness of all directors, credit committee members,
senior management employees, and immediate family members of such individuals. The Board’s
review shall be included as part of the minutes of the meeting at which the report was presented.
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) Governing Board Option. At the discretion of the Board, the reporting requirement of
subsection (e) of this section may be waived for any individual if the aggregate amount of all
outstanding loans and extensions of credit to that person, the person’s business interests, and the
members of the person’s immediate family do not exceed the greater of $25,000 or one-quarter
of one percent (.25%) of the credit union’s net worth.
Source: The provisions of this §91.719 adopted to be effective August 9, 1999, 24 TexReg 6023; amended to be
effective on August 10, 2003, 28 TexReg 6269; amended to be effective March 14, 2004, 29 TexReg 2637; amended
to be effective November 12, 2006, 31 TexReg 9022; reviewed and amended to be effective November 7, 2010, 35
TexReg 9721; reviewed and readopted to be effective June 23, 2014, 39 TexReg 5203.
§91.720. Small-Dollar, Short-Term Credit.
(a) General. Credit unions are encouraged to offer small-dollar credit products that are
affordable, yet safe and sound, and consistent with applicable laws. The goal in offering these
small-dollar credit products should be to help members avoid, or transition away from, reliance
on high-cost debt. To accomplish this goal, credit unions should offer products with reasonable
interest rates, low fees, and payments that reduce the principal balance of the loan or extension of
credit.
(b) Definition. For purposes of this section, small-dollar, short term credit product is defined
as a low denomination loan or extension of credit having a term of 6 months or less, where the
amount financed does not exceed $1,100. Each credit union is responsible for establishing
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appropriate dollar limits and terms based upon its size and sophistication of operations, and its
net worth.
(c) Limitation. Accessibility and expediency are important factors for many members with
emergency or other short-term needs. Therefore, small-dollar credit products must balance the
need for quick availability of funds with the fundamentals of responsible lending. Sound
underwriting criteria should focus on a member’s history with the credit union and ability to
repay a loan within an acceptable timeframe. Given the small dollar amounts of each individual
credit request, documenting the member’s ability to repay can be streamlined and may need to
include only basic information, such as proof of recurring income. The aggregate total of
streamlined underwritten small-dollar credit products outstanding, however, shall not exceed
20% of the credit union’s net worth.
(d) Fees. A credit union may require a member to pay reasonable expenses and fees incurred
in connection with making or closing a loan. With respect to expenses and fees being assessed
on small-dollar, short–term credit products, the expenses and fees are presumed to be reasonable
if the aggregate total is $20 or less. In addition, if the credit union refinances a small-dollar,
short-term credit product, it may charge such expenses and fees only once in a 180-day period.
Credit unions may also charge a late fee as permitted by Finance Code §4124.153.
(e) Payments. Credit unions should structure payment programs in a manner that reduces the
principal owed. For closed-end products, loans should be structured to provide for affordable
and amortizing payments. Lines of credit should require minimum payments that pay off
principal. Excessive renewals or the prolonged failure to reduce the outstanding balance are signs
that the product is not meeting the member’s credit needs and will be considered an unsound
practice.
(f) Required Savings. Credit unions may structure small-dollar credit programs to include a
savings component. The funds in this account may also serve as a pledge against the loan or
extension of credit.
Source: The provisions of this §91.720 adopted to be effective July 11, 2010, 35 TexReg 5807; reviewed and
readopted to be effective June 23, 2014, 39 TexReg 5203.
Subchapter H. Investments
§91.801. Investments in Credit Union Service Organizations.
(a) Definitions. As used in this section:
(1) A credit union service organization (CUSO) is an organization whose primary
purpose is to strengthen or advance the credit union movement, serve or otherwise assist credit
unions or their operations, and provide products or services authorized by this section to credit
unions and their members.
(2) An investment in a CUSO includes the following:
(A) an investment in the stock, bonds, debentures, or other equity ownership
interest of the CUSO; and
(B) loans granted by a third party to the CUSO which are guaranteed in
writing by the credit union.
(3) A financing program is a plan, approved by the credit union’s board of directors,
that provides for multiple extensions of credit to a CUSO during the regular course of business.
(b) Authority. A credit union by itself, or with other parties, may organize, invest in or make
loans to a CUSO only if it is structured and operated in a manner that demonstrates to the public
that it maintains a legal existence separate from the credit union. A credit union and a CUSO
must operate so that:
(1) their respective business transactions, accounts, and records are not intermingled;
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(2) each observes the formalities of its separate corporate or other organizational
procedures;
(3) each is adequately capitalized as a separate unit in light of normal obligations
reasonably foreseeable in a business of its size and character;
(4) each is held out to the public as a separate and distinct enterprise;
(5) all transactions between them are at arm’s length and consistent with sound
business practices as to each of them;
(6) unless the credit union has guaranteed a loan to the CUSO, all borrowings by the
CUSO indicate that the credit union is not liable; and
(7) their respective activities are in compliance with any licensing or registration
requirements imposed by applicable federal or state law.
(c) Notice; Authorization; Supplemental Information; Written Objection.
(1) Required Notice. Before committing to any aggregate investment or loan to a
CUSO in an amount greater than 15% of the credit union’s net worth, a credit union shall
provide at least thirty days’ written notice to the commissioner of its intent to make or increase
its investment in a CUSO, or make a loan to or enter into a financing program with a CUSO.
Subject to the net worth threshold, a credit union shall also provide notice of its intent to engage
in additional or substitute activities in an existing CUSO or its intent to materially alter an
existing loan or financing program with a CUSO. The written notice shall include as applicable:
(A) a description of the organizational and legal structure of the CUSO and the
proposed method of capitalizing the organization;
(B) a description of the loan, including the purpose, terms, guarantors, and
collateral;
(C) a description of the products or services to be offered by the CUSO and
the customer base it will serve;
(D) an explanation of how the CUSO will primarily serve credit unions or
members of credit unions, or how the activities of the CUSO could be conducted directly by a
credit union or are incidental to the conduct of the business of a credit union; and
(E) a representation that the activities will be conducted in accordance with
applicable law, the requirements of this section, and in a manner that will limit exposure of the
credit union to no more than the loss of funds invested in, or loaned to, the CUSO.
(2) Authorization to Proceed. If the commissioner issues a non-objection letter, the
credit union may proceed with the proposed transaction when it receives the letter. Otherwise, a
credit union may proceed with the proposed transaction or the CUSO may engage in the new
activities 30 days after the department receives the required notice, unless the commissioner
takes one of the following actions before the expiration of that time period:
(A) the commissioner notifies the credit union that it must file additional
information supplementing the required notice. If a credit union is required to file additional
information, it may proceed with the proposed transaction or the CUSO may engage in the new
activities 30 days after the department receives the requested information, unless the
commissioner issues a written objection before the expiration of that time period; or
(B) the commissioner notifies the credit union of an objection to the proposed
transaction or new activity.
(3) Request for Supplemental Information. A credit union shall provide any
additional information reasonably requested by the commissioner.
(4) Action on a Notice. The commissioner shall object to a proposed transaction or
activity if the commissioner finds that:
(A) there is inadequate capital to support the proposed transaction or activity;
(B) the proposed transaction or activity does not comply with this section;
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(C) the credit union’s concentrated exposures to the CUSO give rise to safety
and soundness issues; or
(D) the credit union has regulatory or operational deficiencies which would
materially affect its ability to properly and effectively manage and monitor the risk associated
with the CUSO.
(5) Written Objection. If the commissioner determines that an objection should be
interposed, the commissioner will notify the credit union in writing of the determination and the
actions the credit union must take to proceed with the proposed transaction or activity. A credit
union receiving notification of an objection may appeal the commissioner’s finding to the
commission in the manner provided by Chapter 93, Subchapter C of this title (relating to Appeals
of Preliminary Determinations on Applications).
(d) Limitations. The board of directors of a credit union that organizes, invests in, or lends to
any CUSO shall adopt and maintain written policies, which establish appropriate limits and
standards for this type of investment including the maximum amount relative to the credit
union’s net worth, that will be invested in or loaned to any one CUSO. The maximum amount
invested in any one CUSO may not exceed the statutory limit established by Texas Finance Code
§124.352(b). Total investments in and total loans to CUSOs shall not, in the aggregate, exceed
10% of the total unconsolidated assets of the credit union, unless the credit union receives the
prior written approval of the commissioner. The amount of loans to CUSOs, cosigned, endorsed,
or otherwise guaranteed by the credit union, shall be included in the aggregate for the purpose of
determining compliance with the limitations of this section.
(e) Prohibitions. No credit union may invest in or make loans to a CUSO:
(1) if any officer, director, committee member, or employee of the credit union or any
member of the immediate family of such persons owns or makes an investment in or has made or
makes a loan to the CUSO;
(2) unless the organization is structured as a corporation, limited liability company,
registered limited liability partnership, or limited partnership;
(3) unless the credit union has obtained written legal advice that the CUSO has been
designed in a manner that will limit the credit union’s potential exposure to no more than the
amount of funds invested in or loaned to the CUSO;
(4) if the CUSO engages in any revenue-producing activity other than the
performance of services for credit unions or members of credit unions, and such activity equals
or exceeds one half (1/2) of the CUSO’s total revenue;
(5) unless prior to investing in or making a loan to a CUSO the credit union obtains a
written agreement which requires the CUSO to follow GAAP, render financial statements to the
credit union at least quarterly, and provide the department, or its representatives, complete access
to the CUSO's books and records at reasonable times without undue interference with the
business affairs of the CUSO;
(6) unless the CUSO is adequately bonded or insured for its operations;
(7) unless the CUSO obtains an annual opinion audit, by a licensed Certified Public
Accountant, on its financial statements in accordance with generally accepted auditing standards,
unless the investment in or loan to the CUSO by any one or more credit unions does not exceed
$100,000, or the CUSO is wholly owned and the CUSO is included in the annual consolidated
financial statement audit of its parent credit union; or
(8) if any director of the credit union is an employee of the CUSO, or anticipates
becoming an employee of the CUSO upon its formation.
(f) Permissible activities and services. The commissioner may, based upon supervisory,
legal, or safety and soundness reasons, limit any CUSO activities or services, or refuse to permit
any CUSO activities or services. Otherwise, a credit union may invest in or loan to a CUSO that
is engaged in providing products and services that include, but are not limited to:
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(1) operational services including credit and debit card services, cash services, wire
transfers, audits, ATM and other EFT services, share draft and check processing and related
services, shared service center operations, electronic data processing, development, sale, lease, or
servicing of computer hardware and software, alternative methods of financing and related
services, other lending related services, and other services or activity, including consulting,
related to the routine daily operations of credit unions;
(2) financial services including financial planning and counseling, securities
brokerage and dealer activities, estate planning, tax services, insurance services, administering
retirement, or deferred compensation and other employee or business benefit plans;
(3) internet-based or related services including sale and delivery of products to credit
unions or members of credit unions; or
(4) any other product, service or activity deemed economically beneficial or attractive
to credit unions or credit union members if approved, in writing, by the commissioner.
(g) Compensation. A credit union director, senior management employee, or committee
member or immediate family member of any such person may not receive any salary,
commission, or other income or compensation, either directly or indirectly, from a CUSO
affiliated with their credit union, unless received in accordance with a written agreement between
the CUSO and the credit union. The agreement shall describe the services to be performed, the
rate of compensation (or a description of the method of determining the amount of
compensation) and any other provisions deemed desirable by the CUSO and the credit union.
The agreement, and any amendments, must be approved by the board of directors of the credit
union and the board of directors (or equivalent governing body) of the CUSO prior to any
performance of service or payment and annually thereafter. For purposes of this section, senior
management employee shall include the chief executive officer, any assistant chief executive
officers (vice presidents and above), and the chief financial officer. Immediate family shall
include a person’s spouse or any other person living in the same household.
(h) Examination fee. If the commissioner requests a CUSO to make its books and records
available for inspection and examination, the CUSO shall pay a supplemental examination fee as
prescribed in §97.113(e) of this title (relating to Supplemental examination fees). The
commissioner may waive the supplemental examination fee or reduce the fee.
(i) Exception. A credit union which has a net worth ratio greater than six percent (6%) and is
deemed adequately capitalized by its insuring organization may make an investment in or make
loans to a CUSO that is not limited by the restriction set forth in subsection (e)(4) of this section,
provided the activities of the CUSO are limited to activities which could be conducted directly
by a credit union or are incidental to the conduct of the business of a credit union.
Notwithstanding this exception, all other provisions of the act and this chapter applicable to a
CUSO apply. In the event a credit union’s net worth declines below the required thresholds, the
credit union may not renew, extend the maturity of, or restructure an existing loan, advance
additional funds, or increase the investment in the CUSO without the prior written approval of
the commissioner.
(j) Change in Valuation. If the limitations established by this section are reached or
exceeded solely because of the profitability of the CUSO and the related GAAP valuation of the
investment under the equity method, divestiture is not required. A credit union may continue to
invest up to the limitation without regard to the increase in the GAAP valuation resulting from a
CUSO’s profitability.
Source: The provisions of this §91.801 adopted to be effective August 14, 2000, 25 TexReg 7635; adopted to be effective January
7, 2004, 29 TexReg 83; amended to be effective July 11, 2004, 29 TexReg 6630; amended to be effective July 10, 2005, 30
TexReg 3863; amended to be effective November 11, 2007, 32 TexReg 7921; amended to be effective March 4, 2009, 34 TexReg
1400; reviewed and amended to be effective March 8, 2012, 37 TexReg 1506; amended to be effective June 18, 2012, 37, TexReg
4410; reviewed and readopted to be effective June 19, 2015, 40 TexReg 4380.
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§91.802. Other Investments.
(a) Definitions. Unless the context clearly indicates otherwise, these words and terms, when
used in this section, shall have the following meanings. Any technical words, terms, or phrases
that are not specifically defined in this section shall be construed in a manner consistent with the
Texas Code of Construction Act (Tex. Govt. Code §311.001).
(1) Asset-backed security--A bond, note, or other obligation issued by a financial
institution, trust, insurance company, or other corporation secured by either a pool of loans,
extensions of credit which are unsecured or secured by personal property, or a pool of personal
property leases.
(2) Bailment for hire contract--A contract whereby a third party, bank, or other financial
institution, for a fee, agrees to exercise ordinary care in protecting the securities held in safekeeping
for its customers; also known as a custodial agreement.
(3) Bankers' acceptance--A time draft that is drawn on and accepted by a bank, and that
represents an irrevocable obligation of the bank.
(4) Borrowing repurchase transaction--A transaction whereby a credit union either:
(A) agrees to sell a security to a counterparty and to repurchase the same or any
identical security from that counterparty at a future date and at a specified price; or (B) borrows
funds from a counterparty and collateralizes the loan with securities owned by the credit union.
(5) Cash forward agreement--An agreement to purchase or sell a security with delivery
and acceptance being mandatory and at a future date in excess of 30 days from the trade date.
(6) Counterparty--An entity with which a credit union conducts investment-related
activities in such a manner as to create a credit risk exposure for the credit union to the entity.
(7) Eurodollar deposit--A deposit denominated in U. S. dollars in a foreign branch of
a United States financial institution.
(8) Federal funds transaction--A short-term or open-ended transfer of funds to a
financial institution.
(9) Financial institution--A bank or savings association, the deposits of which are
insured by the Federal Deposit Insurance Corporation, a federal or state-chartered credit union,
or the National Credit Union Central Liquidity Facility.
(10) Investment--Any security, obligation, account, deposit, or other item authorized for
investment by the Act or this section. For the purposes of this section, the term does not include an
investment authorized by §124.351(a)(1) of the Texas Finance Code.
(11) Investment repurchase transaction--A transaction in which a credit union agrees to
purchase a security from a counterparty and to resell the same or any identical security to that
counterparty at a later date and at a specified price.
(12) Mortgage related security--A security which meets the definition of mortgage related
security in United States Code Annotated, Title 15, §78c(a)(41).
(13) Nationally recognized statistical rating organization (NRSRO)--A rating
organization such as Standard and Poor’s, Moody’s, or Fitch which is recognized by the Securities
and Exchange Commission.
(14) Ordinary care--The degree of care, which an ordinarily prudent and competent
person engaged in the same line of business or endeavor should exercise under similar
circumstances.
(15) Security--An investment that has a CUSIP number or that is represented by a share,
participation, or other interest in property or in an enterprise of the issuer or an obligation of the
issuer that:
(A) either is represented by an instrument issued in bearer or registered form or,
if not represented by an instrument, is registered in books maintained to record transfers by or on
behalf of the issuer;
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(B) is of a type commonly traded on securities exchanges or markets or, when
represented by an instrument, is commonly recognized in any area in which it is issued or traded as
a medium for investment; and
(C) either is one of a class or series or by its terms is divisible into a class or
series of shares, participations, interests, or obligations.
(16) Settlement date--The date originally agreed to by a credit union and a vendor for
settlement of the purchase or sale of a security.
(17) Small business-related securities -- is a security as defined in Section 3(a)(53) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(53). This definition does not include Small
Business Administration securities permissible under section 107(7) of the Federal Credit Union
Act.
(18) Trade date--The date a credit union originally agrees, whether orally or in writing, to
enter into the purchase or sale of a security.
(19) Yankee dollar deposit--A deposit in a United States branch of a foreign bank, the
deposits of which are insured by the Federal Deposit Insurance Corporation, that is licensed to do
business in the state in which it is located, or a deposit in a state chartered, foreign controlled bank.
(b) Policy. A credit union may invest funds not used in loans to members, subject to the
conditions and limitations of the written investment policy of the board of directors. The
investment policy may be part of a broader, asset-liability management policy. The board of
directors must review and approve the investment policy at least annually to ensure that the
policies adequately address the following issues:
(1) The types of investments that are authorized to be purchased.
(2) The aggregate limit on the amount that may be invested in any single investment
or investment type, set as a percentage of net worth. This requirement does not apply to
certificates of deposit or other accounts issued by a financial institution that are fully insured
(including accumulated interest) by either the Federal Deposit Insurance Corporation or the
National Credit Union Administration.
(3) The delegation of investment authority to the credit union’s officials or employees,
including the person or persons authorized to purchase or sell investments, and a limit of the
investment authority for each individual or committee.
(4) The authorized broker-dealers or other third-parties that may be used to purchase
or sell investments, and the internal process for assessing the credentials and previous record of
the individual or firm.
(5) The risk management framework given the level of risk in the investment
portfolio. This will include specific methods for evaluating, monitoring, and managing the credit
risk, interest-rate risk, and liquidity risk from the investment activities.
(6) The authorized third-party safekeeping agents.
(7) If the credit union operates a trading account, the policy shall specify the persons
authorized to engage in trading account activities, trading account size limits, stop loss and sale
provisions, time limits on inventoried trading account investments, and internal controls that specify
the segregation of risk-taking and monitoring activities related to trading account activities.
(8) The procedure for reporting to the board of directors investments and investment
activities that become noncompliant with the credit union’s investment policy subsequent to the
initial purchase.
(c) Authorized activities.
(1) General authority. A credit union may contract for the purchase or sale of a security
provided that delivery of the security is by regular-way settlement. Regular-way settlement means
delivery of a security from a seller to a buyer within the time frame that the securities industry has
established for that type of security. All purchases and sales of investments must be delivery versus
payment (i.e., payment for an investment must occur simultaneously with its delivery).
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(2) Cash forward agreements. A credit union may enter into a cash forward agreement
to purchase or sell a security, provided that:
(A) the period from the trade date to the settlement date does not exceed 90 days;
(B) if the credit union is the purchaser, it has written cash flow projections
evidencing its ability to purchase the security;
(C) if the credit union is the seller, it owns the security on the trade date; and
(D) the cash forward agreement is settled on a cash basis at the settlement date.
(3) Investment repurchase transactions. A credit union may enter an investment
repurchase transaction provided:
(A) the purchase price of the security obtained in the transaction is at or below
the market price;
(B) the repurchase securities are authorized investments under Texas Finance
Code §124.351 or this section;
(C) the credit union has entered into signed contracts with all approved
counterparties;
(D) the counterparty is rated in one of the three highest long-term or counterparty
rating categories by a NRSRO; and
(E) the credit union receives a daily assessment of the market value of the
repurchase securities, including accrued interest, and maintains adequate margin that reflects a risk
assessment of the repurchase securities and the term of the transaction.
(4) Borrowing repurchase transactions. A credit union may enter into a borrowing
repurchase transaction, which is a borrowing transaction subject to §123.201 of the Texas Finance
Code, provided:
(A) any investments purchased by the credit union with either borrowed funds or
cash obtained by the credit union in the transaction are authorized investments under Texas Finance
Code §124.351 and this section;
(B) the credit union has entered into signed contracts with all approved
counterparties; and
(C) investments referred to in subparagraph (A) of this paragraph mature no later
than the maturity date of the borrowing repurchase transaction; and
(D) the counterparty is rated in one of the three highest long-term or counterparty
rating categories by a NRSRO.
(5) Federal funds. A credit union may enter into a federal funds transaction with a
financial institution, provided that the interest or other consideration received from the financial
institution is at the market rate for federal funds transactions and that the transaction has a maturity
of one or more business days or the credit union is able to require repayment at any time.
(6) Yankee dollars. A credit union may invest in yankee dollar deposits.
(7) Eurodollars. A credit union may invest in eurodollar deposits.
(8) Bankers' acceptance. A credit union may invest in bankers' acceptances.
(9) Open-end Investment Companies (Mutual Funds). A credit union may invest funds
in an open-end investment company established for investing directly or collectively in any
investment or investment activity that is authorized under Texas Finance Code §124.351 and this
section, including qualified money market mutual funds as defined by Securities and Exchange
Commission regulations.
(10) U.S. Government-sponsored enterprises. A credit union may invest in obligations of
U.S. Government sponsored enterprises such as, for example: the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association,
and the Federal Farm Credit Bank.
(11) Commercial paper. A credit union may invest in commercial paper issued by a
corporation domiciled within the United States and having a short-term or commercial paper rating
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of no less than A1 or P1 by Standard & Poor's or Moody's, respectively, or an equivalent rating by a
NRSRO.
(12) Corporate bonds. A credit union may invest in corporate bonds issued by a
corporation domiciled in the United States. The bonds must be rated by a NRSRO in one of the two
highest long-term rating categories and have remaining maturities of seven years or less.
(13) Municipal bonds. A credit union may invest in municipal bonds rated by a NRSRO
in one of the two highest long-term rating categories with remaining maturities of seven years or
less.
(14) Mortgage-related securities. With the exception of the residual interest of the
mortgage-related security, a credit union may invest in mortgage-related securities backed by
mortgages secured by real estate upon which is located a residential dwelling, a mixed residential
and commercial structure, or a residential manufactured home. The security must be rated by a
NRSRO in one of the two highest long-term rating categories.
(15) Asset-backed securities. Provided the underlying collateral is domestic- and
consumer-based, a credit union may invest in asset-backed securities which are rated by a NRSRO
in one of the two highest long-term rating categories.
(16) Small business-related securities. A credit union may invest in small business-
related securities that represent an interest in one or more promissory notes or leases of personal
property evidencing the obligation of a domestic small business concern and originated by a
financial institution, insurance company, or similar institution which is regulated and supervised by
a Federal or State authority. The securities must be rated by a NRSRO in one of the two highest
long-term rating categories and have remaining maturities of seven years or less.
(17) Derivative authority. A credit union may enter into certain derivative transactions
exclusively for the purpose of decreasing interest rate risk. The transaction is used to manage risk
arising from otherwise permissible credit union activities and not entered into for speculative
purposes. Permissible derivatives include interest rate swaps, options on swaps, interest rate caps,
interest rate floors, and Treasury futures. Derivative authority is restricted to the provisions outlined
under Subpart B of Part 703 of the National Credit Union Administration Rules and Regulations.
(d) Documentation. A credit union shall maintain files containing credit and other information
adequate to demonstrate evidence of prudent business judgment in exercising the investment powers
under the Act and this rule including:
(1) Except for investments that are issued, insured or fully guaranteed as to principal
and interest by the U.S. Government or its agencies, enterprises, or corporations or fully insured
(including accumulated interest) by the National Credit Union Administration or the Federal
Deposit Insurance Corporation, a credit union must conduct and document a credit analysis of the
issuing entity and/or investment before purchasing the investment. The credit union must update the
credit analysis at least annually as long as the investment is held.
(2) Credit and other due diligence documentation for each investment shall be
maintained as long as the credit union holds the investment and until it has been both audited and
examined. Before purchasing or selling a security, a credit union must obtain either price quotations
on the security (or a similarly-structured security) from at least two broker-dealers or a price
quotation on the security (or similarly-structured security) from an industry-recognized information
provider. If a credit union is unable to obtain a price quotation required by this subsection for a
particular security, then it can compare prices using nominal or option-adjusted spreads, or spreads
to TBA (to-be-announced) mortgage backed securities. This requirement to obtain a price quotation
does not apply to new issues purchased at par or at original issue discount.
(3) The reference to and use of NRSRO credit ratings in this rules provides a minimum
threshold and is not an endorsement of the quality of the ratings. Credit unions must conduct their
own independent credit analyses to determine that each security purchased presents an acceptable
credit risk, regardless of the rating.
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(e) Classification. A credit union must classify a security as hold-to-maturity, available-for-sale,
or trading, in accordance with generally accepted accounting principles and consistent with the
credit union’s documented intent and ability regarding the security.
(f) Purchase or Sale of Investments Through a Third-Party.
(1) A credit union may purchase and sell investments through a broker-dealer as long as
the broker-dealer is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.) or is a financial institution whose broker-dealer
activities are regulated by a federal or state regulatory agency.
(2) Before purchasing an investment through a broker-dealer, a credit union must
analyze and annually update the following information.
(A) The background of the primary sales representative and the local broker-
dealer firm with whom the credit union is doing business, using information available from federal
or state securities regulators and securities industry self-regulatory organizations, such as the
Financial Industry Regulatory Authority and the North American Securities Administrators
Association, about any enforcement actions against the broker-dealer firm, its affiliates, or
associated personnel.
(B) If the broker-dealer is acting as the credit union’s counterparty, the ability of
the broker-dealer and its subsidiaries or affiliates to fulfill commitments, as evidenced by capital
strength, liquidity, and operating results. The credit union should consider current financial data,
annual reports, long-term or counterparty ratings that have been assigned by NRSROs, reports of
NRSROs, relevant disclosure documents such as annual independent auditor reports, and other
sources of financial information.
(3) Paragraphs (1) and (2) of this subsection do not apply when a credit union purchases
a certificate of deposit or share certificate directly from a bank, credit union, or other financial
institution.
(g) Discretionary Control Over Investments and Investment Advisers.
(1) Except as provided in paragraph (2) of this subsection, a credit union must retain
discretionary control over its purchase and sale of investments. A credit union has not delegated
discretionary control to an investment adviser when the credit union reviews all recommendations
from the investment adviser and is required to authorize a recommended purchase or sale
transaction before its execution.
(2) A credit union may delegate discretionary control over the purchase and sale of
investments in an aggregate amount not to exceed 100% of its net worth at the time of delegation to
persons other than the credit union’s officials or employees, provided each such person is an
investment adviser registered with the Securities and Exchange Commission under the Investment
Advisers Act of 1940 (15 U.S.C. 80b).
(3) Before transacting business with an investment adviser to which discretionary
control has been granted, and annually thereafter, a credit union must analyze the adviser’s
background and information available from federal and state securities regulators and securities
industry self-regulatory organizations, including any enforcement actions against the adviser,
associated personnel, and the firm for which the adviser works.
(4) A credit union may not compensate an investment adviser with discretionary control
over the purchase and sale of investments on a per transaction basis or based on capital gains,
capital appreciation, net income, performance relative to an index, or any other incentive basis.
(5) A credit union must obtain a report from its investment adviser at least monthly that
details the investments under the adviser’s control and their performance.
(h) Investment Practice Permitted to Federal Credit Unions.
If an applicant credit union proposes to make the same type of investment which a federally
chartered credit union has been granted permission to make, the commissioner shall grant the
application unless the commissioner finds that due to the financial position or the state of
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management of the applicant credit union, the proposed investments or deposits would not be sound
or prudent investment practices for the applicant credit union. The commissioner may instead grant
the application conditionally, grant in modified form, or deny the application.
(i) Modification or Revocation of Investment Authority.
If the commissioner finds that due to the financial condition or management of a credit union, an
investment practice authorized by this section has ceased to be a safe and prudent practice, the
commissioner shall inform the board of directors of the credit union, in writing, that the authority to
engage in the practice has been revoked or modified. The credit union’s directors and management
shall immediately take steps to begin liquidating the investments in question or make the
modification required by the commissioner. The commissioner for cause shown may grant the
credit union a definite period of time to comply with the commissioner’s orders. Credit unions
which continue to engage in investment practices after their authority to do so has been revoked or
modified will be treated as if the authority to engage in the practice had never been granted, and
their actions may be deemed an unsound practice and a willful violation of an order of the
commissioner and may be grounds for appropriate supervisory action against the credit union, its
directors or officers.
(j) Waivers.
(1) The commissioner in the exercise of discretion may grant a written waiver,
consistent with safety and soundness principles, of a requirement or limitation imposed by this
subchapter. A decision to deny a waiver is not subject to appeal. A waiver request must contain
the following:
(A) A copy of the credit union’s investment policy;
(B) The higher limit or ratio sought;
(C) An explanation of the need to raise the limit or ratio; and
(D) Documentation supporting the credit union’s ability to manage this activity;
(2) In determining action on a waiver request made under this subsection, the
commissioner will consider the:
(A) Credit union’s financial condition and management, including compliance
with regulatory net worth requirements. If significant weaknesses exist in these financial and
managerial factors, the waiver normally will be denied.
(B) Adequacy of the credit union’s policies, practices, and procedures.
Correction of any deficiencies may be included as conditions, as appropriate, if the waiver is
approved.
(C) Credit union’s record of investment performance. If the credit union’s record
of performance is less than satisfactory or otherwise problematic, the waiver normally will be
denied.
(D) Credit union’s level of risk. If the level of risk poses safety and soundness
problems or material risks to the insurance fund, the waiver normally will be denied.
Source: The provisions of this §91.802 adopted to be effective February 11, 2001, 26 TexReg 1135;
amended to be effective August 11, 2002, 27 TexReg 6835; amended to be effective November 14, 2004,
29 TexReg 10254; amended to be effective November 11, 2007, 32 TexReg 7922; amended to be effective
July 12, 2009, 34 TexReg 4512; reviewed and amended to be effective November 13, 2011, 36 TexReg
7540; reviewed and amended to be effective November 8, 2015, 40 TexReg 7663.
§91.803. Investment Limits and Prohibitions.
(a) Limitations. With the exception of deposits held by a Federal Reserve Bank, a credit
union may invest no more than 50% of its net worth with any single obligor or related obligors.
This limitation also does not apply to the extent that the investment is insured or guaranteed by
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the United States government, or an agency, sponsored enterprise, corporation, or instrumentality
of the United States government, or to any trust or trusts established for investing, directly or
collectively, in such securities, obligations, or instruments. For the purposes of this section,
obligor is defined as an issuer, trust, or originator of an investment, including the seller of a loan
participation.
(b) Designated Depository. As a single exception to subsection (a) of this section, a credit
union’s board of directors may establish the maximum aggregate deposit limit for a single
financial institution approved by the board as the credit union’s designated depository. This
deposit limit shall be a percentage of net worth and must be based on the credit union's liquidity
trends and funding needs as documented by its asset/liability management policy. This authority
is contingent upon the credit union appropriately documenting its due diligence to demonstrate
that the investments in this designated depository do not pose a safety and soundness concern.
The credit union’s board of directors shall review and approve at least annually the maximum
aggregate deposit limit for its designated depository. The review shall include a current due
diligence analysis of the financial institution.
(c) Prohibited Activities.
(1) Definitions.
(A) Adjusted trading--selling an investment to a counterparty at a price above its
current fair value and simultaneously purchasing or committing to purchase from the counterparty
another investment at a price above its current fair value.
(B) Collateralized mortgage obligation (CMO)--a multi-class bond issue
collateralized by mortgages or mortgage-backed securities.
(C) Commercial mortgage related security--a mortgage related security except
that it is collateralized entirely by commercial real estate, such as a warehouse or office building,
or a multi-family dwelling consisting of more than four units.
(D) Fair value--the price at which a security can be bought or sold in a current,
arm’s length transaction between willing parties, other than in a forced or liquidation sale.
(E) Real estate mortgage investment conduit (REMIC)--a nontaxable entity
formed for the sole purpose of holding a fixed pool of mortgages secured by an interest in real
property and issuing multiple classes of interests in the underlying mortgages.
(F) Residual interest--the remainder cash flows from a CMO/REMIC, or other
mortgage-backed security transaction, after payments due bondholders and trust administrative
expenses have been satisfied.
(G) Short sale--the sale of a security not owned by the seller.
(H) Stripped mortgage-backed security--a security that represents either the
principal-only or the interest-only portion of the cash flows of an underlying pool of mortgages or
mortgage-backed securities.
(I) Zero coupon investment--an investment that makes no periodic interest
payments but instead is sold at a discount from its face value. The holder of a zero coupon
investment realizes the rate of return through the gradual appreciation of the investment, which is
redeemed at face value on a specified maturity date.
(2) A credit union may not:
(A) Use financial derivatives for replication, or for any purposes other than
hedging;
(B) Engage in adjusted trading or short sales;
(C) Purchase stripped mortgage backed securities;
(D) Purchase residual interests in CMOs/REMICs, or other structured mortgage
backed securities;
(E) Purchase mortgage servicing rights as an investment but may retain
mortgage servicing rights on a loan originated by the credit union and sold on the secondary market;
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(F) Purchase commercial mortgage related securities of an issuer other than a
U.S. Government sponsored enterprise;
(G) Purchase any security that has the capability of becoming a first credit loss
piece which supports another more senior security;
(H) Purchase a zero coupon investment with a maturity date that is more than 10
years from the settlement date;
(I) Purchase investments whereby the underlying collateral consists of foreign
receivables or foreign deposits;
(J) Purchase securities used as collateral by a safekeeping concern;
(K) Purchase exchangeable mortgage backed securities, unless they are fully
compliant with the provisions outlined in Part 703 of the National Credit Union Administration
Rules and Regulations; or
(L) Purchase securities convertible into stock at the option of the issuer.
(d) Investment pilot program.
(1) The commissioner may authorize a limited number of credit unions to engage in
other types of investment activities under an investment pilot program. A credit union wishing to
participate in an investment pilot program shall submit a request that addresses the following
items:
(A) Board policies approving the activities and establishing limits on them;
(B) A complete description of the activities, with specific examples of how the
credit union will conduct them and how they will benefit the credit union;
(C) A demonstration of how the activities will affect the credit union’s financial
performance, risk profile, and asset-liability management strategies;
(D) Examples of reports the credit union will generate to monitor the activities;
(E) A projection of the associated costs of the activities, including personnel,
computer, audit, etc.;
(F) A description of the internal systems to measure, monitor, and report the
activities, and the qualifications of the staff and/or official(s) responsible for implementing and
overseeing the activities; and
(G) The internal control procedures that will be implemented, including audit
requirements.
(2) In connection with a request to participate in an investment pilot program, the
commissioner will consider the general nature and functions of credit unions, as well as the specific
financial condition and management of the applicant credit union, as revealed in the request,
examinations, or such other information as may be available to the commissioner. The
commissioner may approve the request, approve the request conditionally, approve it in modified
form, or deny it in whole or in part. A decision by the commissioner concerning participation in an
investment pilot program is not appealable.
(3) The commissioner may find that an investment pilot program previously authorized
is no longer a safe and prudent practice for credit unions generally to engage in, or has become
inconsistent with applicable state or federal law, or has ceased to be a safe and prudent practice for
one or more particular credit unions in light of their financial condition or management. Upon such
a finding, the commissioner will send written notice informing the board of directors of any or all of
the credit unions engaging in such a practice that the authority to engage in the practice has been
revoked or modified. When the commissioner so notifies any credit union, its directors and officers
shall forthwith take steps to liquidate the investments in question or to make such modifications as
the commissioner requires. Upon demonstration of good cause, the commissioner may grant a
credit union some definite period of time in which to arrange its affairs to comply with the
commissioner’s direction. Credit unions which continue to engage in investment practices where
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their authority to do so has been revoked or modified will be deemed to be engaging in an unsound
practice.
Source: The provisions of this §91.803 adopted to be effective July 9, 2001, 26 TexReg 5001; amended to
be effective July 11, 2004, 29 TexReg 6632; amended to be effective November 11, 2007, 32 TexReg
7922; reviewed and amended to be effective November 13, 2011, 36 TexReg 7544; reviewed and amended
to be effective November 8, 2015, 40 TexReg 7664.
§91.804. Custody And Safekeeping.
(a) A credit union’s purchased investments and repurchased collateral must be in its
possession, recorded as owned by the credit union through the federal reserve book-entry system,
or be held by a board-approved safekeeper under a bailment for hire contract or a custodial
arrangement subject to regulation by the Securities and Exchange Commission. Any safekeeper
used by a credit union must be regulated and supervised by either the Securities and Exchange
Commission or a federal or state financial institution regulatory agency. For the purposes of this
section a bailment for hire contract has the same meaning as in §91.802 (relating to Other
Investments). Annually, a credit union must analyze the ability of any safekeeper used by the
credit union to fulfill its custodial responsibilities, as evidenced by capital strength and financial
conditions. The credit union should consider current financial data, annual reports, reports of
nationally-recognized statistical rating organizations (NRSROs), relevant disclosure documents
such as annual independent auditor reports, and other sources of financial information. At least
monthly, a credit union must obtain and reconcile a statement of purchased investments and
repurchased collateral held in safekeeping.
(b) A credit union that invests funds in a certificate of deposit in a financial institution as
defined in §91.802 (relating to Other Investments) shall hold such certificate of deposit in the
name of the credit union or, if held by a safekeeper or registered broker-dealer, in the
safekeeper’s or registered broker-dealer’s name as custodial nominee for a credit union. Any
certificate of deposit held by a safekeeper or registered broker-dealer as custodial nominee for a
credit union or the credit union’s registered broker or dealer must be eligible for extended or
flow-through insurance coverage to the credit union through either the Federal Deposit Insurance
Corporation or the National Credit Union Share Insurance Fund.
Source: The provisions of this §91.804 adopted to be effective August 14, 2000, 25 TexReg 7636; amended to be
effective July 11, 2004, 29 TexReg 6632; amended to be effective March 6, 2005, 30 TexReg 1065; amended to be
effective November 11, 2007, 32 TexReg 7922; reviewed and amended to be effective November 13, 2011, 36
TexReg 7544; reviewed and readopted to be effective June 19, 2015, 40 TexReg 4380.
§91.805. Loan Participation Investments.
(a) A credit union may purchase a participation interest in a loan, where the borrower is
neither a member of the credit union or a member of another participating credit union, as
permitted by §124.351(a)(8) of the Texas Finance Code, provided the following conditions are
satisfied:
(1) the purchase complies with all regulatory requirements to the same extent as if the
credit union had originated the loan;
(2) the originating lender retains at least 10 percent of the outstanding balance of the
loan through the life of the loan;
(3) the purchase complies with the credit union's investment policy, which, at a
minimum, must:
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(A) establish the same degree of independent credit and collateral analysis as if
the credit union was the originator; and
(B) establish commitment limits for aggregate purchased participations, out-of-
area participations, and loans originated by individual lead institutions.
(4) the written loan participation agreement fully describes the lead institution's
responsibilities, establishes requirements for obtaining timely borrower credit information,
addresses remedies upon default, and outlines dispute resolution procedures.
(b) Financial Reporting. A participation interest in a non-credit union member loan purchased
under this section shall be reported in accordance with generally accepted accounting principles.
(c) Other Requirements. A credit union purchasing a loan participation investment must also
comply with applicable requirements contained within Part 741 of the National Credit Union
Administration Rules and Regulations.
Source: The provisions of this §91.805 adopted to be effective August 14, 2000, 25 TexReg 7636; readopted
to be effective February 24, 2004, 29 TexReg 2393; amended to be effective November 11, 2007, 32 TexReg
7923; reviewed and amended to be effective November 13, 2011, 36 TexReg 7544; reviewed and amended to
be effective November 8, 2015, 40 TexReg 7655.
§91.808. Reporting Investment Activities to the Board of Directors.
(a) A credit union shall provide its board of directors a monthly comprehensive report of
investment activities, including:
(1) investments purchased and sold during the month;
(2) unrealized market gains or losses compared to book value for each security at
month’s end;
(3) fair or market value of each security;
(4) total book value of investments outstanding at month’s end;
(5) unrecorded and unreported obligations to buy or sell investments; and
(6) amount of investments, other than deposits and investments in designated
depositories, that are not either issued by, or fully guaranteed as to principal and interest by, the
Federal Deposit Insurance Corporation, the National Credit Union Administration, the United
States or any agency, enterprise, corporation, or instrumentality of the United States, or in any
trust or trusts established for investing, directly or collectively, in such securities, obligations or
instruments.
(b) The credit union shall also provide a quarterly report to the board of directors that
summarizes the volatility of the entire security portfolio, if the aggregate amount of securities
with one or more of the features included below exceeds the credit union’s net worth:
(1) embedded options;
(2) remaining maturities greater than three years; or
(3) coupon formulas that are related to more than one index or are inversely related
to, or multiples of, an index.
(c) The report described in subsection (b) of this section must provide a reasonable and
supportable estimate of the potential impact, in percentage and dollar terms, of an immediate and
sustained parallel shift in market interest rates of plus and minus 300 basis points on the:
(1) fair value of each security in the entire portfolio;
(2) fair value of the entire security portfolio as a whole; and
(3) credit union’s net worth.
(d) For the purposes of this section, an embedded option means a characteristic of an
investment that gives the issuer or holder the right to alter the level and timing of the cash flows
of the investment. Embedded options include call and put provisions and interest rate caps and
floors. Since a prepayment option in a mortgage is a type of call provision, a mortgage-backed
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security composed of mortgages that may be prepaid is an example of an investment with an
embedded option.
Source: The provisions of this §91.808 adopted to be effective February 11, 2001, 26 TexReg 1137; readopted to be
effective February 24, 2004, 29 TexReg 2393; amended to be effective November 11, 2007, 32 TexReg 7923;
reviewed and readopted to be effective June 20, 2011, 36 TexReg 4152; amended to be effective July 8, 2012; 37
TexReg 4888; reviewed and readopted to be effective June 19, 2015, 40 TexReg 4380.
Subchapter I. Reserves and Dividends
§91.901. Reserve Requirements.
(a) Definitions. The words and terms, when used in this chapter, shall have the following
meanings, unless the context clearly indicates otherwise.
(1) Net worth means the retained earnings balance of the credit union as determined
under generally accepted accounting principles. Retained earnings consist of undivided earnings,
regular reserves, and any other appropriations designated by management, the insuring organization,
or the commission. This means that only undivided earnings and appropriations of undivided
earnings are included in net worth. Net worth does not include the allowance for loan and lease
losses account.
(2) Net worth ratio means, with respect to a credit union, the ratio of the net worth of the
credit union to the total assets of the credit union.
(3) Total assets means the average of the total assets as measured using one of the
following methods:
(A) average quarterly balance. The average of quarter-end balances of the four
most recent calendar quarters; or
(B) average monthly balance. The average of month-end balances over the three
calendar months of the calendar quarter; or
(C) average daily balance. The average daily balance over the calendar quarter;
or
(D) quarter-end balance. The quarter-end balance of the calendar quarter as
reported on the credit union's call report.
(b) In accordance with the requirements of §122.104 of the Act, state-chartered credit unions
shall set aside a portion of their current gross income, prior to the declaration or payment of
dividends, as follows:
(1) A credit union with a net worth ratio below 7.0% shall increase the dollar amount of
its net worth reserves by the following amounts at the indicated intervals until its net worth ratio
equals 7.0% of total assets:
(A) in the case of a monthly dividend period, net worth must increase monthly
by an amount equivalent to at least 0.0334% of its total assets; and
(B) in the case of a quarterly, semi-annual or annual dividend period, net worth
must increase quarterly by an amount equivalent to at least 0.1% per quarter of its total assets.
(2) For a credit union in operation less than ten years and having assets of less than $10
million, a business plan must be developed that reflects, among other items, net worth projections
consistent with the following:
(A) 2.0% net worth ratio by the end of the third year of operation;
(B) 3.5% net worth ratio by the end of the fifth year of operation;
(C) 6.0% net worth ratio by the end of the seventh year of operation; and
(D) 7.0% net worth ratio by the time it reaches $10 million in total assets or by
the end of the tenth year of operation, whichever is shorter.
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(3) Whenever the net worth ratio falls below 7.0%, the credit union shall transfer a
portion of its current period net income to its regular reserve in such amounts as described in
paragraph (1) of this subsection.
(4) Special reserves. In addition to the regular reserve, special reserves to protect the
interest of members may be established by board resolution or by order of the commissioner, from
current income or from undivided earnings. In lieu of establishing a special reserve, the
commissioner may direct that all or a portion of the undivided earnings and any other reserve fund
be restricted. In either case, such directives must be given in writing and state with reasonable
specificity the reasons for such directives.
(5) Insuring organization’s capital requirements. As applicable, a credit union shall also
comply with any and all net worth or capital requirements imposed by an insuring organization as a
condition to maintaining insurance on share and deposit accounts. For federally-insured credit
unions this includes all prompt corrective action requirements contained within Part 702 of the
NCUA Rules and Regulations.
(6) Decrease in Required Reserve Transfer. The commissioner, on a case-by-case basis,
and after receipt of a written application, may permit a credit union to transfer an amount that is less
than the amount required under paragraph (1) of this subsection. A credit union shall submit such
statements and reports as the commissioner may, in his discretion, require in support of a decreased
transfer request. The application must be received no later than 10 days before the quarter end and
shall include but not be limited to:
(A) An explanation of the need for the reduced transfer amount;
(B) Financial statement reflecting the fiscal impact of the required transfer; and
(C) Documentation supporting the credit union’s ability to resume the required
transfer at a future date certain.
(7) Financial Plan. A credit union that is not capable of making the prescribed reserve
transfer under paragraph (1) of this subsection for three consecutive quarters, shall file a written
financial plan detailing a quarterly timetable of steps the credit union will take to increase its net
worth ratio and fully comply with this section in the future. A credit union shall file and implement
the financial plan within 45 days of the triggering quarter end date. A credit union may, after prior
written notice to the Department, amend its financial plan to reflect a change in circumstances.
Failure to meet the terms of the financial plan may be considered a violation of a written agreement
with the commissioner under §122.255 of the Finance Code.
(c) Revised business plan for new credit unions. A credit union that has been in operation
for less than ten years and has assets of less than $10 million shall file a written revised business
plan within 30 calendar days of the date the credit union’s net worth ratio has failed to increase
consistent with its current business plan. Failure to submit a revised business plan, or
submission of a plan not adequate to either increase net worth or increase net worth within a
reasonable time; or failure of the credit union to implement its revised business plan, may trigger
the regulatory actions described in subsection (b)(4) of this section.
(d) Unsafe practice. Any credit union which has less than a 6.0% net worth ratio may be
deemed to be engaged in an unsafe practice pursuant to §122.255 of the Finance Code. The
determination may be abated if, the credit union has entered into and is in compliance with a written
agreement or order with the department or is in compliance with a net worth restoration or revised
business plan approved by the department to increase its net worth ratio. If a credit union has a net
worth ratio below 6.0% or is otherwise engaged in an unsafe practice, the department may impose
the following administrative sanctions in addition to, or in lieu of, any other authorized supervisory
action:
(1) all unencumbered reserves, undivided earnings, and current earnings are
encumbered as special reserves;
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(2) dividends and interest refunds may not be declared, advertised, or paid without the
prior written approval of the commissioner; and
(3) any changes to the credit union’s board of directors or senior management staff must
receive the prior written approval of the commissioner.
(e) Supervisory action. Notwithstanding any requirements in this section, the department may
take enforcement action against a credit union with capital above the minimum requirement if
the credit union’s circumstances indicate such action would be appropriate.
Source: The provisions of this §91.901 adopted to be effective August 14, 2000, 25 TexReg 7636;
amended to be effective July 11, 2004, 29 TexReg 6633; amended to be effective November 11, 2007, 32
TexReg 7923; reviewed and amended to be effective November 8, 2009, 34 TexReg 7628; reviewed and
readopted to be effective June 20, 2011, 36 TexReg 4152; reviewed and amended to be effective
November 8, 2015, 40 TexReg 7666.
§91.902. Dividends.
(a) Dividend eligibility shall be prescribed by written board policy.
(b) When a credit union is subject to a cease and desist order or is otherwise notified that it is
deemed to be in a troubled condition or engaged in an unsafe practice, the credit union must
obtain prior written approval of the commissioner before it declares or pays any dividend or
interest refund. A request for approval to pay a dividend or interest refund under this section
must be in writing and must include the following supporting information:
(1) the proposed dividend and/or interest refund rate and the estimated total dollar
amount of payment;
(2) an analysis of the credit union’s ability to make the payment from current
earnings without incurring an operating loss for the period; and
(3) an explanation of the progress in resolving the areas of concern detailed in the
cease and desist order or the examiner’s findings schedule of the most recent report of
examination.
Source: The provisions of this §91.902 adopted to be effective August 14, 2000, 25 TexReg 7638; readopted to be
effective February 24, 2004, 29 TexReg 2393; amended to be effective November 11, 2007, 32 TexReg 7924;
reviewed and readopted to be effective June 20, 2011, 36 TexReg 4152; reviewed and readopted to be effective June
19, 2015, 40 TexReg 4380.
Subchapter J. Changes in Corporate Status
§91.1003. Mergers/Consolidations.
(a) Definitions. The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Acquirer credit union - The credit union that will continue in operation after the
merger/consolidation.
(2) Acquiree credit union - The credit union that will cease to exist as an operating
credit union at the time of the merger/consolidation.
(3) Merger inducement – A promise by a credit union to pay to the members of
another credit union a sum of money or other material benefit upon the successful completion of
a merger of the two credit unions.
(b) Two or more credit unions organized under the laws of this state, another state, or the
United States, may merge/consolidate, in whole or in part, with each other, or into a newly
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incorporated credit union to the extent permitted by applicable law, subject to the requirements
of this rule. A credit union may not offer a merger inducement to another credit union’s
members as a means of promoting a merger of the two credit unions.
(c) Notice of Intent to Merge/Consolidate. The credit unions shall notify the commissioner
in writing of their intent to merge/consolidate within ten days after the credit unions’ boards of
directors formally agree in principle to merge/consolidate.
(d) Plan for Merger/Consolidation. Upon approval of a proposition for merger/consolidation
by the boards of directors, the credit unions must prepare a plan for the proposed
merger/consolidation. The plan shall include:
(1) the current financial reports of each credit union;
(2) the combined financial reports of the two or more credit unions;
(3) an analysis of the adequacy of the combined Allowance for Loan and Lease
Losses account;
(4) an explanation of any proposed adjustments to the members’ shares, or provisions
for reserves, dividends, or undivided profits;
(5) a summary of the products and services proposed to be available to the members
of the acquirer credit union, with an explanation of any changes from the current products and
services provided to the members;
(6) a summary of the advantages and disadvantages of the merger/consolidation;
(7) the projected location of the main office and any branch location(s) after the
merger/consolidation and whether any existing office locations will be permanently closed; and
(8) any other items deemed critical to the merger/consolidation agreement by the
boards of directors.
(e) Submission of an Application to Merge/Consolidate to Department.
(1) An application for approval of the merger/consolidation will be complete when
the following information is submitted to the commissioner:
(A) the merger/consolidation plan, as described in this rule;
(B) a copy of the corporate resolution of each board of directors approving the
merger/consolidation plan;
(C) the proposed Notice of Special Meeting of the members;
(D) a copy of the ballot form to be sent to the members;
(E) the current delinquent loan summaries for each credit union;
(F) if the acquiree credit union has $65.2 million or more in assets on its latest
call report, a statement as to whether the transaction is subject to the Hart-Scott Rodino Act
premerger notification filing requirements; and
(G) a request for a waiver of the requirement that the plan be approved by the
members of any of the affected credit unions, in the event the board(s) seek such a waiver,
together with a statement of the reason(s) for the waiver(s).
(2) If the acquirer credit union is organized under the laws of another state or of the
United States, the commissioner may accept an application to merge or consolidate that is
prescribed by the state or federal supervisory authority of the acquirer credit union, provided that
the commissioner may require additional information to determine whether to deny or approve
the merger/consolidation. The application will be deemed complete upon receipt of all
information requested by the commissioner.
(3) Notice of the proposed merger must be published in the Texas Register and
Department Newsletter as prescribed in §91.104 (relating to Notice of Applications).
(f) Commissioner Action on the Application.
(1) The commissioner may grant preliminary approval of an application for
merger/consolidation conditioned upon specific requirements being met, but final approval shall
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not be granted unless such conditions have been met within the time specified in the preliminary
approval.
(2) The commissioner shall deny an application for merger/consolidation if the
commissioner finds any of the following:
(A) the financial condition of the acquirer credit union before the
merger/consolidation is such that it will likely jeopardize the financial stability of the merging
credit union or prejudice the financial interests of the members, beneficiaries or creditors of
either credit union;
(B) the plan includes a change in the products or services available to
members of the acquiree credit union that substantially harms the financial interests of the
members, beneficiaries or creditors of the acquiree credit union;
(C) the merger/consolidation would probably substantially lessen the ability of
the acquirer credit union to meet the reasonable needs and convenience of members to be served;
(D) the credit unions do not furnish to the commissioner all information
requested by the commissioner which is material to the application;
(E) the credit unions fail to obtain any approval required from a federal or
state supervisory authority; or
(F) the merger/consolidation would be contrary to law.
(3) For applications to merge/consolidate in which the products and services of the
acquirer credit union after merger/consolidation are proposed to be substantially the same as
those of the acquiree and acquirer credit unions, the commissioner will presume that the
merger/consolidation will not significantly change or affect the availability and adequacy of
financial services in the local community.
(g) Procedures for Approval of Merger/Consolidation Plan by the Members of Each Credit
Union.
(1) The credit unions have the option of allowing their members to vote on the plan in
person at a meeting of the members, by mail ballot, or both. With prior approval of the
commissioner, a credit union may accept member votes by an alternative method that is
reasonably calculated to ensure each member has an opportunity to vote.
(2) Members shall be given advance notice of the meeting in accordance with the
credit union’s bylaws. The notice of the meeting shall:
(A) specify the purpose of the meeting and state the date, time, and place of
the special meeting;
(B) state the reasons for the proposed merger/consolidation;
(C) contain a summary of the merger plan and state that any interested person
may obtain more detailed information about the merger from the credit union at its principal
place of business, or by any method approved in advance by the commissioner;
(D) provide the name and location of the acquirer credit union;
(E) specify the methods permitted for casting votes; and
(F) if applicable, be accompanied by a mail ballot.
(h) Completion of Merger/Consolidation.
(1) Upon approval of the merger/consolidation plan by the membership, if applicable,
the Certificate of Merger/Consolidation shall be completed, signed and submitted to the
commissioner for final authority to combine the records. Necessary amendments to the acquirer
credit union’s articles of incorporation or bylaws shall also be submitted at this time.
(2) Upon receipt of the commissioner’s written authorization, the records of the credit
unions shall be combined as of the effective date of the merger/consolidation. The board of the
directors of the acquirer credit union shall certify the completion of the merger/consolidation to
the commissioner within 30 days after the effective date of the merger/consolidation.
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(3) Upon receipt by the commissioner of the completion of the merger/consolidation
certification, any article of incorporation or bylaw amendments will be approved and the charter
of the acquiree credit union will be canceled.
Source: The provisions of this §91.1003 adopted to be effective May 11, 1998, 23 TexReg 4568; readopted to be
effective November 19, 2001, 26 TexReg 9934; amended to be effective November 16, 2005, 30 TexReg 7434;
amended to be effective November 11, 2007, 32 TexReg 7924; reviewed and amended to be effective November 8,
2009, 34 TexReg 7628; reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.1005. Conversion to a Texas Credit Union.
(a) Authority to convert. A federal credit union or an out of state credit union is authorized
to convert to a credit union incorporated under the laws of this state by Section 122.203 of the
Act.
(b) Requirements for conversion. A credit union wishing to convert to a credit union
incorporated under the laws of this state shall comply with the following requirements:
(1) Submit a complete application on a form and in a manner prescribed by the
commissioner;
(2) Furnish evidence that the current federal or state regulatory agency having
jurisdiction over the applicant has no preliminary objection to the conversion plan;
(3) Submit to a conversion examination by the department and pay the supplemental
examination fee prescribed in Section 97.113 of this Title (relating to Fees and Charges). The
commissioner may waive the examination or the fee, upon finding good cause;
(4) Furnish evidence confirming that the applicant has complied with all applicable
requirements of and has completed the conversion in a manner satisfactory to the insuring
organization and the current federal or state regulatory agency; and
(5) Furnish evidence that the applicant has established or will relocate its principal
place of business in a specific location in the State of Texas.
(c) Approval. The commissioner shall approve the conversion once the conditions required by
this section have been met and the commissioner finds that the applicant: (1) is financially sound;
(2) has no material supervisory problems; and (3) can reasonably be expected to conduct its
operations in a safe and sound manner and in accordance with the laws of this state. The
commissioner may approve the conversion conditioned upon specific requirements being met, but
the certificate of incorporation shall not be issued unless such conditions have been met.
(d) Effective date. The conversion shall become effective immediately upon the issuance of the
certificate of incorporation or on a stipulated date within 90 days of the conversion approval. On
request and for good cause shown, the commissioner may grant a reasonable extension of the
effective date.
Source: The provisions of this §91.1005 adopted to be effective July 2, 2006, 31 TexReg 5076; reviewed and readopted to be
effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013, 38 TexReg 4392.
§91.1006. Conversions to a Federal or Out-of-State Credit Union.
(a) Authority to Convert. A credit union organized under the laws of this state is authorized
to convert to a federal credit union or an out-of-state credit union by Sections 122.201 and
122.202 of the Act.
(b) Requirements for Conversion. A credit union wishing to convert to a federal credit union
or an out-of-state credit union shall comply with the following requirements:
(1) Furnish evidence to the department that a conversion proposal has been approved by
a two-thirds vote of the board of directors;
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(2) Submit copies of all filings made with any state or federal regulatory agency and
insuring organization with jurisdiction over any aspect of the conversion process;
(3) Furnish evidence confirming that the insuring organization and the acquiring state or
federal regulatory agency have no preliminary objections to the plan;
(4) Submit a vote certification as required by Section 91.1008(c) of this chapter
showing that the conversion proposal was approved by an affirmative vote of a majority of the
eligible members of the credit union voting; and
(5) Furnish written evidence confirming that the credit union has met all of the
conversion requirements of the insuring organization and the acquiring state or federal regulatory
agency.
(c) Approval. The commissioner shall approve the conversion if all of the conditions
required by this section have been met, unless the commissioner determines the conversion is
being made to circumvent a pending supervisory action that is about to be or has been initiated
by the commissioner because of a concern over the safety and soundness of the credit union.
(d) Effective Date. Once the commissioner has approved the conversion, it shall become
effective upon the issuance of a charter or certificate of incorporation from the acquiring state or
federal regulatory agency.
Source: The provisions of this §91.1006 adopted to be effective July 2, 2006, 31 TexReg 5077; reviewed and
readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 23, 2013, 38
TexReg 4392.
§91.1007. Conversion to a Mutual Savings Institution.
(a) Authority to convert. A credit union organized under the laws of this state is authorized
to convert to a mutual savings bank or association by Section 123.003 of the Act.
(b) Requirements for conversion. A credit union that is considering converting to a mutual
savings bank or association must comply with the following requirements:
(1) Preliminary communication with membership and department. At least thirty
days prior to a final vote by the board of directors to formally adopt a conversion proposal, the
credit union shall send notice to the department and each member advising that the board is
considering a possible conversion to a mutual savings bank or association. The notice shall, at a
minimum, contain the following information: (a) a prominent legend in bold-face type that
advises members of a potential conversion; (b) the electronic availability of information related
to a potential conversion; (c) a telephone number and e-mail address that members may use to
request copies of the potential conversion information that is available by electronic means; (d)
the ability of members to submit written comments on the potential conversion; and (e) a clear,
concise, and impartial description of the potential conversion to be considered by the board.
(2) Information posted on Internet web site. The credit union shall post information
related to a potential conversion on the credit union’s principal Internet web site at least thirty
days prior to a vote by the board of directors to adopt a proposal of conversion. The posted
information shall, at a minimum, discuss:
(A) The business purposes that might be accomplished by a conversion;
(B) The differences between and similarities of a credit union and a mutual
savings institution;
(C) An estimate of the anticipated conversion expenses;
(D) The methods by which a member may request a copy of the posted
information;
(E) The method and timeline for members to submit written comments on the
potential conversion; and
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(F) The process that will be followed if the board formally adopts a
conversion proposal.
(3) Written comments from members. The board shall provide members a reasonable
opportunity to submit written comments relating to a potential conversion. The board may hold
a special meeting to receive member input regarding the potential conversion. It is within the
board’s discretion to determine the type, number, duration, and location of any special
meeting(s). Before taking a final vote on a conversion proposal, the board should consider all
written comments and any other member input received at any special meeting.
(4) Adoption of a conversion proposal by the board. Subsequent to the written
comment period, the credit union may adopt, by the affirmative vote of at least two-thirds of the
members of its board of directors, a conversion proposal consistent with this section. The credit
union shall notify the department of the board’s approval of the proposal within 5 days of the
approval. In addition, the following documents must be sent to the department as soon as
reasonably practical:
(A) Copies of any filings made with any state or federal regulatory agency and
insuring organization with jurisdiction over any aspect of the conversion process;
(B) A copy of the disclosure materials and the ballot to be sent to eligible
members relative to voting on the conversion proposal;
(C) An estimated budget of the anticipated conversion expenses including
legal, postage and mailing, advertising, printing, consulting fees, examination and operating fees,
and any overtime or other employee compensation to be paid exclusively as a result of the
conversion; and
(D) Any other information reasonably requested by the commissioner.
(5) Membership approval. The members of the credit union must approve the
conversion proposal by an affirmative vote of a majority of those eligible members who vote on
such proposal, unless the bylaws require a higher vote threshold. The credit union shall submit a
vote certification as required by section 91.1008(c) of this chapter showing that the conversion
proposal was approved by the members of the credit union;
(6) Insuring organization requirements. The credit union must furnish written
evidence of its compliance with any voting procedures and disclosure requirements imposed by
its insuring organization; and
(7) Other regulatory oversight. The credit union must furnish written evidence that it
has met all conversion requirements of the acquiring state or federal regulatory agency.
(c) Notice, disclosure materials, and ballot mailed to members. The credit union shall mail
to each eligible member, as defined in Section 91.1008 of this Chapter, a notice advising the
member of the adoption and filing of the conversion proposal. The notice must include a
prominent statement that the conversion will be decided by a majority of eligible members who
vote on the issue (unless the bylaws require a higher vote threshold), and that each eligible
member is only entitled to vote once. Also, incorporated with the mailing of the notice, eligible
members shall be provided with plain language disclosures of material facts and information to
be used as a basis for reaching an informed decision to vote on the conversion. The disclosures
and ballot shall be submitted to the commissioner for approval. The commissioner may require
changes in the disclosures and ballot provided to eligible members to assure full and adequate
disclosure prior to the documents being mailed to eligible members.
(d) Conflict of interest. A director, officer, committee member, agent, or senior management
employee of the credit union, and immediate family members of such individuals shall not,
directly or indirectly, receive a fee, commission, or other consideration, other than that person’s
usual salary or compensation, for aiding, promoting, or assisting in a conversion under this
section.
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(e) Continuity of existence. The corporate existence of a credit union converting under this
rule shall continue in its successor. Each member shall be entitled to receive a share or deposit
account or accounts in the converted institution equal in amount to the value of accounts held in
the former credit union subject to any lien or right of offset held by the credit union.
(f) Approval. The commissioner shall approve the conversion if all of the conditions
required by this section have been met, unless the commissioner determines the conversion is
being made to circumvent a pending supervisory action that is about to be or has been initiated
by the commissioner because of a concern over the safety and soundness of the credit union.
(g) Effective date. Once the commissioner has approved the conversion, it shall become
effective upon the issuance of a charter or certificate of incorporation from the acquiring state or
federal regulatory agency.
Source: The provisions of this §91.1007 adopted to be effective July 2, 2006, 31 TexReg 5077; reviewed and
readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013, 38
TexReg 4392.
§91.1008. Conversion Voting Procedures and Restrictions; Filing Requirements.
(a) Voting procedures. Eligible members may vote on a plan of conversion by written ballot
either filed in person at a special meeting held on the date set for the vote or mailed by the
member. The vote on a conversion proposal must be by secret ballot. Mail balloting must be
conducted in accordance with §91.302 of this Chapter.
(b) Definitions.
(1) “Eligible Member” means a member of a credit union who is approved and fully
qualified for membership in accordance with the credit union’s bylaws and written policies as of
the eligibility record date.
(2) “Eligibility Record Date” means the cut off date for determining eligible
members, which shall be deemed to be the last day of the month immediately preceding the date
the credit union’s board of directors notifies members or the public that it is contemplating a
conversion.
(c) Voting ballots. All ballots must include the following:
(1) The name of the credit union and the name of the proposed institution if the
conversion is approved. This information may be incorporated into the body of the voting
options;
(2) The date and time by which the ballot must be received if mailed; and
(3) The following statements, printed in a manner acceptable to the commissioner:
(A) The conversion will be decided by a majority of credit union members
who vote on the issue (unless the bylaws require a higher vote threshold);
(B) Once a vote has been cast, it may not be changed; and
(C) A “yes” vote means the credit union will become a (insert conversion
entity type) and a “no” vote means the credit union will remain a (insert state or federal) credit
union.
(D) Vote certification. Within ten business days following a vote on a plan of
conversion, the credit union shall file with the department a certified copy of a resolution of the
board of directors stating that voting on the conversion has been completed in accordance with
this section and setting out the following information:
(1) The total number of members eligible to vote;
(2) The number of eligible members who voted (either at the special meeting or by
mail); and
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(3) The total number of votes cast in favor and against the plan of conversion.
Source: The provisions of this §91.1008 adopted to be effective July 2, 2006, 31 TexReg 5078; reviewed and
readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013, 38
TexReg 4392.
Subchapter K. Credit Union Development Districts
§91.2000. Purpose and Scope.
(a) This subchapter implements Tex. Fin. Code §279.001 et seq. regarding the establishment
of credit union development districts.
(b) This subchapter does not affect or circumvent requirements under the Tax Increment
Financing Act or the Property Redevelopment and Tax Abatement Act (Tex. Gov. Code,
Chapters 311 and 312, respectively), including requirements for designation of an area as a
municipal or county reinvestment zone or for authorization to enter into a tax abatement
agreement.
Source: The provisions of this §91.2000 adopted to be effective November 8, 2015, 40 TexReg 7666.
§91.2001. Definitions.
Unless the context clearly indicates otherwise, these words and terms, when used in this
subchapter, shall have the following meanings:
1. “Credit union” includes state and federal credit unions.
2. "District" means a credit union development district approved under this subchapter.
3. “Local government” means a municipality or county.
Source: The provisions of this §91.2001 adopted to be effective November 8, 2015, 40 TexReg 7666.
§91.2002. Application Requirements to Establish a District.
(a) Basic application. A local government, in conjunction with a credit union, may submit
an application to the Commission for the designation of a proposed credit union development
district, as provided by §91.2003 of this subchapter (relating to Submission and Processing of
Application). The application shall contain the following items to the extent available:
1. the name of the local government, the county in which it is located and evidence
of the approval of the application by its governing body;
2. identification of the participating credit union and the location of the proposed
credit union or branch by street address;
3. a description of the geographic area comprising the proposed district, including a
map indicating the borders of the proposed district;
4. the location, number and proximity of sites where credit union services are
available in the proposed credit union development district, including branches of other financial
institutions and deposit-taking ATMs other than those located at branches;
5. a compilation and description of consumer needs for credit union services in the
proposed district, including population demographics included within the proposed district;
6. a compilation and description of the economic viability and local credit needs of
the community in the proposed district, including economic indicators pertinent to the proposed
district;
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7. a compilation and description of the existing commercial development in the
proposed district, including a description of the type and nature of commercial businesses located
in the proposed district; and
8. a compilation and description of the impact additional credit union services would
have on potential economic development in the proposed district, including significant business
developments within the past three years, corporate restructurings, plant closings, other business
closings, and recent or proposed business openings or expansions.
(b) Optional information. An application for designation of a credit union development
district may also include:
1. a description of other local government and community initiatives proposed to be
undertaken and coordinated with establishment of the proposed district;
2. indications of community support or opposition for the application, as evidenced
by letters from entities such as local chambers of commerce, local businesses, community-based
organizations, non-profit organizations, government officials, or community residents; and
3. such other information that the applicant believes will demonstrate that the
proposed district meets the standards set forth in §91.2004 of this subchapter (relating to Criteria
for Approval).
Source: The provisions of this §91.2002 adopted to be effective November 8, 2015, 40 TexReg 7666.
§91.2003. Submission and Processing of Application.
(a) The application must be submitted to the Commission in care of the Department, 914
East Anderson Lane, Austin, TX 78752-1699. No filing fee is required.
(b) After the initial application is submitted, the Department shall issue a written notice
informing the applicant either that the application is complete and accepted for filing or that the
application is deficient and specific additional information is required. The applicant must
supply any additional information requested by the Department not later than the 61st day after
the date the applicant received written notice from the Department that the application is
deficient. Upon a finding of good and sufficient cause, the Department shall grant an applicant
additional time to complete the application. Once the deficient application is complete and
accepted for filing, the Department shall issue a written notice informing the applicant that the
application is complete and accepted for filing.
(c) After the issuance of written notice informing the applicant that the application is
complete and accepted for filing, the Department shall evaluate the application to the extent
necessary to make a written recommendation to the Commission under the criteria set forth in
§91.2004 of this subchapter. The Department shall submit the completed application and the
Department’s recommendations to the Commission for decision at the next regularly scheduled
meeting of the Commission, which must occur not later than the 120
th
date after the date the
completed application is accepted for filing.
(d) If the Commission approves the application, the Department shall notify the interested
parties as required by Tex. Fin. Code §279.105(b).
(e) All approved districts shall be posted on the Department's web site.
Source: The provisions of this §91.2003 adopted to be effective November 8, 2015, 40 TexReg 7666.
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§91.2004. Criteria for Approval of a District by the Commission.
In determining whether to approve an application for the designation of a credit union
development district, the Commission must consider the criteria listed in Tex. Fin. Code §
279.102(b).
Source: The provisions of this §91.2004 adopted to be effective November 8, 2015, 40 TexReg 7666.
§91.2005. Monitoring.
(a) A local government that receives approval for a district under this subchapter shall notify
the Department in writing not later than the 21
st
day after the date:
1. the credit union establishes a branch in the district and the address of such a
branch; and
2. the credit union closes a branch in the district.
(b) On behalf of the Commission, the Department may request periodic status reports from
the local government or the credit union in order to ensure that the needs of the community
located in the district are being met in an appropriate manner.
Source: The provisions of this §91.2005 adopted to be effective November 8, 2015, 40 TexReg 7666.
§91.2006. Rulemaking and Amendment for this Subchapter.
Tex. Fin. Code §279.102(b) requires the Credit Union Department to adopt rules in consultation
with the Texas Economic Development and Tourism Office within the Office of the Governor.
The Department will develop policies with this office within the Governor’s office, outlining the
procedures for consultation.
Source: The provisions of this §91.2006 adopted to be effective November 8, 2015, 40 TexReg 7666.
Subchapter L. Submission of Comments by Interested Parties
§91.3001. Opportunity To Submit Comments On Certain Applications.
(a) An interested party may submit comments to the commissioner on the following matters:
(1) an application for incorporation under the Texas Finance Code, Section 122.001;
(2) an amendment to a credit union’s articles of incorporation under the Texas
Finance Code, Section 122.011, which includes an amendment to expand the credit union’s field
of membership; or
(3) an application to merge or consolidate under the Texas Finance Code, Section
122.152.
(b) An interested party is a person or entity that has an interest in particular to the application
other than as a member of the general public.
(c) Acceptance of comments under this section does not constitute a determination of
standing to protest or otherwise participate in a contested case hearing on the application.
(d) Comments may be made in writing or provided in a meeting with the commissioner or
deputy commissioner, as follows:
(1) written comments shall be submitted within 30 days after notice of the application
is published in the Texas Register or the department’s newsletter, whichever is later;
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(2) a meeting to receive comments shall be held upon written request by an interested
party or upon the commissioner’s direction.
Source: The provisions of this §91.3001 adopted to be effective May 10, 1998, 23 TexReg 4568; readopted to be
effective November 19, 2001, 26 TexReg 9934; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and readopted to be effective June 22, 2009, 34 TexReg 4549; reviewed and readopted to be effective June 24, 2013,
38 TexReg 4392.
§91.3002. Conduct Of Meetings To Receive Comments.
(a) Meetings to receive comments under 91.3001 of this title (relating to opportunities to
submit comments on certain applications) will be conducted in the following manner:
(1) a written request for a meeting to receive comments must be received by the
department within 30 days after publication of the notice of the application and shall contain the
following:
(A) the identity of the requestor, including the name of a natural person who
represents a business entity or other association, mailing address, daytime telephone number, and
a facsimile number if any;
(B) the name of the application and type of application;
(C) a description of the requestor’s interest in the application; and
(D) a list of at least three dates and times within 30 days after the date of
publication of notice of application, which are available for the meeting.
(2) the meeting will be scheduled and may be rescheduled, if necessary, by the
commissioner to occur after at least three business days’ notice by telephone, facsimile, or mail;
(3) one meeting may be scheduled to receive comments from more than one
interested party, at the discretion of the commissioner;
(4) a limit on the length and other conditions for the conduct of the meeting may be
imposed by the commissioner, and the conditions will be stated in the notice of the meeting;
(5) the meeting may be conducted by telephone with the consent of the interested
party; and
(6) the department is not required to make a record of the meeting.
(b) An interested party who fails to attend a meeting scheduled for the party’s benefit may
submit written comments within three days after the date scheduled for the meeting, but the
commissioner is not required to schedule another meeting.
(c) The purpose of the meeting is only to receive comments, and no decision, preliminary or
otherwise, will be made at the meeting.
Source: The provisions of this §91.3002 adopted to be effective May 10, 1998, 23 TexReg 4568; readopted to be
effective November 19, 2001, 26 TexReg 9934; readopted to be effective June 20, 2005, 30 TexReg 3882; reviewed
and readopted to be effective June 22, 2009, 34 TexReg 4550; reviewed and readopted to be effective June 24, 2013,
38 TexReg 4392.
Subchapter M. Electronic Operations
§91.4001. Authority to Conduct Electronic Operations.
(a) A credit union may use, or participate with others to use, electronic means or facilities to
perform any function or provide any product or service as part of an authorized activity.
Electronic means or facilities include, but are not limited to, automated teller machines,
automated loan machines, personal computers, the Internet, the World Wide Web, telephones,
and other similar electronic devices.
84
(b) To optimize the use of its resources, a credit union may market and sell, or participate
with others to market and sell, electronic capacities and by-products to others, provided the credit
union acquired or developed these capacities and by-products in good faith as part of providing
financial services to its members.
(c) If a credit union uses electronic means and facilities authorized by this rule, the credit
union’s board of directors must require staff to:
(1) Identify, assess, and mitigate potential risks and establish prudent internal
controls, and system backup procedures; and
(2) Implement security measures designed to ensure secure operations. Such
measures should take into consideration:
(A) the prevention of unauthorized access to credit union records and credit
union members’ records;
(B) the prevention of financial fraud through the use of electronic means or
facilities; and
(C) compliance with applicable security device requirements for teller
machines contained elsewhere in Chapter 91.
(d) All credit unions engaging in such electronic activities must comply with all applicable
state and federal laws and regulations as well as address all safety and soundness concerns.
(e) A credit union shall review, on at least an annual basis, its system backup procedures for
all electronic activities.
(f) A credit union shall not be considered doing business in this State solely because it
physically maintains technology, such as a server, in this State, or because the credit union’s
product or services are accessed through electronic means by members located in this State.
(g) A credit union that shares electronic space, including a co-branded web site, with a credit
union affiliate, or another third-party must take reasonable steps to clearly and conspicuously
distinguish between products and services offered by the credit union and those offered by the
credit union’s affiliate, or the third-party.
Source: The provisions of this §91.4001 adopted to be effective May 11, 2000, 25 TexReg 3953; amended to be
effective December 8, 2002, 27 TexReg 11074; amended to be effective March 13, 2006, 31 TexReg 1648; reviewed
and readopted to be effective October 19, 2009, 34 TexReg 7657; reviewed and readopted to be effective October
21, 2013, 38 TexReg 7735.
§91.4002. Transactional Web Site Notice Requirement; and Security Review.
(a) A credit union must file a written notice with the commissioner at least 30 days before it
establishes a transactional web site. The notice must:
(1) Include an address for and a description of the transactional features of the web
site;
(2) Indicate the date the transactional web site will become operational; and
(3) List a contact person familiar with the deployment, operation, and security of the
transactional web site.
(b) For the purposes of this chapter a transactional web site is an Internet site that enables
users to conduct financial transactions such as accessing an account, obtaining an account
balance, transferring funds, processing bill payments, opening an account, applying for or
obtaining a loan, or purchasing other authorized products or services.
(c) Credit unions, which have a transactional web site, must provide for a review of the
adequacy of the web site’s security measures at least once every two years. The scope of the
review should cover the adequacy of physical and logical protection against unauthorized access
including denial of service and other forms of electronic access. If the credit union outsources
85
this technology platform, it can rely on testing performed for the service provider to the extent it
satisfies the scope requirements of this subsection.
Source: The provisions of this §91.4002 adopted to be effective May 13, 1999, 24 TexReg 3475; amended to be
effective December 8, 2002, 27 TexReg 11075, amended to be effective March 13, 2006, 31 TexReg 1648; reviewed
and readopted to be effective October 19, 2009, 34 TexReg 7657; reviewed and readopted to be effective October
21, 2013, 38 TexReg 7735.
Subchapter N. Emergency or Permanent Closing of Office or Operation
§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) Each credit union shall maintain on file with the department a report of emergency
contact information pertaining to its officers, directors, and committee members in such form as
the commissioner may prescribe.
(e) 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 and any applicable backup 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.
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(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.
Source: The provisions of this §91.5001 adopted to be effective August 9, 1999, 24 TexReg 6026; readopted to be
effective August 2, 2002, 27 TexReg 6874, amended to be effective March 13, 2006, 31 TexReg 1649; reviewed and
readopted to be effective October 19, 2009, 34 TexReg 7657; reviewed and readopted to be effective October 21,
2013, 38 TexReg 7735.
§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 §91.5001 of this title (relating to Emergency Closings) 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.
Source: The provisions of this §91.5002 adopted to be effective August 9, 1999, 24 TexReg 6026; readopted to be
effective August 2, 2002, 27 TexReg 6874; amended to be effective March 13, 2006, 31 TexReg 1649; reviewed and
readopted to be effective October 19, 2009, 34 TexReg 7657; reviewed and readopted to be effective October 21,
2013, 38 TexReg 7735.
§91.5005. Permanent Closing of an Office.
A credit union may permanently close any of its established offices or service facilities. The
credit union shall provide notice to its members and the department no later than 60 days prior to
the proposed closing. The credit union shall also post a notice to members in a conspicuous
manner on the premises of the effected office or service facility at least 30 days prior to the
proposed closing.
Source: The provisions of this §91.5005 adopted to be effective March 13, 2006, 31 TexReg 1649; reviewed and
readopted to be effective October 19, 2009, 34 TexReg 7657; reviewed and readopted to be effective October21,
2013, 38 TexReg 7735.
Subchapter O. Trust Powers
§91.6001. Fiduciary Duties.
A credit union must conduct its trust operations in accordance with applicable law, and must
exercise its fiduciary powers in a safe and sound manner. All fiduciary activities shall be under the
direction of the credit union’s board of directors. In carrying out its responsibilities, the board may
assign, by action duly entered in the minutes, any function related to the exercise of fiduciary
powers to any director, officer, employee, or committee thereof.
Source: The provisions of this §91.6001 adopted to be effective August 10, 2003, 28 TexReg 6270;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6002. Fiduciary Capacities.
A credit union is subject to this chapter if it acts in a fiduciary capacity. A credit union acts in a
fiduciary capacity when it acts in any of the following capacities:
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(1) Trustee.
(2) Custodian.
(3) Executor.
(4) Administrator.
(5) Guardian.
(6) Receiver.
Source: The provisions of this §91.6002 adopted to be effective August 10, 2003, 28 TexReg 6270;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6003. Notice Requirements.
(a) Intent. A credit union is required to notify the commissioner in writing of its intent to
exercise fiduciary powers, at least 31 days prior to the anticipated commencement date of such
fiduciary activities. The notice must contain:
(1) A statement describing the fiduciary powers that the credit union will exercise;
(2) An opinion of counsel that the proposed activities do not violate law, including
citations to applicable law;
(3) A statement that the capital of the credit union is not less than the capital required by
law of other financial institutions exercising comparable fiduciary powers;
(4) Sufficient biographical information on proposed trust management personnel to
enable the Department to assess their qualifications; and
(5) A description of the locations where the credit union will conduct fiduciary
activities.
(b) Prior Activity. A credit union that has initiated trust activities prior to the effective date of
this rule shall file the notice prescribed in subsection (a) by October 1, 2003.
Source: The provisions of this §91.6003 adopted to be effective August 10, 2003, 28 TexReg 6270;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6004. Exercise of Fiduciary Powers.
(a) Supervisory Review. Unless otherwise notified by the department, a credit union may
exercise its fiduciary powers on the 30
th
day after the credit union receives written confirmation
from the Department that the notice required under Section 91.6003 of this title (relating to Notice
Requirements) is complete and accepted for filing. The Department will consider the following
factors when reviewing such a notice:
(1) The credit union’s financial condition.
(2) The credit union’s capital and whether that capital is sufficient under the
circumstances.
(3) The credit union’s overall performance.
(4) The fiduciary powers the credit union proposes to exercise.
(5) The availability of legal counsel.
(6) The experience and expertise of proposed trust management personnel.
(7) The needs of the members to be served.
(8) Any other facts or circumstances that the Department considers appropriate.
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(b) Written Notice. Prior to expiration of the 30 day period referred to in subsection (a), the
commissioner may give the credit union written notice of denial or consent, subject to certain
conditions.
(c) Acceptance of Conditions. Commencement of the exercise of fiduciary powers constitutes
confirmation of acceptance of all conditions imposed by the commissioner under subsection (b) and
shall be considered an enforceable agreement against the credit union for all purposes.
Source: The provisions of this §91.6004 adopted to be effective August 10, 2003, 28 TexReg 6270;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective on
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6005. Exemption from Notice.
A credit union does not need to provide notice under section 91.6003 (relating to notice
requirements) to act as a trustee or custodian of any form of retirement, pension, profit sharing or
deferred income accounts for its members, pension funds of self-employed individuals eligible for
membership and pension funds of a company or organization whose employees are eligible for
membership in the credit union if acting as such will only involve holding the funds on deposit and
reporting information to the account holders and government agencies. All contributions to such
fiduciary accounts, however, must be initially made to a share or deposit account in the credit union
and the credit union may not directly or indirectly provide any investment advice for such fiduciary
accounts.
Source: The provisions of this §91.6005 adopted to be effective August 10, 2003, 28 TexReg 6271; readopted to be
effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective October 24, 2011, 36 TexReg
7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg 7672.
§91.6006. Policies and Procedures.
A credit union exercising trust powers shall adopt and follow written policies and procedures
adequate to maintain its fiduciary activities in compliance with applicable law. Among other
relevant matters, the policies and procedures should address, where appropriate, the credit union’s:
(1) Brokerage placement practices;
(2) Methods for ensuring that fiduciary officers and employees do not use material
inside information in connection with any decision or recommendation to purchase or sell any
security;
(3) Methods for preventing self-dealing and conflicts of interest;
(4) Selection and retention of legal counsel who is readily available to timely review
trust instruments or other documents creating the credit union’s fiduciary status and advise the credit
union and its fiduciary officers and employees on all fiduciary related matters; and
(5) Investment of funds held as fiduciary, including short-term investments and the
treatment of fiduciary funds awaiting investment or distribution.
Source: The provisions of this §91.6006 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
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§91.6007. Review of Fiduciary Accounts.
(a) Pre-acceptance review. Before accepting a fiduciary account, a credit union shall
review the prospective account and related instruments and documents to determine whether it can
properly administer the account.
(b) Initial post-acceptance review. Upon the acceptance of a fiduciary account for
which a credit union has investment discretion, the credit union shall conduct a prompt review of all
assets of the account to evaluate whether they are appropriate for the account.
(c) Annual review. At least once during every calendar year, a credit union shall
conduct a review of all assets of each fiduciary account for which the credit union has investment
discretion to evaluate whether they are appropriate, individually and collectively, for the account.
Source: The provisions of this §91.6007 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6008. Recordkeeping.
A credit union shall adequately document the establishment and termination of each fiduciary
account and shall maintain adequate records for all fiduciary accounts. All records pertaining to a
fiduciary account shall be separate and distinct from other records of the credit union.
Source: The provisions of this §91.6008 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6009. Audit.
At least once during each calendar year, a credit union shall arrange for a suitable audit by a
certified public accountant in accordance with generally accepted standards for attestation
engagement. The audit must ascertain whether the credit union’s internal control policies and
procedures provide reasonable assurance of three things:
(1) The credit union is administering fiduciary activities in accordance with applicable
law and the trust instrument or other documents creating the fiduciary responsibility; (2) The
credit union is properly safeguarding fiduciary assets; and
(3) The credit union is accurately recording transactions in appropriate accounts in a
timely manner.
Source: The provisions of this §91.6009 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6010. Custody of Fiduciary Assets.
(a) A credit union shall place assets of fiduciary accounts in the joint custody or
control of not fewer than two the fiduciary officers or employees designated for that purpose by
the board of directors.
(b) A credit union shall keep assets of fiduciary accounts separate from the assets of
the credit union. Except as otherwise authorized by applicable law and as may be in the best
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interests of the beneficiaries of the fiduciary account, a credit union shall keep assets of each
fiduciary account separate from all other accounts.
Source: The provisions of this §91.6010 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6011. Trust Funds.
All monies received by a credit union as fiduciary on trust business shall be deposited in a specially
designated account or accounts, shall not be commingled with any funds of the credit union and
shall remain on deposit until disbursed or invested in accordance with powers and duties of the
credit union in its capacity as such fiduciary.
Source: The provisions of this §91.6011 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6012. Compensation, Gifts, and Bequests.
A credit union may not permit its directors, officers, or employees to retain any compensation for
acting as co-fiduciary with the credit union in the administration of a fiduciary account, except with
the specific approval of the board of directors. In addition, a credit union may not permit any
fiduciary officer or employee to accept a bequest or gift of fiduciary assets, unless the bequest or
gift is directed or made by a relative of the director, officer, or employee or is specifically approved
by the board of directors.
Source: The provisions of this §91.6012 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6013. Bond Coverage.
A credit union is required to maintain a bond for protection and indemnity of members, in
reasonable amounts against dishonesty, fraud, defalcation, forgery, theft, embezzlement, and
other similar insurable losses with an insurance or surety company authorized to do business in
this state. Coverage against such losses shall include all agents who do not otherwise provide
protection and indemnity for the credit union, directors, officers, and employees of the credit
union acting independently or in collusion or combination with any person or persons whether or
not they draw salary or compensation.
Source: The provisions of this §91.6013 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
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§91.6014. Errors and Omissions Insurance.
The credit union shall procure errors and omission insurance of at least five hundred thousand
dollars.
Source: The provisions of this §91.6014 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
§91.6015. Litigation File.
A credit union shall keep an adequate record of all pending litigation to which it is a party in
connection with its exercise of fiduciary powers.
Source: The provisions of this §91.6015 adopted to be effective August 10, 2003, 28 TexReg 6271;
readopted to be effective November 11, 2007, 32 TexReg 7936; reviewed and readopted to be effective
October 24, 2011, 36 TexReg 7570; reviewed and readopted to be effective October 19, 2015, 40 TexReg
7672.
Subchapter P. Other Forms of Equity Capital
§91.7000. Certificates of Indebtedness.
(a) General. No credit union may issue certificates of indebtedness pursuant to this section
or amend the terms of such certificates unless it has obtained a written letter from the
commissioner stating that the commissioner does not object (“non-objection letter”). All
requirements of the provisions of this section must be met before a non-objection letter will be
issued.
(b) Form of application; supporting information. Applications must be in the form
prescribed by the commissioner and shall include all information and exhibits required by the
application instructions.
(c) Requirements as to certificates. Certificates of Indebtedness issued pursuant to this
section shall meet all of the following requirements:
(1) Form of certificate. Each certificate evidencing subordinated debt issued by a
credit union pursuant to this section shall:
(A) Bear on its face, in bold-face type, the following legends:
(i) “This certificate is not a share account or deposit and it is not
insured by the United States or any other insuring organization or fund”; and
(ii) “This certificate is not eligible for purchase by any credit union or
a credit union service organization thereof without the prior written approval of the Credit Union
Commissioner of the State of Texas.”
(B) Clearly state that the certificate –
(i) Is subordinated to all other claims of the credit union’s creditors;
(ii) Is totally unsecured; and
(iii) May not be used as collateral for any loan by the issuing credit
union.
(C) Shall include within its terms the right of the issuing credit union to
prepay the obligation, which shall, at a minimum, include the right to prepay any amount without
premium or penalty any time during the fifteen months prior to the maturity date;
(D) Shall contain the following statement:
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“Notwithstanding anything to the contrary in this certificate (or in any related documents); (i) if
the NCUA or other insuring organization shall be appointed liquidating agent for the issuer of
this certificate (“the issuer’) and in its capacity as such shall cause the issuer to merge with or
into another credit union, or in such capacity shall sell or otherwise convey part or all of the
assets of the issuer to another credit union or shall arrange for the assumption of less than all of
the liabilities of the issuer by one or more credit unions, the NCUA or other insuring
organization shall have no obligation, either in its capacity as liquidating agent or in its corporate
capacity, to contract for or to otherwise arrange for the assumption of the obligations represented
by this certificate in whole or in part by any credit union or credit unions which results from any
such merger or which has purchased or otherwise acquired from the NCUA or other insuring
organization as liquidating agent for the issuer, any of the assets of the issuer, or which, pursuant
to any arrangement with the NCUA or insuring organization, has assumed less than all of the
liabilities of the issuer. To the extent that obligations represented by this certificate have not
been assumed in full by a credit union with or into which the issuer may have been merged, as
described in this paragraph (A), and/or by one or more credit unions which have succeeded to all
or a portion of the assets of the issuer, or which have assumed a portion but not all of the
liabilities of the issuer as a result of one or more transactions entered into by the NCUA or other
insuring organization as liquidating agent for the issuer, then the holder of this certificate shall be
entitled to payments on this obligation in accordance with the procedures and priorities set forth
in any applicable law. (ii) In the event that the obligation represented by this certificate is
assumed in full by another credit union, which shall succeed by merger or otherwise to
substantially all of the assets and the business of the issuer, or which shall by arrangement with
the NCUA or insuring organization assume all or a portion of the liabilities of the issuer, and
payment or provision for shall have been made in respect of all matured installments of interests
upon the certificates together with all matured installments of principal on such certificates
which shall have become due otherwise than by acceleration, than any default caused by the
appointment of a liquidating agent for the issuer shall be deemed to have been cured, and any
declaration consequent upon such default declaring the principal and interest on the certificate to
be immediately due and payable shall be deemed to have been rescinded. (iii) This certificate is
not eligible to be purchased or held by any credit union or credit union service organization
thereof. The issuer of this certificate may not recognize on its transfer books any transfer made
to a credit union or any credit union service organization thereof and will not be obligated to
make any payments of principal or interest on this certificate if the owner of this certificate is a
credit union or any credit union service organization thereof.”
(2) Limitations as to term and prepayment.
(A) No certificate of indebtedness issued by a credit union pursuant to this
section shall have an original period to maturity of less than seven years. During the first six
years that such a certificate is outstanding, the total of all required sinking fund payments, other
required prepayments, and required reserve allocations with respect to the portion of such six
years as have elapsed shall at no time exceed the original principal amount or original
redemption price, thereof multiplied by a fraction, the numerator of which is the number of years
that have elapsed since the issuance of the certificate and the denominator of which is the
number of years covered by the original period to maturity.
(B) No voluntary prepayment of principal shall be made and no payment of
principal shall be accelerated without the approval of the commissioner if the credit union’s net
worth ratio is below 6% or, if after giving effect to such payment, the credit union’s net worth
ratio would fall below 6%.
(d) Offering circular. The credit union shall submit the proposed offering circular to the
Department. The offering circular must state the following in bold print:
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“These certificates have not been approved by the Texas Credit Union Department nor has
the Texas Credit Union Department approved this offering circular.”
(e) Supervisory objection. Generally, the commissioner will not issue a non-objection letter
where:
(1) The proposed issue fails to transfer risk away from the National Credit Union
Share Insurance Fund or other insuring organization and onto the certificate holders.
(2) Information submitted in connection with the application or otherwise available to
the Department indicates that the credit union will not be able to service the proposed debt.
Evaluation of the issuer’s ability to service debt should be prospective, based upon the issuer’s
business plan.
(3) The ratio of subordinated debt included as equity capital to the credit union’s net
worth requirements exceeds one-third, after giving effect to the proposed issue.
(4) The proposed deployment of the proceeds of the proposed issue is contrary to the
credit union’s business plan, is unrealistic in its assumptions, or is inconsistent with the
principles of safety and soundness.
(5) The credit union has failed to comply with the terms and conditions imposed upon
previous subordinated debt issuances, or has failed to comply with any outstanding enforcement
action, written agreement or any other significant supervisory requirement.
(f) Additional requirements. The commissioner may impose on the credit union such
requirements or conditions with regard to certificates or the offering or issuance thereof as the
commissioner may deem necessary or desirable for the protection of purchasers, the credit union,
the National Credit Union Share Insurance Fund, or other insuring organization, as the case may
be.
(g) Limitation on offering period. Following the date of the issuance of a non-objection
letter, the credit union shall have an offering period of not more than one year in which to
complete the sale of the certificates of indebtedness issued pursuant to this section. The
commissioner may in his discretion extend such offering period if a written request showing
good cause for such extension is filed with the Department not later than 30 days before the
expiration of such offering period or any previous extension thereof.
(h) Policies and Procedures. Before any offers or sales of the certificates are made on the
premises of the credit union or its credit union service organization, the credit union shall submit
to the Department a set of policies and procedures for such sale of certificates that is satisfactory
to the Department.
(i) Records. A credit union shall establish and maintain certificate of indebtedness
documentation practices and records that demonstrate the credit union appropriately administers
and monitors certificate of indebtedness-related activities. The credit union’s records should
adequately evidence ownership, balances, and all transactions involving each certificate. The
credit union may maintain records on certificate of indebtedness activities in any format that is
consistent with standard business practices.
(j) Disclosures.
(1) In connection with the purchase of a certificate of indebtedness by a person from
the issuing credit union or its credit union service organization, the credit union and/or the credit
union service organization must disclose to the person that:
(A) The certificate of indebtedness is not a share or deposit;
(B) The certificate of indebtedness is not insured by the National Credit Union
Share Insurance Fund or any other insuring organization;
(C) There is investment risk associated with the certificate of indebtedness,
including the possible loss of value; and
(D) The credit union may not condition an extension of credit on a person’s
purchase of a certificate of indebtedness.
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(2) The disclosures required by paragraph (1) above must be provided orally and in
writing before the completion of the sale of a certificate of indebtedness. If the sale of a
certificate of indebtedness is conducted by telephone, the credit union may provide the written
disclosure required by paragraph (1) by mail within three business days beginning the first
business day after the sale, solicitation, or offer.
(3) A credit union may provide the written disclosures required by paragraph (1)
through electronic media instead of on paper, if the person affirmatively consents to receiving
the disclosures electronically and if the disclosures are provided in a format that the person may
retain or obtain later, for example, by printing or storing electronically (such as by downloading).
(4) The disclosures provided shall be conspicuous and designed to call attention to
the nature and significance of the information provided.
(k) Sales Activities. A credit union must, to the extent practicable:
(1) Keep the area where the credit union conducts transactions involving certificate of
indebtedness physically segregated from areas where shares and deposits are routinely accepted
from members;
(2) Identify the area where certificate of indebtedness activities occur; and
(3) Clearly delineate and distinguish those areas from the areas where the credit
union’s share- and deposit-taking activities occur.
(l) Referrals. Any person who accepts deposits from members in an area where such
transactions are routinely conducted in a credit union may refer a member who seeks to purchase
a certificate of indebtedness to a qualified person who sells that product only if the person
making the referral receives no additional compensation for making the referral.
(m) Reports. Within 30 days after completion of the sale of the subordinated debt issued
pursuant to this section, the credit union shall transmit a written report to the Department stating
the number of purchases, the total dollar amount of certificates sold, and the amount of net
proceeds received by the credit union. The credit union’s report shall clearly state the amount of
subordinated debt, net of all expenses that the credit union intends to have counted as equity
capital. In addition, the credit union, shall submit to the Department, certification of compliance
with all applicable laws and regulations in connection with the offering, issuance, and sale of the
certificates.
(n) Equity capital. When a certificate of indebtedness has a remaining maturity of 5 years,
the amount of the certificates that may be considered equity capital shall be reduced by a
minimum of 20% of the original amount of the certificate per year. The equity capital shall be
reduced by a constant monthly amortization to ensure the recognition of subordinated debt is
fully amortized when the certificate matures or is prepaid.
(o) Prohibited practices.
(1) A credit union may not engage in any practice or use any advertisement at
any office of, or on behalf of, a credit union that could mislead any person or otherwise cause a
reasonable person to reach an erroneous belief with respect to:
(A) the fact that a certificate of indebtedness a credit union sells or offers for sale is
not insured by the National Credit Union Share Insurance Fund or other insuring organization;
(B) the fact that there is an investment risk, including the potential that principal may
be lost and that the certificate may decline in value; or
(C) the fact that the approval of an extension of credit to a person by the credit union
or credit union service organization may not be conditioned on the purchase of a certificate of
indebtedness from the credit union or credit union service organization.
(2) No credit union shall directly or indirectly:
(A) employ any device, scheme or artifice to defraud,
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(B) make any untrue statement of a material fact or omit to state a material fact
necessary in order to make statements made, in light of the circumstances under which they were
made, not misleading, or
(C) engage in any act, practice, or course of business which operates as a fraud or
deceit upon any person, in connection with the purchase or sale of any certificate of
indebtedness.
Source: The provisions of this §91.7000 adopted to be effective March 14, 2004, 29 TexReg 2638; reviewed and
readopted to be effective June 23, 2008, 33 TexReg 5352; reviewed and readopted to be effective July 18, 2012, 37
TexReg 4958.
Subchapter Q. Access to Confidential Information
§91.8000. Discovery of Confidential Information.
(a) Policy. The legislature has determined that certain information is confidential and, with
limited exceptions, should not be disclosed. See Texas Finance Code, §126.002. Non-disclosure
under this section protects the stability of credit unions by preventing disclosures that could
adversely impact the institutions. Inappropriate disclosures can result in substantial harm to
credit unions and to those persons and entities (including other financial institutions) that have
relationships with them. For example, the department may criticize a credit union in an
examination report for a financial weakness that does not currently threaten the solvency of the
credit union. If improperly disclosed, the criticism can lead to adverse impacts such as the
possibility of a "run," short-term liquidity problems, or volatility in costs of funds, which in turn
can exacerbate the problem and cause the failure of the credit union. These failures lead to
reduced access to credit and greater risk to depositors. Further, since specific loans may be
criticized in an examination report, confidentiality of the information protects the financial
privacy of borrowers. Finally, protecting confidential information from disclosure facilitates the
free exchange of information between the credit union and the regulator, encourages candor, and
promotes regulatory responsiveness and effectiveness. Information that does not fall within the
meaning of confidential information as defined in this section may be confidential under other
definitions and controlled by other laws, and is not subject to this section.
(b) Disclosure prohibited. Pursuant to Finance Code §126.002, the department has an
absolute privilege against disclosure of its confidential information. Discovery of confidential
information from a person subject to §126.002 must comply with subsection (c) of this section.
Only a person to whom confidential information has been released pursuant to §126.002 or this
rule may disclose that information to another, and only in accordance with that section and this
rule.
(c) Discovery of confidential information. A credit union, governmental agency, credit
union service organization, service provider, or insuring organization that receives a subpoena or
other form of discovery for the release of information that is confidential under §126.002 of the
Act shall promptly:
(1) notify the department of the request;
(2) provide the department with a copy of the discovery documentation and, if
requested by the department, a copy of the requested information; and
(3) move for a protective order, or its equivalent under applicable rules of procedure.
In addition, prior to the release of confidential information, such credit union, governmental
agency, credit union service organization, service provider, or insuring organization must obtain
a ruling on its motion in accordance with this section. Confidential information may be released
only pursuant to a protective order, or its equivalent, in a form consistent with that set out in this
section and only if a court with jurisdiction has found that:
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(A) the party seeking the information has a substantial need for the
information;
(B) the information is directly relevant to the legal dispute in issue; and
(C) the party seeking the information is unable without undue hardship to
obtain its substantial equivalent by other means.
(d) Discretionary filings by department. On receipt of notice under subsection (c) of this
section, the department may take action as may be appropriate to protect confidential
information. The department has standing to intervene in a suit or administrative hearing for the
purpose of filing a motion for protective order and in camera inspection in accordance with this
section.
(e) Motion for protective order, or equivalent, and in camera inspection. The movant shall
ask the court to enter an order in accordance with this section regarding the release of
confidential information. If necessary to resolve a dispute regarding the confidential status or
direct relevance of any information sought to be released, the party seeking the order shall move
for an in camera inspection of the pertinent information. Until subject to a protective order, or its
equivalent, confidential information may not be released, and, if necessary, the party seeking an
order shall request the court officer to deny discovery of such confidential information.
(f) Protective order or equivalent. An order obtained pursuant to the terms of this section
must:
(1) specifically bind each party to the litigation, including one who becomes a party
to the suit after the order is entered, each attorney of record, and each person who becomes privy
to the confidential information as a result of its disclosure under the terms of the order;
(2) describe in general terms the confidential information to be produced;
(3) state substantially the following in the body of the order:
(A) absent court order to the contrary, only the court reporter and attorneys of
record in the cause may copy confidential information produced under the order in whole or part;
(B) the attorneys of record are custodians responsible for all originals and
copies of confidential information produced under the order and must insure that disclosure is
limited to those persons specified in the order;
(C) confidential information subject to the order and all information derived
there from may be used only for the purposes of the trial, appeal, or other proceedings in the case
in which it is produced;
(D) confidential information to be filed or included in a filing in the case must
be filed with the clerk separately in a sealed envelope bearing suitable identification, and is
available only to the court and to those persons authorized by the order to receive confidential
information, and all originals and copies made of such documents and records must be kept
under seal and disclosed only in accordance with the term of the protective order;
(E) confidential information produced under the order may be disclosed only
to the following persons and only after counsel has explained the terms of the order to the person
who will receive the information and provided that person with a copy of the order;
(i) to a party and to an officer, employee, or representative of a party,
to a party's attorneys (including other members and associates of the respective law firms and
contract attorneys in connection with work on the case) and, to the extent an attorney of record in
good faith determines disclosure is necessary or appropriate for the conduct of the litigation,
legal assistants, office clerks and secretaries working under the attorney's supervision;
(ii) to a witness or potential witness in the case;
(iii) to an outside expert retained for consultation or for testimony,
provided the expert agrees to be bound by the terms of the order and the party employing the
expert agrees to be responsible for the compliance by its expert with this confidentiality
obligation; and
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(iv) to the court or to an appellate officer or body with jurisdiction of
an appeal in the case;
(F) at the request of the department or a party, only the court, the parties and
their attorneys, and other persons the court reasonably determines should be present may attend
the live testimony of a witness or discussions or oral arguments before the court that may include
confidential information or relate to such confidential information. The parties shall request the
court to instruct all persons present at such testimony, discussions, or arguments that release of
confidential information is strictly forbidden;
(G) a transcript, including a deposition transcript, that may include
confidential information subject to non-disclosure is subject to the order. The party requesting
the testimony of a current or former department officer, employee, or agent shall, at its expense,
furnish the department a copy of the transcript of the testimony once it has been transcribed.
(H) Upon ultimate conclusion of the case by final judgment and the expiration
of time to appeal, or by settlement or otherwise, counsel for each party shall return all copies of
every document subject to the order for which the counsel is custodian to the party that produced
the confidential information; and
(I) Production of documents subject to the order does not waive a claim of
privilege or right to withhold the documents from a person not subject to the order.
(4) Paragraph (3)(A), (B) and (E) - (H) of this subsection are subject to modification
by the court for good cause before the conclusion of the proceeding, after giving the department
notice and an opportunity to appear.
Source: The provisions of this §91.8000 adopted to be effective March 14, 2004, 29 TexReg 2638; reviewed and
readopted to be effective June 23, 2008, 33 TexReg 5352, amended to be effective July 12, 2009, 34 TexReg 4513;
reviewed and readopted to be effective July 18, 2012, 37 TexReg 4958.
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Title 7
Part VI. Credit Union Department
Chapter 93
ADMINISTRATIVE PROCEEDINGS
97
CHAPTER 93
Subchapter A. Common Terms
§93.101. Scope; Definitions; Severability.
(a) This chapter is 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) Application -- shall have the same definition as in 91.101 (Definitions and
Interpretations).
(4) 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.
(5) Party -- an applicant, a protestant, a respondent, or department staff, who is admitted
as a party.
(6) PFD -- a proposal for decision issued by an ALJ.
(7) SOAH -- the State Office of Administrative Hearings.
(8) TAC -- Texas Administrative Code.
(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.
Source: The provisions of this §93.101 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5810; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
Subchapter B. General Rules
§93.201. Party Status.
Party status will be conferred on persons or entities with a legal right, duty, privilege, power or
current economic interest that may be directly affected by the outcome of the case. In a
contested case, each party is entitled to an opportunity for hearing after reasonable notice of not
less than 10 days and to respond and present evidence and argument on each issue involved in
the case.
Source: The provisions of this §93.201 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective on February 24, 2003, 28 TexReg 1631; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and readopted to be effective February 22, 2010, 35 TexReg 2021; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
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§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. Time limits shall be computed using calendar days rather
than business days.
Source: The provisions of this §93.202 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5811; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§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.
Source: The provisions of this §93.203 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and readopted to be effective February 22, 2010, 35 TexReg 2021; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.204. Contested Case Hearing; Informal Disposition.
All hearings in contested cases will be conducted by SOAH pursuant to the Administrative
Procedures Act and SOAH’s procedural rules (1 TAC Chapter 155). At any time during the
proceedings, the commissioner may make an informal disposition of a contested case by stipulation
of the parties, agreed settlement, consent order, or default.
Source: The provisions of this §93.204 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5811; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§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;
99
(3) A reference to the particular sections of the statutes and rules involved, including a
specific reference to 1 TAC Chapter 155;
(4) A short, plain statement of the matters asserted; and
(5) A description of the relief requested.
(b) At the discretion of the Commissioner, the following language set forth in bold capital
letters may be included: “IF YOU DO NOT FILE A WRITTEN ANSWER OR OTHER
WRITTEN RESPONSIVE PLEADING TO THIS NOTICE OF HEARING ON OR
BEFORE THE 10TH DAY AFTER THE DATE ON WHICH YOU WERE SERVED
WITH THIS NOTICE, 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 WITH
THE STATE OFFICE OF ADMINISTRATIVE HEARINGS”.
(c) If a written response is required, the response must be filed with the department and SOAH,
and 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. 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).
Source: The provisions of this §93.205 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5811; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.206. Default.
(a) If the parties in a contested case fail to file a written response as provided in §93.205 of this
title (relating to Notice of Hearing), or fail to appear in person or through a legal representative on
the date and at the time set for the hearing of the case, the commissioner may make an informal
disposition of the case by default.
(b) In a case of default, the ALJ assigned to a contested case shall promptly grant the
department’s motion for remand for informal disposition.
(c) Prior to issuing a default order, the commissioner must find that notice was properly served
on the defaulting party as prescribed by §93.207(a) of this title (relating to Service of Documents on
Parties), and that the notice contained the language prescribed in §93.205(b) of this title. The
default order may grant the relief requested in the notice of hearing and may deem admitted the
matters set forth in the notice.
(d) Upon the motion of a party, the commissioner may, for good cause shown, set aside a
default order and reschedule a hearing with SOAH. A motion to set aside a default order shall be
filed with the commissioner not later than the 10th day after the date the party is served with the
default order. If the commissioner does not, rule on the motion in writing within ten days after
the motion is filed, the motion shall be considered denied by operation of law.
Source: The provisions of this §93.206 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be effective
November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479; reviewed and amended to
be effective July 11, 2010, 35 TexReg5812; reviewed and readopted to be effective February 24, 2014, 39 TexReg 1738.
100
§93.207. Service of Documents on Parties.
(a) Unless otherwise specified in this chapter, notice to a party or a party’s representative in a
contested case shall be by hand-delivery, by facsimile transmission, by email if all parties agree, or
by regular, certified or registered mail, to the party’s last known address. Service by mail shall be
complete when the properly addressed document is deposited in a post office or official depository
under the care and custody of the United States Postal Service.
(b) A certificate by a party, who files a pleading stating that it has been served on all other
parties, is prima facie evidence of service.
Source: The provisions of this §93.207 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5812; reviewed and readopted to be effective
February 24, 2014; 39 TexReg 1738.
§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.
Source: The provisions of this §93.208 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and readopted to be effective February 22, 2010, 35 TexReg 2021; reviewed and readopted to be effective
February 24, 2014; 39 TexReg 1738.
§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 request with the commissioner setting
forth the name and address of the witness, time and place of appearance, and any documents or
tangible things sought to be produced. Each request shall contain a statement of the reasons why
the subpoena should be issued.
(b) Upon a finding that a party has shown good cause for the issuance of the subpoena, the
commissioner shall issue the subpoena as prescribed by Government Code §2001.089. The party
requesting the subpoena shall be responsible for the payment of any fees or expenses as set out in
Government Code §2001.103.
(c) Within ten days after service of the subpoena or, if the return date is less than ten days after
service, before the return date, the person to whom the subpoena is directed may, 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. The party
serving the subpoena shall have five days to file a written response to the objection. No oral
argument shall be heard on the objection unless the commissioner or ALJ directs.
Source: The provisions of this §93.209 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5812; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
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§93.210. Discovery; Protective Orders; Motions To Compel.
Except as modified by SOAH, parties have the discovery rights set out in the Administrative
Procedure Act and the Texas Rules of Civil Procedure (TRCP). If a party or witness is asked to
produce information that is exempt or privileged under the TRCP, the party, in addition to filing a
written objection under .§93.209(c) of this title (relating to Subpoenas), may make a motion with
the ALJ for a protective order. The objecting party must request an in camera inspection as set out
in 1 TAC §155.251(c)(7). The ALJ shall rule on all objections and motions under this section.
Source: The provisions of this §93.210 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5813; reviewed and readopted to be effective
February 24, 2014; 39 TexReg 1738.
§93.211. Administrative Record.
(a) A record of all contested case proceedings shall be made as directed by SOAH. The
department may assess costs against one or more parties.
(b) If a decision of the commission is appealed or otherwise taken to district court and the
department is required to send to the court an original or certified copy of the record of the
proceeding, or any part thereof, the appealing party shall pay all of the costs of preparing the record
that is to be sent to the reviewing court. 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.
Source: The provisions of this §93.211 adopted to be effective August 10, 1999, 24 TexReg 602; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5813; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.212. Proposal for Decision.
(a) Following the hearing, the ALJ shall review the evidence and testimony and prepare a
PFD which shall include findings of fact and conclusions of law. The ALJ shall also prepare a
proposed final order for the commissioner to sign adopting the PFD.
(b) The ALJ shall serve copies of the PFD and proposed final order on all parties of record
within 30 days after conclusion of the hearing. The parties may submit exceptions to the PFD
and replies to the exceptions. Exceptions, replies to exceptions, and related briefs must be
submitted to the ALJ and to the department and, unless otherwise indicated, 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.
(c) The ALJ shall submit the PFD and proposed order together with all materials listed in
Government Code §2001.060, to the commissioner for review. 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;
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(3) Decline to adopt the PFD and proposed final order, in whole or in part;
(4) Remand for further proceedings 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.
(d) The commissioner shall make a final determination within 30 days of the date of receipt of
the PFD and proposed final order.
Source: The provisions of this §93.212 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1631; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5813; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.213. Appearances and Representation.
A party may be represented by an attorney or by an authorized representative, if that person
observes proper decorum and the instructions of the ALJ. The ALJ may require any person
appearing in a representative capacity to provide evidence of authority to appear as the party’s
representative.
Source: The provisions of this §93.213 adopted to be effective February 24, 2003, 28 TexReg 1632; readopted to be
effective February 21, 2006, 31 TexReg 1479; reviewed and amended to be effective July 11, 2010, 35 TexReg 5813;
reviewed and readopted to be effective February 24, 2014, TexReg 1738.
§93.214. Recovery of Department Costs.
The ALJ may allocate costs incurred by the department among the parties in accordance with
applicable law. Notwithstanding any other provision of this chapter, the ALJ may impose costs
that are solely or primarily attributable to a particular party against that party.
Source: The provisions of this §93.214 adopted to be effective July 2, 2006, 31 TexReg 5079; reviewed and
readopted to be effective February 22, 2010, 35 TexReg 2021; reviewed and readopted to be effective February 24,
2014, 39 TexReg 1738.
Subchapter C. Appeals of Preliminary Determinations on Applications
§93.301. Finality of Decision; Request for SOAH Hearing; Waiver of Appeal.
(a) The commissioner shall issue a preliminary decision on all applications. Unless a party
files a written appeal, the preliminary decision will become final when the time for appeal set out
in Finance Code §122.007 or §122.011 expires. If a party submits a written waiver of its right to
appeal, the preliminary decision becomes final on receipt of the waiver. If a party files a timely
appeal, the commissioner’s preliminary decision is withdrawn and the matter will be referred to
SOAH. The commissioner may, at the commissioner’s sole discretion, refer any matter to
SOAH for hearing prior to entering a preliminary decision.
(b) Notwithstanding subsection (a) of this section, if an application is approved without
modification, and no protest or comment was received during the notice period, the
commissioner may determine that the preliminary decision should become final immediately.
Source: The provisions of this §93.301 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1632; readopted to be effective February 21, 2006, 31 TexReg 1479;
103
amended to be effective July 2, 2006, 31 TexReg 5080; reviewed and amended to be effective July 11, 2010, 35
TexReg 5814; reviewed and readopted to be effective February 24, 2014, 39 TexReg 1738.
§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.
Source: The provisions of this §93.302 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and readopted to be effective February 22, 2010, 35 TexReg 2021; reviewed and readopted to be effective
February 24, 2014; 39 TexReg 1738.
§93.303. Hearings on Applications.
(a) If ADR is not used or if it fails to resolve the controversy, the commissioner shall furnish to
the ALJ all information upon which the preliminary decision was based.
In preparing a PFD, the ALJ shall consider this information along with the testimony and
documentary evidence presented at the hearing.
(b) Burden of Proof for Unprotested Applications. The applicant must prove each of the
statutory and regulatory requirements for approval by a preponderance of the evidence.
(c) Burden of Proof for Protested Applications. The applicant must prove each of the
statutory and regulatory requirements for approval by a preponderance of the evidence. 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. For the
purposes of this section, to constitute “unreasonable harm” an overlap must threaten the
protestant’s welfare and stability or its financial viability to such an extent that it would
adversely impact its safety and soundness as a credit union.
Source: The provisions of this §93.303 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1633; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5814; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.305. Appeals of All Other Applications for Which No Specific Procedure is Provided
by this Title.
If ADR is not used or fails to resolve the controversy, whether the application is protested or
unprotested, the applicant has the burden to prove each of the applicable statutory and regulatory
requirements for approval by a preponderance of the evidence.
Source: The provisions of this §93.305 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1633; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5815; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
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Subchapter D. Appeals of Cease and Desist Orders and Orders of Removal
§93.401. Appeals Of Cease And Desist Orders And Orders Of Removal.
(a) Unless the board of directors or person affected by the order files a timely written appeal,
the commissioner’s cease and desist order or order of removal becomes final when the applicable
statutory time for appeal expires.
(b) If a timely request for appeal 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, correspondence, and records relating thereto, are confidential and cannot be revealed to
the public. Parties with access to confidential information during the contested case must sign a
confidentiality agreement as provided in §91.8000(f) of this title (relating to Discovery of
Confidential Information).
(d) At the hearing, the commissioner must establish a prima facie case that the statutory or
regulatory violations or the unsafe or unsound practices justify the cease and desist order or order of
removal.
Source: The provisions of this §93.401 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1634; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5815; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.402. Stays.
Where an order by its terms, by statute, or by these rules will become final 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 part or all of the order until the matter has
been heard and a final decision issued. The commissioner may grant a stay where the respondent
has adequately demonstrated a reasonable defense which might result in the respondent
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.
Source: The provisions of this §93.402 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1634; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5815; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
Subchapter E. Appeals of Orders of Conservation
§93.501. Appeals of Orders of Conservation.
(a) Unless the credit union’s former board of directors files a timely written appeal, the
commissioner’s order of conservation becomes final when the statutory time for appeal expires.
(b) If a timely request for hearing is filed, the commissioner shall forward the matter to SOAH to
set a hearing. The hearing date shall be no earlier than the 11th day and no later than the 30th day
after the date on which the appeal is received.
(c) The credit union’s former board of directors has the burden to prove by a preponderance of
the evidence that the board should regain control of the credit union.
105
(d) The SOAH hearing on an order of conservation is closed to the public. All orders and
correspondence relating thereto are confidential and may not be revealed to the public. Parties
with access to confidential information during the contested case must sign a confidentiality
agreement as provided in §91.8000(f) of this title (relating to Discovery of Confidential
Information).
(e) Parties must file exceptions to the PFD within five days of the date of service of the PFD.
Replies to exceptions shall be filed within eight days of the date of service of the PFD.
Source: The provisions of this §93.501 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5816; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.502. Retention of Attorney.
In the event a credit union retains an attorney or hires other persons to assist the credit union in
contesting or satisfying the requirements of an order of conservation, the commissioner shall
authorize the payment of reasonable fees and expenses for such persons as expenses of the
conservatorship. In order for the commissioner to determine the reasonableness of the fees and
expenses, the credit union must submit a billing statement showing the billable rate, the number
of hours claimed, and a detailed description of services performed and related expenses incurred.
The credit union may also submit copies of other bids received for the services, research
substantiating the reasonableness of the fees charged, or any other evidence the credit union
believes may support the reasonableness of the fees and expenses. Any fees or expenses the
commissioner deems unreasonable shall not be authorized for payment.
Source: The provisions of this §93.502 adopted to be effective March 14, 2004, 29 TexReg 2639; readopted to be
effective February 21, 2006, 31 TexReg 1479; reviewed and readopted to be effective February 22, 2010, 35 TexReg
2021; reviewed and readopted to be effective February 24, 2014, 39 TexReg 1738.
Subchapter F. Appeal of Commissioner’s Final Determination to the Commission
§93.601. Appeal to the Commission.
(a) An aggrieved party may appeal the commissioner’s final decision to the Commission.
The appeal must be in writing and must be filed within the applicable statutory deadline.
(b) The appeal must state the identities and interests of the parties, the particular matters
complained of, any specific objections, and the action sought from the Commission.
(c) The Commission shall act on the appeal within the applicable statutory deadline or within
sixty days, whichever is earlier.
Source: The provisions of this §93.601 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1634; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5816; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
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§93.602. Decision by the Commission.
The Commission shall consider the questions raised in the appeal, as well as any additional
matters pertinent to the appeal, whether or not included in the motion for appeal. Decisions by
the Commission must be based on testimony and other evidence in the hearing record. The
Commission may adopt or decline to adopt, with or without changes, all or part of the
commissioner’s decision or the ALJ’s PFD and the underlying findings of fact and conclusions
of law. The Commission may remand the proceeding for further consideration by the
commissioner with or without reopening the hearing. The Commission may take any additional
actions it considers to be just and reasonable, as permitted by law.
Source: The provisions of this §93.602 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1635; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5816; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.603. Oral Arguments Before the Commission.
Any party wishing to present oral arguments to the Commission must make a written request at
least fifteen days before the scheduled Commission meeting. The request must state the length
of time the party seeks. The Commission, may grant or deny the request. If the request is
granted, the Commission will determine the amount of time allotted and the issues on which oral
argument is allowed. The Commission may deny the request for oral argument but request that
the parties be present at the meeting at which the case is to be considered to address any
questions that Commission members may have.
Source: The provisions of this §93.603 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1635; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5816; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.604. Motion for Rehearing.
(a) The procedures and deadlines of APA §2001.146 govern the filing of a motion for rehearing
with the Commission.
(b) The Commission by written order may shorten the times for filing motions for rehearing and
replies and for Commission action or overruling by operation of law, provided all parties agree in
writing to the modifications.
Source: The provisions of this §93.604 adopted to be effective August 10, 1999, 24 TexReg 6027; amended to be
effective February 24, 2003, 28 TexReg 1635; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5817; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
§93.605. Final Decisions and Appeals.
(a) The Commission’s decision is final and appealable:
(1) if a motion for rehearing is not filed on time, upon the expiration of the period for
filing a motion for rehearing; or
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(2) if a motion for rehearing is filed on time, on the date the order overruling the motion
for rehearing is rendered; or the motion is overruled by operation of law.
(b) A person who is aggrieved by a final decision of the Commission in a contested case may
seek judicial review of the decision. Judicial review of a final decision is under the substantial
evidence rule.
Source: The provisions of this §93.605 adopted to be effective August 10, 1999, 24 TexReg 6027; readopted to be
effective November 18, 2002, 27 TexReg 11185; readopted to be effective February 21, 2006, 31 TexReg 1479;
reviewed and amended to be effective July 11, 2010, 35 TexReg 5817; reviewed and readopted to be effective
February 24, 2014, 39 TexReg 1738.
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Title 7
Part VI. Credit Union Department
Chapter 95
SHARE AND DEPOSITOR INSURANCE
PROTECTION
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CHAPTER 95
Subchapter A. Insurance Requirements
§95.100. Definitions.
The following words and terms, when used in this chapter, shall have the following meanings,
unless the context clearly indicates otherwise.
(1) “Act” means the Texas Credit Union Act (Texas Finance Code, Subtitle D).
(2) “Deposit” means a balance held by a credit union and established by a credit union
member, another credit union, a governmental unit, or an authorized nonmember in accordance
with standards specified by the credit union, including balances designated as deposits, deposit
certificates, checking accounts or accounts by other names. A “deposit” is a debt which earns
interest and is owed by the credit union to the account holder.
(3) “Federally-insured” means insured by the National Credit Union Administration (NCUA)
through the National Credit Union Share Insurance Fund (NCUSIF) under Title II of the Federal
Credit Union Act (12 USC Section 1781 et. seq.), or its successor.
(4) “Insuring organization” means a cooperative share insurance fund or a guaranty
corporation or credit union that provides aid and financial assistance to credit unions that are in
the process of liquidation or are incurring financial difficulty in order that the share and deposit
accounts in the credit unions will be protected or guaranteed against loss up to a specified level
for each account.
(5) “Membership share” means a share of the credit union which shall be the balance held by
a credit union and established by a member in accordance with standards specified by the credit
union. Each member may own only one membership share. In the case of a joint account, the
account may serve to represent the membership of each of the joint owners who have applied for
and were accepted as members, as long as a full membership share for each joint owner seeking
membership is maintained in the account.
(6) “Participating credit union” means a credit union that has applied for and been admitted
to participate in an insuring organization’s program and whose participation has not been
terminated.
(7) “Shares” means a balance held by a credit union and established in accordance with
standards specified by the credit union including, but not limited to shares, share accounts, share
certificates, share draft accounts or other such accounts. “Shares” may include membership
shares. In addition, “shares” earn dividends.
Source: The provisions of this §95.100 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.101. Share and Depositor Insurance Protection.
(a) Each credit union incorporated under the Act or otherwise authorized to do business in
this state shall obtain share and deposit insurance for the protection of its members’ accounts.
Such share and deposit guarantee insurance may be obtained from the NCUA through the
NCUSIF or from an insuring organization approved by the commissioner, with the advice and
consent of the commission.
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(b) Any credit union that fails to maintain in full force and effect share and deposit insurance
protections as provided in this section shall cease accepting deposits and making loans
immediately and shall terminate its corporate existence in this state under such terms and
conditions as the commissioner deems appropriate.
Source: The provisions of this §95.101 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.102. Qualifications for an Insuring Organization.
(a) An insuring organization must, at a minimum, demonstrate the following prerequisites
and must continue to meet these standards on an ongoing basis, in order to do business in this
state:
(1) The insuring organization is authorized to provide share and deposit insurance
protection in its state of domicile or in the State of Texas;
(2) The insuring organization is in good standing with the regulatory authorities in its
state of domicile;
(3) The insuring organization receives regular examinations from its state of
domicile;
(4) The insuring organization has capital which is adequate for its prospective
business; and
(5) The insuring organization has loss reserves that are actuarially sound.
(b) In addition to the prerequisites delineated above, the department may scrutinize other
data and information as the commissioner deems appropriate, including, but not limited to,
demonstrated expertise in insuring credit union shares and deposits.
(c) The department shall have the right to examine the books and records of the insuring
organization as part of the approval process. The insuring organization shall be assessed the
supplemental examination fee as prescribed in <*>97.113 of this title (relating to Fees and
Charges). The insuring organization shall pay the fee to the department within thirty days of the
assessment.
(d) The department may, in approving an insuring organization, impose such written
conditions as the commissioner deems reasonable, necessary, or advisable in the public interest.
(e) If an approved insuring organization subsequently fails to meet any of the prerequisite
standards or written conditions imposed by the department, the commissioner, in the exercise of
discretion, may provide a reasonable period of time for the insuring organization to take
corrective actions to bring its operations back into compliance. During this period of corrective
action, however, an insuring organization may not contract with any additional credit unions to
provide share and deposit insurance protection.
Source: The provisions of this §95.102 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
amended to be effective March 10, 2011, 36 TexReg 1657; reviewed and readopted to be effective October 20, 2014,
39 TexReg 8604.
§95.103. General Powers and Duties of an Insuring Organization.
In carrying out its general purposes, an insuring organization may:
(1) guarantee to participating credit unions the payment of any deficiency in an individual
member’s share or deposit account(s) caused by credit union’s insolvency or any other reason;
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(2) issue share and deposit insurance contracts or otherwise effect credit union share
guaranty, and enter into other contracts necessary or advisable in the conduct of its business;
(3) advance funds in accordance with agreed upon lending terms and conditions to aid
participating credit unions to operate and to meet liquidity needs;
(4) upon the written order of the commissioner, and at such compensation as shall be agreed
upon, the insuring organization may assume control of the property and business of any
participating credit union and operate it at the direction of the commissioner until its financial
stability has been reestablished to the satisfaction of the commissioner, or the credit union has
been liquidated or merged into another credit union;
(5) assist in the merger, consolidation, or liquidation of participating credit unions;
(6) receive money or other property from participating credit unions;
(7) conduct investigation and audits of any applicant or participating credit union in order to
determine the financial and operating condition of the applicant or participating credit union; and
(8) establish conditions for participation by credit unions, including the establishment of risk
eligibility standards.
Source: The provisions of this §95.103 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.104. Notices.
(a) An insuring organization shall provide written notice to the department of receipt of any
application for participation by a credit union. Within 30 days of receipt of the notice, the
department will advise the applicant and the insuring organization if it will interpose an objection to
the proposal based on safety and soundness concerns. Any such objection must be addressed to the
satisfaction of the department before the applicant will be eligible to participate in the insuring
organization’s program. The insuring organization shall also be responsible for notifying the
department of its underwriting decision on any application and advising the department when an
applicant has become a participating credit union.
(b) At least 30-days prior to the effective date of any termination, an insuring organization
shall notify the department in writing of any termination, voluntary or involuntary, of a
participating credit union.
Source: The provisions of this §95.104 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.105. Reporting.
(a) Within one hundred days after the close of a fiscal year, an insuring organization shall
file with the commissioner annually audited financial statements, prepared in accordance with
generally accepted accounting principles covering that fiscal year. The audited financial
statements shall be accompanied by an opinion of an independent certified public accountant. In
addition, at least once every three years, the audit shall include an actuarial study of the capital
adequacy of the insuring organization.
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(b) The provisions of this section are in addition to those prescribed in §91.209 of this title
(relating to Reports and Charges for Late Filing).
Source: The provisions of this §95.105 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, TexReg 8604.
§95.106. Amount of Insurance Protection.
(a) The primary insured or guaranteed amount for share and deposit accounts of individual
members of participating credit unions shall never be less than the corresponding share insurance
coverage provided by the NCUSIF or its successor.
(b) With the approval of the commissioner and if authorized by the insuring organization, a
participating credit union may, from time to time as determined by its board of directors, issue
membership shares that are not guaranteed and are subordinate to all other claims, including
creditors, shareholders and the insuring organization.
Source: The provisions of this §95.106 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.107. Sharing Confidential Information.
In order to permit the insuring organization to assess the financial condition and performance of
a participating credit union, the department shall, with the consent of such participating credit
union, provide to the insuring organization any and all reports of examination conducted by, and
orders and determinations issued by, the commissioner regarding that institution.
Source: The provisions of this §95.107 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.108. Examinations.
(a) The department may conduct examinations and investigations within or outside this state
to determine whether an insuring organization has engaged, is engaging or is about to engage in
any act, practice or transaction which constitutes an unsafe or unsound practice or a violation of
any law or rule applicable to the insuring organization.
(b) In lieu of an examination under this section, the commissioner may accept the
examination report of another regulator authorized to examine the insuring organization.
Source: The provisions of this §95.108 adopted to be effective March 7, 2007, 32 TexReg 1064, reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.109. Fees and Charges.
(a) An insuring organization shall pay the cost associated with an examination as prescribed in
Section 97.113(k) of this title (relating to Foreign Credit Union Examination Fees).
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(b) At the sole discretion of the commissioner, the department may engage professionals to
perform and complete any aspect of an examination or investigation. The reasonable expenses and
compensation of such professionals shall be paid by the insuring organization.
Source: The provisions of this §95.109 adopted to be effective March 7, 2007, 32 TexReg 1064; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
§95.110. Enforcement; Penalty; and Appeal.
(a) The commissioner may issue a cease and desist order, generally in accordance with Finance
Code §122.257(b), (c), (d) and (e), Finance Code, to an officer, employee, director, and/or the
insuring organization itself, if the commissioner determines from examination or other credible
evidence that the insuring organization has or is operating in an unsafe or unsound manner, or
violated or is violating any applicable Texas law or rule of the commission, including causing a
credit union to operate in an unsafe or unsound condition as defined by Finance Code
§121.002(11)(C). If the insuring organization does not comply with the order, the commissioner
may assess an administrative penalty as authorized by Finance Code §122.260, Finance Code, as
well as institute procedures to revoke the authority to provide primary share insurance coverage in
this state.
(b) An insuring organization may file a notice of appeal of a cease and desist order in
accordance with §93.401 of this title (relating to Finality and Request for SOAH Hearing).
Source: The provisions of this §95.110 adopted to be effective July 8, 2007, 32 TexReg 3982; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
Subchapter B. Liquidating Agents
§95.200. Notice of Taking Possession; Appointment of Liquidating Agent; Subordination
of Rights.
(a) The department shall give prompt notice to the NCUA or the applicable insuring
organization whenever the commissioner takes possession of the property and assets of a
respective federally-insured or participating credit union. The Department shall give further
prompt notice whenever the commissioner determines to liquidate the property and assets of
such federally-insured or participating credit union.
(b) If the commissioner finds that the closing of a credit union and the liquidation of the
credit union’s assets are in the public interest and the best interest of the credit union members,
depositors, and creditors, the NCUA or, alternatively, the insuring organization shall be
appointed liquidating agent for the purpose of liquidation or the winding up of the affairs of the
credit union.
(c) When any member’s share or deposit account is paid, the NCUA or, alternatively, the
insuring organization shall be subrogated to all rights of the member, up to the amount paid by
the NCUA or the insuring organization to such member.
Source: The provisions of this §95.200 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to be effective
August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1065; reviewed and readopted to be
effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20, 2014, 39 TexReg 8604.
114
§95.205. State Not Liable for Any Deficiency.
Nothing in this chapter creates any liability upon this state for the payment of any funds to any
credit union by reason of the acts or omissions of the NCUA or insuring organization, nor shall
the state pay any deficiency of any credit union in the event the NCUA or insuring organization
is unable to pay such deficiency.
Source: The provisions of this §95.205 adopted to be effective March 7, 2007, 32 TexReg 1066; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
Subchapter C. Guaranty Credit Union
§95.300. Share and Deposit Guaranty Credit Union.
(a) The commissioner may authorize, with the advice and consent of the commission, the
establishment of a share and deposit guaranty credit union. The charter shall be granted only on
proof satisfactory to the commissioner that member credit union convenience and advantage will
be promoted by the establishment of the guaranty credit union. In determining whether the
convenience and advantage will be promoted, the commissioner shall consider:
(1) Whether the organizational and capital structure and amount of initial
capitalization is adequate for the business;
(2) Whether the anticipated volume and nature of business indicates a reasonable
probability of success and profitability based on the credit unions sought to be served;
(3) Whether the credit union’s guarantee fund and reserves are actuarially reasonable
and computed in accordance with accepted loss reserving standards and principles;
(4) Whether the long-term financial condition of the entity would prejudice the
interest of participating credit unions;
(5) Whether the proposed officers, directors, and managers have sufficient fiduciary
experience, ability, standing, competence, trustworthiness, and integrity to justify a belief that
the guaranty credit union will operate in compliance with the law and that the long term success
of entity is probable; and
(6) Whether the organizers are acting in good faith.
(b) Prior to commencing business in this state, a guaranty credit union is required to file a
written application supported by such information and data as the commissioner may require to
make the findings necessary to issue a certification of incorporation. The organizers bear the
burden of proof to establish that the incorporation of the guaranty credit union will promote
credit union member convenience and advantage. The failure of an applicant to furnish required
information, data, professional opinions, and other material is considered an abandonment of the
application.
(c) The commissioner may require, for submission to the department of public safety, the
name and fingerprints of any organizer, director or officer of any guaranty credit union.
(d) The commissioner may, in approving a guaranty credit union, impose such conditions as
the commissioner deems reasonable, necessary, or advisable in the public interest.
Source: The provisions of this §95.300 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to be effective
August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1066; reviewed and readopted to be
effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20, 2014, 39 TexReg 8604.
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§95.301. Authority for a Guaranty Credit Union.
If a guaranty credit union is authorized, the commissioner shall issue a certificate of incorporation
which shall provide that said guaranty credit union shall operate as a central credit union including
share and deposit guaranty insurance protection for members subject to supervision, regulation, and
examination by the department.
Source: The provisions of this §95.301 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to
be effective August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1066; reviewed
and readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October
20, 2014, 39 TexReg 8604.
§95.302. Powers.
The guaranty credit union, pursuant to Texas Finance Code §15.410(b) and to the powers
contained in Subtitle D, Title 3, Texas Finance Code, may:
(1) Purchase, hold, lease, receive, use, encumber, sell, exchange, transfer, lend, advance,
convey, assign, give, grant, transmit, hypothecate, or dispose of property or funds of any
description, nature, or kind or of any interest, rights, title, or privileges therein from or to any
participating credit union or any corporation, association, or person, provided that any gift, grant,
or transfer of a similar nature shall be made only with the approval of the commissioner;
(2) Declare and pay dividends on the membership investment fund;
(3) Make any type of investment authorized by law for a credit union chartered in this state;
(4) Act under the order or appointment of any court of record, without giving bond, as guardian,
receiver, trustee, executor, administrator, custodian, or as depository for any money paid into the
court for participating credit unions;
(5) Accept funds or money for deposit by fiduciaries, trustees, or receivers if managing or
holding funds on behalf of a participating credit union;
(6) Accept funds or money for deposit by financial institutions, trust companies, or insurance
companies, if membership or primary ownership of the institutions, associations, or companies is
confined or restricted to or for the benefit of participating credit unions or organizations of
participating credit unions, or if the institutions, associations, or companies are designed to serve or
otherwise assist operations of participating credit unions;
(7) Act as custodian of individual retirement accounts or of pension funds of participating credit
unions, or as trustee under pension and profit sharing plans of participating credit unions;
(8) Make deposits, purchase shares, and invest in legally chartered credit unions, trust
companies, or other financial institutions;
(9) Impress a lien or exercise its right of setoff on the deposits, dividends, and interest of any
participating credit union to the extent of any loans or other obligations due by the participating
credit union;
(10) Make or issue, with the approval of the commissioner, a guarantee or other form of written
assurance to the appropriate person, association, corporation, or other entity which is reasonably
necessary to facilitate the sale, conveyance, assignment, transfer, or other disposition of all or any
part of the property or assets of a participating credit union, and otherwise assist in the merger,
consolidation, conservation, suspension, or liquidation of a participating credit union upon the
request and under the instruction of the commissioner;
(11) Advance funds, with or without interest, in accordance with agreed terms and conditions, to
aid participating credit unions to continue to operate and to maintain solvency or to maintain
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account balances with any financial institution in connection with the assumption of receivables
from a participating credit union, or to meet liquidity requirements;
(12) Purchase from a participating credit union any equitable or other interest in its assets at book
value or at some other value mutually agreed upon by such credit union and the board of directors
of the guaranty credit union, notwithstanding that either of such values may exceed the market value
of the assets so purchased, and upon such terms and conditions as the board of directors of the
guaranty credit union may determine, provided, however, that all such terms, conditions,
agreements and values are approved in writing by the commissioner;
(13) Exercise any setoff or lien rights that a participating credit union may have when the
guaranty credit union is acting as conservator or liquidating agent for such credit union;
(14) Exercise rights of subrogation to the extent of all rights the depositors or shareholders
may have against a participating credit union to the extent of any payments made by the guaranty
credit union to the depositors or shareholders of such credit union, including the right to receive
the same dividends, as would have been payable to the depositor or shareholder;
(15) Raise any defense to the payment of a claim or an insured account which a participating
credit union could have raised, and when made, the actual payment of an insured account to any
person by the guaranty credit union shall discharge the guaranty credit union to the same extent
that payment to such person by the participating credit union would have discharged it from
liability for the insured account;
(16) Acquire a promissory note or other asset upon which a nonmember is liable, provided
such acquisition is made, in the discretion of the guaranty credit union, to protect an inferior lien
held by the guaranty credit union, a participating credit union, member of the guaranty credit
union or a member of a participating credit union member of the guaranty credit union. Such
acquisitions shall not be subject to the restrictions of §91.701 et. seq. of this title (relating to
Loans);
(17) Enter into contracts of insurance or reinsurance, insuring in whole or in part its
contractual guarantees to participating credit unions and any other insurance or bonding
company contracts necessary or advisable in the conduct of its business, provided a guaranty
credit union shall not assume any risks from another insurer; and
(18) Exercise the powers granted corporations organized under the laws of this state and such
other additional incidental powers not inconsistent with these sections and Subtitle D, Title 3,
Texas Finance Code, as may be necessary to enable the guaranty credit union to promote and
carry out effectively its purposes.
Source: The provisions of this §95.302 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to
be effective August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1066; reviewed
and readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October
20, 2014, 39 TexReg 8604.
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§95.303. Subordination of Right, Title, or Interest.
No agreement which tends to diminish or defeat the right, title or interest of the guaranty credit
union in any asset acquired by it, either as security for a loan or by purchase, shall be valid
against the guaranty credit union unless such agreement shall be in writing; shall have been
executed by the credit union and the person or persons claiming an adverse interest thereunder,
including the obligor, contemporaneously with the acquisition of the asset by the credit union;
shall have been approved by the board of directors of the credit union with such approval
reflected in the minutes of said board; and shall have been, continuously, from the time of its
execution, an official record of the credit union.
Source: The provisions of this §95.303 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to
be effective August 10, 2003, 28 TexReg 6030; readopted to be effective November 12, 2006, 31 TexReg 9044;
reviewed and readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective
October 20, 2014, 39 TexReg 8604.
§95.304. Capital Contributions; Membership Investment Shares; Termination.
(a) A guaranty credit union shall establish and maintain a guarantee fund. The fund shall be
maintained at a normal operating level as defined by the board of directors of the guaranty credit
union and approved by the commissioner, however, the normal operating level shall at all times
not be less than one percent of the aggregate share capital of participating credit unions. The
fund of the guaranty credit union shall be comprised of the following:
(1) The membership investment shares of each participating credit union;
(2) Retained and undivided earnings; and
(3) Any reserves required by the commissioner.
(b) Each participating credit union shall contribute to and maintain with a guaranty credit
union a membership investment share, in an amount equal to at least one percent of its insured
shares and deposits. Each participating credit union’s account shall be adjusted at least annually
to reflect changes in the participating credit union’s aggregate insured shares and deposits in
accordance with procedures adopted by the guaranty corporation’s board of directors.
(c) Membership investment shares of participating credit unions shall be established as pledged
assets with appropriate explanatory footnotes on the books and records and in the financial
statements of the participating credit unions. The guaranty credit union may utilize all of the assets
of the guaranty credit union and accordingly reduce the membership investment shares of all
participating credit unions, as required, at the discretion of its board of directors, and utilize such
assets in accordance with the powers of the guaranty credit union as set out in these rules.
Source: The provisions of this §95.304 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to
be effective August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1066; reviewed
and readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October
20, 2014, 39 TexReg 8604.
§95.305. Audited Financial Statements; Accounting Procedures; Reports.
(a) A guaranty credit union shall file with the commissioner annually audited financial
statements, prepared in accordance with generally accepted accounting principles covering the
fiscal year, within one hundred days after the close of such fiscal year. The audited financial
statements shall be accompanied by an opinion of an independent certified public accountant.
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(b) If the opinion of the certified public accountant is other than unqualified pursuant to
generally accepted auditing standards, the commissioner shall require the guaranty credit union
to take such action as is considered appropriate to permit the removal of such qualification from
the opinion.
(c) At a minimum, once every three years the annual audit of the guaranty credit union shall
include an actuarial study of the capital adequacy of the credit union.
(d) All of the provisions of this section are in addition to those prescribed in §91.209 of this
title (relating to Reports and Charges for Late Filing).
Source: The provisions of this §95.305 adopted to be effective November 11, 1999, 24 TexReg 9830; readopted to
be effective August 10, 2003, 28 TexReg 6030; amended to be effective March 7, 2007, 32 TexReg 1066; reviewed
and readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October
20, 2014, 39 TexReg 8604.
§95.310. Fees and Charges.
(a) A guaranty credit union shall pay the fees prescribed in Section 97.113 of this title (relating
to Operating Fees) in the same manner as any other credit union chartered under the Act.
(b) At the sole discretion of the commissioner, the department may engage professionals to
perform and complete any aspect of an examination or investigation. The reasonable expenses and
compensation of such professionals shall be paid by the guaranty credit union.
Source: The provisions of this §95.310 adopted to be effective March 7, 2007, 32 TexReg 1067; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748; reviewed and readopted to be effective October 20,
2014, 39 TexReg 8604.
Subchapter D. Disclosure for Non-Federally Insured Credit Unions
§95.400. Requirements of Participating Credit Unions.
(a) Every participating credit union shall give appropriate notice of the insurance status of its
accounts printed in a manner acceptable to the commissioner. This notice shall be posted at all
public entrances at each office and service facility (excluding shared branching facilities) and
continuously displayed at each station or window (excluding automatic teller machines and point
of sale terminals) where funds or deposits are normally received. At a minimum, the notice shall
clearly and conspicuously disclose the following:
(1) That members’ accounts are insured by an insuring organization;
(2) The name of the insuring organization;
(3) The extent of the insuring organization’s share and deposit insurance protection;
and
(4) That accounts are not insured or guaranteed by any government or government-
sponsored agency.
(b) At the time an account is established, a participating credit union shall provide written
notice to its members that the share or deposit account will be cooperatively insured or
guaranteed by an insuring organization. The notice shall include a conspicuous statement that
discloses that member accounts are not insured or guaranteed by any government or government-
sponsored agency.
(c) The noticed required by paragraph (a) of this section shall also be displayed on a
participating credit union’s web site home page and any other page where it accepts deposits or
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opens accounts. The dimensions and font size of the notice required by this paragraph must be
of a reasonable size and clearly legible.
(d) Every participating credit union shall also include, in any literature, advertising, or other
marketing materials related to joining the credit union, or soliciting funds for a share or deposit
account, a conspicuous statement that discloses that member accounts are not insured or
guaranteed by any government or government-sponsored agency.
Source: The provisions of this §95.400 adopted to be effective March 7, 2007, 32 TexReg 1067; reviewed and
readopted to be effective October 18, 2010, 35 TexReg 9748.
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Title 7
Part VI. Credit Union Department
Chapter 97
COMMISSION POLICIES AND
ADMINISTRATIVE RULES
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CHAPTER 97
Subchapter A. General Provisions
§97.101. Meetings.
The time and place of regular and special meetings of the Commission and its committees shall
be determined by the applicable chair and posted in accordance with the Open Meetings Act
(Government Code, Chapter 551). The minutes of each meeting shall be in writing, shall be
posted on the Department’s website, and shall be available to any person to examine during the
Department’s regular office hours.
Source: The provisions of this §97.101 adopted to be effective March 8, 1984, 9 TexReg 1211; amended to be
effective July 8, 1994, 19 TexReg 4946; amended to be effective December 9, 2001, 26 TexReg 9777; readopted to
be effective February 14, 2005, 30 TexReg 1091; reviewed and amended to be effective July 12, 2009, 34 TexReg
4513; reviewed and readopted to be effective February 15, 2013, 38 TexReg 1378.
§97.102. Delegation of Duties.
The Commissioner is authorized to complete all filings necessary to facilitate the rule making
powers of the Commission. The Commissioner may draft and sign final adoption orders and other
such instruments where delegation is not restricted by statute or rule. Notwithstanding other
provisions of this rule, this authority is conveyed only to promote administrative efficiency and to
expedite properly approved decisions of the Commission.
Source: The provisions of this §97.102 adopted to be effective May 4, 1995, 20 TexReg 3015; readopted to be
effective June 19, 2001, 26 TexReg 4886; readopted to be effective February 14, 2005, 30 TexReg 1091, reviewed
and amended to be effective July 12, 2009, 34 TexReg 4513; reviewed and readopted to be effective February 15,
2013, 38 TexReg 1378.
§97.103. Recusal or Disqualification of Commission Members.
(a) A commission member may not vote on or otherwise participate in the deliberation or
decision of a matter pending before the commission:
(1) in which the commission member has a personal or private interest; or
(2) which directly affects the credit union of which the commission member is an
officer, director, or member.
(b) The term “personal or private interest” shall be given the meaning as prescribed in Texas
Government Code, Section 572.058, and includes a direct personal or financial interest in a
credit union or other matter which is the subject of commission action.
(c) A commission member who is disqualified under subsection (a) of this section shall
publicly disclose the fact to the commission in a meeting called and held in compliance with the
Open Meetings Act, Texas Government Code, Chapter 551. The disclosure shall be entered in
the minutes of the meeting.
(d) A commission member who is recused or disqualified will be counted in determining a
quorum.
Source: The provisions of this §97.103 adopted to be effective February 17, 1998, 23 TexReg 1303; readopted to be
effective June 19, 2001; 26 TexReg 4886; readopted to be effective February 14, 2005, 30 TexReg 1091; reviewed
and readopted to be effective February 12, 2009, 34 TexReg 1452; reviewed and readopted to be effective February
15, 2013, 38 TexReg 1378.
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§97.104. Petitions for Adoption or Amendment of Rules.
(a) An interested party may submit a petition to the Department to adopt or amend a rule
pursuant to Government Code, <*>2001.021. The petition must be in writing, must be directed
to the commissioner, and must include:
(1) a brief explanation of the proposed rule or of the proposed amendment to the rule;
(2) the full text of the proposed rule, or, if the petition is to amend an existing rule,
the text of the rule that clearly identifies any words to be added or deleted from the existing text
by underlining new language and striking through language to be deleted; and
(3) any additional information the commissioner may request.
(b) If the petition complies with the requirements of subsection (a) of this section, the
Department shall notify the applicant that the petition has been accepted for filing and will be
processed in accordance with subsection (c) of this section. If the petition does not comply, the
Department shall notify the applicant in writing of the deficiencies and give the applicant an
opportunity to cure them by filing an amended petition. If the applicant does not file an amended
petition curing the deficiencies by 5:00 p.m. on the 15th day following the date that the
Department mailed a notice of deficiencies to the applicant, the petition shall be deemed denied
for the reasons stated in the deficiency notice without the necessity of further action.
(c) Within 60 days of the date that a petition is accepted for filing, the Department must
either deny the petition for reasons stated in writing or initiate a rulemaking proceeding.
Source: The provisions of this §97.104 adopted to be effective March 10, 2011, 36 TexReg 1658; reviewed and
readopted to be effective February 15, 2013, 38 TexReg 1378.
§97.105. Frequency of Examination.
The department shall perform an examination of each credit union authorized to do business
under the Act at least once each year. Intervals between examinations shall not exceed 18
months, unless a longer interval is authorized in writing by the commission. In lieu of
conducting an examination required by this rule, the commissioner in the exercise of discretion
may accept examinations or reports from other credit union supervisory agencies or insuring
organizations.
Source: The provisions of this §97.105 adopted to be effective March 8, 1984, 9 TexReg 1211; amended to be
effective December 9, 2001, 26 TexReg 9777; readopted to be effective February 14, 2005, 30 TexReg 1091;
reviewed and readopted to be effective February 12, 2009, 34 TexReg 1452; reviewed and readopted to be effective
February 15, 2013, 38 TexReg 1378.
§97.107. Related Entities.
(a) Definition. For the purposes of this section, a related entity is defined as:
1. a credit union service organization in which a credit union has a material interest
by contracting with, lending to or investing in the organization;
2. a subsidiary or affiliate of a credit union service organization that is wholly
owned or controlled by a credit union;
3. an organization engaged primarily in the business of managing a credit union; and
4. third-party contractors providing electronic data processing, electronic fund
transfers, or other member services to or on behalf of a credit union.
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(b) General Supervision. A credit union should perform a thorough analytical assessment to
identify, measure, monitor, and establish controls to manage the risks associated with related
entities and avoid excessive risk-taking that may threaten the safety and soundness of a credit
union. The department may review the risks associated with any related entity and its activities
together with other credit union risks using its supervision-by-risk framework. The department
shall assess the effectiveness of a credit union’s oversight program of related entities, including
its strategic planning, third-party selection process, and ongoing monitoring.
(c) Examination. A credit union’s use of related entities to achieve its strategic goals does
not diminish the responsibility of the department to ensure that the activity is conducted in a safe
and sound manner and in compliance with applicable law. Although in most situations, these
activities should be conducted in the same manner that would be expected if the credit union
were conducting the activities directly, the department shall consider the following factors in
determining whether to examine exam related entities:
1. the high risk or unusual nature of the activities conducted by the related entity for
the credit union;
2. the significance of the activities conducted by the related entity for the credit
union to the credit union’s operations and income; and
3. the extent to which the credit union has sufficient systems, controls, and personnel
to adequately monitor, measure, and control risks arising from activities conducted by the related
entity. The department may examine a related entity, as the commissioner deems necessary to
ensure that a credit union is not assuming excessive risk.
(d) Examination Fee. The related entity shall pay a supplemental examination fee as
prescribed in §97.113(e) of this title (relating to Supplemental examination fees). A credit union
may elect to pay the fee on behalf of the related entity. The supplemental examination fee for a
related entity may be waived or reduced if the commissioner determines it is appropriate.
Source: The provisions of this §97.107 adopted to be effective March 14, 2004, 29 TexReg 2639; readopted to be
effective February 14, 2005, 30 TexReg 1091, reviewed and amended to be effective July 12, 2009, 34 TexReg4514;
reviewed and readopted to be effective February 15, 2013, 38 TexReg 1378.
Subchapter B. Fees
§97.113. Fees and Charges.
(a) Remittance of fees.
(1) Each credit union authorized to do business under the Act shall remit to the
department an annual operating fee. The fee shall be paid in semi-annual installments, billed
effective September 1 and March 1 of each year. The final installment may be adjusted as
provided by subsection (d) of this section. Installments received after September 30 or March 30
of each year will be subject to a monthly 10% late fee unless waived by the commissioner for
good cause.
(2) Credit unions that exit the Texas credit union system on or before August 31 or
February 28 of a given year, will not be subject to the semi-annual assessment for the period
beginning September 1 or March 1, respectively. Only those credit unions leaving the state credit
union system prior to the close of business on those dates avoid paying the semi-annual
assessment for the period beginning September 1 or March 1, as applicable.
(b) Calculation of operating fees. The schedule provided in this section shall serve as the
basis for calculating operating fees. The base date shall be June 30 of the year in which operating
fees are calculated. The asset base may be reduced by the amount of reverse-repurchase
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balances extant on the June 30 base date. The commissioner is authorized to increase the fee
schedule once each year as needed to match revenue with appropriations. An increase greater
than 5% shall require prior approval of the commission. The commissioner shall notify the
commission of any such adjustment at the first meeting of the commission following the
determination of the fee schedule.
For Credit Unions with Total Assets Of: The Operating Fee is:
Less than $200,000 $200
$200,000 but less than $1M $200 plus .001625 of excess over
$200,000
$1M but less than $10M $1,500 plus .00034 of excess over
$1M
$10M but less than $25M $4,560 plus .00014 of excess over
$10M
$25M but less than $50M $6,660 plus .00017 of excess over
$25M
$50M but less than $100M $10,910 plus .00019 of excess over
$50M
$100M but less than $500M $20,410 plus .000080 of excess over
$100M
$500M but less than $1,000M $52,410 plus .000072 of excess over
$500M
$1,000M but less than $2,000M $88,410 plus .000069 of excess over
$1,000M
$2,000M and over $157,410 plus .000062 of excess
over $2,000M
(c) Waiver of operating fees. The commissioner is authorized to waive the operating fee for
an individual credit union when good cause exists. The commissioner shall document the
reason(s) for each waiver of operating fees and report such waiver to the commission at its next
meeting.
(d) Adjustment of an installment. The commissioner in the exercise of discretion may, after
review and consideration of actual revenues to date and projected revenues for the remainder of
the fiscal year, lower the amount of the final installment due from credit unions.
(e) Supplemental examination fees.
(1) If the commissioner or deputy commissioner schedules a special examination in
addition to the regular examination, the credit union is subject to a supplemental charge to cover
the cost of time and expenses incurred in the examination.
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(2) The credit union shall pay a supplemental fee of $50 for each hour of time
expended on the examination. The commissioner may waive the supplemental fee or reduce the
fee, individually or collectively, as he deems appropriate. Such waiver or reduction shall be in
writing and signed by the commissioner. The department shall fully explain the time and
charges for each special examination to the president or designated official in charge of
operations of a credit union.
(f) Foreign credit union branches. Credit unions operating branch offices in Texas as
authorized by §91.210 of this title (relating to Foreign Credit Unions) shall pay an annual
operating fee of $500 per branch office.
(g) Credit union conversion fee. A credit union organized under the laws of the United
States or of another State that converts to a credit union organized under the laws of this State
shall remit to the department an annual operating fee within 30 days after the issuance of a
charter by the commissioner. The schedule provided in subsection (b) of this section shall serve
as the basis for calculating the operating fee. All provisions set forth in subsection (b) of this
section shall apply to converting credit unions with the following exceptions:
(1) Should the effective date of the conversion fall on or after October 31, the base
date shall be the calendar quarter end immediately preceding the issuance date of a charter by the
commissioner.
(2) The amount of the operating fee calculated under this section will be prorated
based upon the number of full months remaining until September 1. For example, should the
effective date of the conversion be January 31, the converting credit union will remit seven-
twelfths of the amount of the operating fee calculated using December 31 base date.
(3) Any fee received more than 30 days after the issuance of a charter will be subject
to a monthly 10% late fee unless waived by the commissioner for good cause.
(h) Mergers/Consolidations. In the event a credit union in existence as of June 30 merges or
consolidates with another credit union and the merger/consolidation is completed on or before
August 31, the surviving credit union’s asset base, for purposes of calculating the operating fee
prescribed in subsection (b) of this section, will be increased by the amount of the merging credit
union’s total assets as of the June 30 base date.
(i) Special assessment. The commission may approve a special assessment to cover material
expenditures, such as major facility repairs and improvements and other extraordinary expenses.
(j) Foreign credit union fee for field of membership expansion. A foreign credit union
applying to expand its field of membership in Texas shall pay a fee of $200. This fee shall be
paid at the time of filing to cover the cost of processing the application. In addition, the
applicant shall pay any cost incurred by the department in connection with a hearing conducted
at the request of the applicant.
(k) Foreign credit union examination fees.
(1) If the commissioner schedules an examination of a foreign credit union, the credit
union is subject to supplemental charges to cover the cost of time and expenses incurred in the
examination.
(2) The foreign credit union shall pay a fee of $50 for each hour of time expended by
each examiner on the examination. The commissioner may waive the examination fee or reduce
the fee as he deems appropriate.
(3) The foreign credit union shall also reimburse the department for actual travel
expenses incurred in connection with the examination, including mileage, public transportation,
food, and lodging in addition to the fee set forth in paragraph (2) of this subsection. The
commissioner may waive this charge at his discretion.
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(l) Contract Services. In addition, the commissioner may charge, or otherwise cause to be
paid by, a credit union, a foreign credit union or related entities the actual cost incurred by the
department for an examination or a review of all or part of the operations or activities of a credit
union, a foreign credit union or related entity that is performed under a personal services contract
entered into between the department and third parties.
Source: The provisions of this §97.113 adopted to be effective November 13, 2000, 25 TexReg 11279; amended to
be effective December 9, 2001, 26 TexReg 9777; readopted to be effective February 14, 2005, 30 TexReg 1091;
reviewed and amended to be effective July 12, 2009, 34 TexReg 4514; reviewed and readopted to be effective
February 15, 2013, 38 TexReg 1378.
§97.114. Charges for Public Records.
(a) Reproduction Charges. Copies of documents not excepted from disclosure by the Texas
Public Information Act (Government Code, Chapter 552) may be obtained upon written request
to the department at rates established by the Office of the Attorney General in 1 TAC Sections
§§70.1-70.12 (relating to Cost of Copies of Public Information) or other applicable law.
(b) Request for Information. The following guidelines apply to requests for records under
the Public Information Act (Government Code, Chapter 552).
(1) Request must be in writing and reasonably identify the records requested.
(2) Records access will be by appointment only.
(3) Records access is available only during the regular business hours of the
department.
(4) Generally, unless confidential information is involved, review may be by physical
access or by duplication, at the requestor’s option. Any person, however, whose request would
be unduly disruptive to the ongoing business of the office may be denied physical access and will
be provided only the option of receiving copies by duplication.
(5) When the safety of any public record is at issue, physical access may be denied,
and the records will be provided by duplication as previously described.
(6) Confidential files will not be made available for inspection or for duplication
unless required by a court order or Attorney General decision.
(c) Waiver of Fees or Charges. The commissioner may waive or reduce an established
charge when, in his or her discretion, a waiver or reduction of the fee is in the public interest
because furnishing the information primarily benefits the general public. The fee may also be
waived if the cost of processing the collection of a charge will exceed the amount of the charge.
Source: The provisions of this §97.114 adopted to be effective September 1, 1994, 19 TexReg 6557; amended to be
effective December 9, 2001, 26 TexReg 9778; readopted to be effective February 14, 2005, 30 TexReg 1091;
reviewed and amended to be effective July 12, 2009, 34 TexReg 4515; reviewed and readopted to be effective
February 15, 2013, 38 TexReg 1378.
§97.115. Reimbursement of Legal Expenses.
(a) The commissioner may seek reimbursement of expenses from an individual credit union
for legal fees incurred solely and necessarily because the credit union acted in an unreasonable or
egregious manner or acted outside the course and scope of what is permitted by statute or
regulation. To ensure that the rights and interest of all parties are protected, this section shall not
apply to any adjudicative proceedings in which the legal rights, duties, or privileges of the credit
union are being determined by the Department after an opportunity for hearing. This section also
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does not apply to court proceedings where the individual credit union’s legal rights, duties, or
privileges are being determined as against the Department.
(b) The credit union has thirty days from the date it receives the assessment to pay in full or
to appeal in writing to the Commission.
(c) If a credit union files a written notice of appeal, the Commission shall hear the appeal at
its next regularly scheduled meeting. In making its decision, the Commission shall consider
whether the credit union acted reasonably under the circumstances or acted within its legal
rights.
(d) When possible, the Department will notify a credit union before the Department requests
legal assistance which may be charged to a credit union under this section.
Source: The provisions of this §97.115 adopted to be effective November 7, 2010, 29 TexReg 9722; reviewed and
readopted to be effective February 15, 2013, 38 TexReg 1378.
§97.116. Recovery of Costs for Extraordinary Services Not Related to an Examination.
(a) The commissioner may seek reimbursement from an individual credit union for non
examination-related expenses incurred solely and necessarily because the credit union acted in an
unreasonable or egregious manner, or acted outside the course and scope of what is permitted by
statute or regulation. Expenses can include personnel costs, transportation costs, meals, lodging,
and other incidental expenses. If the commissioner determines that recovery of costs is
appropriate, the Department shall provide advance notice to the credit union of its intention to
recover the expenses.
(b) In seeking reimbursement, the commissioner shall consider the amount of the costs
involved, the nature of the credit union’s conduct, the service provided, the financial impact on
the credit union, and the impact of the activity on other Department services. The commissioner
may reduce the charges and bill the credit union less than the full amount of the costs.
(c) The credit union has thirty days from the date it receives the assessment to pay in full or
to appeal in writing to the Commission.
(d) If a credit union files a written notice of appeal, the Commission shall hear the appeal at
its next regularly scheduled meeting. In making its decision, the Commission shall consider
whether the credit union acted reasonably under the circumstances or acted within its legal
rights.
Source: The provisions of this §97.116 adopted to be effective November 7, 2010, 35 TexReg 9723; readopted to be
effective February 15, 2013, 38 TexReg 1378.
Subchapter C. Department Operations
§97.200. Employee Training Program.
(a) Components of program. The employee training program for the department consists of
one or more of the following components:
(1) Agency-sponsored training to include in-house training sessions and on-the-job
training;
(2) Formal training program conducted through the National Credit Union
Administration as administrator of the National Credit Union Share Insurance Fund.
(3) Seminars and conferences; and
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(4) Formal course of study at an institution of higher education or a private or
independent institution of higher education.
(b) In order for the cost of training and the time related to that training to be reimbursed by
the department, the employee must demonstrate that the course has direct applicability to the
employee's job with the department. Attendance at an approved training session described in
subsection (a)(1)-(3) will be considered part of the employee's normal work duties and will not
require the employee to use accrued leave to attend.
(c) Requests to attend an external training program, seminar or conference pursuant to this
section must be approved by the commissioner. Approval of a request is contingent upon
availability of funds. If limited funds are available, and more than one employee wishes to
participate, a decision regarding who will attend will be based upon the extent of their previous
use of funds, the training's merit and its value to the department's operations.
(d) Continuing education courses. Continuing education courses required by licensing or
certifying bodies for employees to maintain a professional license or designation will only be
reimbursed if such courses relate directly to the employee's job duties with the department and
there are funds available.
(e) Tuition reimbursement.
(1) The department may reimburse full-time employees for part or all of tuition and
required fees for formal courses of study described in subsection (a)(4) provided the eligibility
criteria set forth below are met.
(A) An employee must have completed 24 consecutive months of full-time
employment with the department prior to requesting approval to receive tuition reimbursement.
However, the 24-month requirement may be waived if the commissioner finds that the employee
needs a particular course to fulfill his or her work duties.
(B) An employee must be performing consistently above that normally
expected or required and must have achieved an overall performance rating of at least 3.50 on
the employee's most recent performance evaluation.
(C) An employee must not have been subject to formal disciplinary action for
at least twelve months prior to requesting approval. As used in this section, "disciplinary action"
includes a formal written reprimand, suspension without pay, or salary reduction for disciplinary
reasons.
(D) The course work must be related to a current or prospective duty
assignment within the department.
(E) An employee, before the course begins, must agree in writing to the
repayment requirement stated in paragraph 3 of this subsection.
(F) At the time of the request for approval to receive tuition reimbursement,
comparable training must not be scheduled to be offered in-house or through the National Credit
Union Administration during the period of time covered by the tuition reimbursement.
(G) The employee's participation must not adversely affect workload or
performance.
(H) The employee must complete the course within the semester for which
tuition reimbursement was requested.
(I) The employee must receive a passing grade in the course. A passing grade
is a grade which will entitle the employee to receive credit for the course from the educational
institution offering the course.
(2) Reimbursable costs. Criteria addressing the extent to which cost of tuition may be
reimbursed are as follows:
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(A) The maximum amount an employee may be reimbursed for an approved
tuition reimbursement request is $250 per semester, not to exceed $500 per fiscal year. The
maximum amount of reimbursement may be increased up to $400 per semester for good cause
shown upon approval by the commissioner.
(B) Reimbursable costs include tuition, related fees, and required textbooks
and workbooks. Employees will not be reimbursed for auditing a course.
(C) Costs described in subparagraph (2)(B) will be paid to the employee at the
completion of the course upon the employee submitting proof that the course was completed and
a passing grade was received.
(3) Repayment. Should an employee separate from department service within 12
months of completion of the course, the employee must reimburse the department for all
reimbursable costs expended by the department for that course in accordance with section
656.103 of the Texas Government Code (relating to Restrictions on Certain Training Costs). The
commission may adopt an order waiving this requirement upon finding that such action is in the
best interest of the department or is warranted because of an extreme personal hardship suffered
by the employee.
(4) Prohibition on use of state resources. Employees may not use department
equipment, such as computers, calculators or typewriters to complete course work.
Source: The provisions of this §97.200 adopted to be effective February 16, 2000, 25 TexReg 91099; readopted to
be effective June 19, 2001, 26 TexReg 4886; readopted to be effective February 14, 2005, 30 TexReg 1091;
reviewed and readopted to be effective February 12, 2009, 34 TexReg 1452; reviewed and readopted to be effective
February 15, 2013, 38 TexReg 1378.
§97.205. Use of Historically Underutilized Businesses.
Pursuant to Chapter 2161 of the Government Code, the Department hereby incorporates by
reference the rules of the Comptroller of Public Accounts, 34 TAC §§20.11-20.28 (relating to
Historically Underutilized Business Program), or any successor rules, regarding historically
underutilized businesses. The Department shall comply, to the extent applicable, with the
requirements of these rules when purchasing goods and services that are paid for with State
appropriated money.
Source: The provisions of this §97.205 adopted to be effective November 13, 2000, 25 TexReg 11279; readopted to
be effective June 22, 2004, 29 TexReg 6423; readopted to be effective February 14, 2005, 30 TexReg 1091;
reviewed and amended to be effective July 12, 2009, 34 TexReg 4515; reviewed and readopted to be effective
February 15, 2013, 38 TexReg 1378.
§97.206. Posting Of Certain Contracts: Enhanced Contracts And Performance Monitoring.
(a) Pursuant to section 2261.253 of the Texas Government Code, the Department will
implement the following procedures for contracts for the purchase of goods or services from
private vendors:
(1) The Department will list information pertaining to its contract with private
vendors on its website. The information will include:
(A) The name of the vendor with whom the contract is made;
(B) A description of the competitive bidding process for the contract, or, if the
contract did not involve competitive bidding, a citation and explanation of the legal authority
supporting exemption from the competitive bidding process;
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(C) A link to a copy of the request for proposal for the contract, if applicable
until the contract expires or is completed; and
(D) A link to a copy of the contract with the vendor until the contract expires
or is completed.
(2) Enhanced contract or performance monitoring procedure until the contract expires
or is completed.
(A) For each contract whose value is greater than $25,000, the Commissioner
and the Department Procurement Director will evaluate whether enhanced contract or
performance monitoring is appropriate. Criteria that may be considered include:
(i) Total cost of the contract.
(ii) Risk of loss to the Department under the contract.
(iii) Department resources available for enhanced contract or
performance monitoring.
(B) After evaluation of the contract, the Commissioner will immediately
report to the Commission Members:
(i) The basis for determination as to whether enhanced contract or
performance monitoring is appropriate;
(ii) Include any serious issues or risks identified with the contract, if
applicable; and
(iii) If enhanced contract or performance monitoring is appropriate, the
Department’s plan for carrying out the enhanced contract or performance monitoring.
(C) Commission members may agree to convene a special commission
meeting for the purposes of discussion or deciding upon matters related to enhanced contract or
performance monitoring of Department contracts. This meeting would be conducted in
conformity with the Texas Open Meetings Act.
(b) This rule applies only to contracts for which the request for bids or proposals is made
public on or after September 1, 2015; or, if the contract is exempt from competitive bidding,
where the contract is entered into on or after September 1, 2015. This rule does not apply to
memorandums of understanding, interagency contracts, interlocal agreements or contracts that do
not involve a cost to the Department.
Source: The provisions of this §97.206 adopted to be effective November 8, 2015, 40 TexReg 7667.
§97.207. Contracts for Professional or Personal Service.
(a) In connection with the authority granted to the commissioner to negotiate, contract or
enter into an agreement for professional or personal services under §15.414, Texas Finance
Code, the Department hereby incorporates by reference the procurement rules of the Comptroller
of Public Accounts, 34 TAC Chapter 20 (relating to Texas Procurement and Support Services),
or any successor rules, regarding soliciting and awarding contracts. The Department shall
comply, to the extent applicable, with the requirements of these rules when contracting for
professional or personal services that are paid for with State appropriated money or paid by
credit unions pursuant to 7 TAC §97.113(l) of this title (relating to Fees and Charges).
(b) Any professional or personal service contracts between the Department and entities that
receive funds from the State of Texas shall contain the following language regarding the
authority of the State Auditor’s Office to conduct an audit or investigation in connection with
those funds: “Contractor understands that acceptance of funds under this contract acts as
acceptance of the authority of the State Auditor’s Office, or any successor agency, to conduct an
audit or investigation in connection with those funds. Contractor further agrees to cooperate
131
fully with the State Auditor’s office or its successor in the conduct of the audit or investigation,
including providing all records requested. Contractor will ensure that this clause concerning the
authority to audit funds received indirectly by subcontractors through Contractor and the
requirements to cooperate is included in any subcontract it awards.”
(c) Any professional or personal service contracts between the Department and entities that
receive funds from the State of Texas shall contain the following language regarding dispute
resolution: “The parties shall attempt to resolve any dispute arising under this contract by using
the Department’s dispute resolution process.” The Department hereby incorporates by reference
as its dispute resolution process the rules found in 1 TAC Chapter 68 (relating to Negotiation and
Mediation of Certain Contract Disputes), or any successor rules.
Source: The provisions of this §97.207 adopted to be effective March 14, 2004, 29 TexReg 2639; readopted to be
effective February 14, 2005, 30 TexReg 1091; reviewed and amended to be effective July 12, 2009, 34 TexReg 4516;
reviewed and amended to be effective July 14, 2013, 38 TexReg 4318.
Subchapter D. Gifts and Bequests
§97.300. Gifts of Money or Property.
(a) The department may accept money or property by gift, bequest, devise, or otherwise
(“Donation”), only from an organization described in Section 501(c)(3), Internal Revenue Code
of 1986, for the purposes of funding or performing any authorized activity (“Donor”).
(b) All Donations must be accepted in an open meeting by a majority of the commission
members present and reported in the minutes of the meeting setting forth the name of the Donor
and the purpose of the Donation. Before accepting a Donation, the commission may require the
Donor to provide information that the commission deems reasonable and necessary to ensure
itself that the Donation is not being conveyed to directly or indirectly influence an official act of
the department or the commission.
(c) The department may not solicit money or property from any person or organization to
settle an administrative action or to keep the department from taking formal enforcement action.
Source: The provisions of this §97.300 adopted to be effective March 14, 2004, 29 TexReg 2640, readopted to be
effective February 14, 2005, 30 TexReg 1091; reviewed and amended to be effective July 12, 2009, 34 TexReg 4516;
reviewed and readopted to be effective February 15, 2013, 38 TexReg 1378.
Subchapter E. Advisory Committees
§97.401. General Requirements.
(a) Definition. For purposes of this rule, the term “advisory committee” means a committee,
council, board, task force, or other entity with multiple members established to provide advice
and counsel to the commission.
(b) Creation. The commission may establish advisory committees to advise the commission
on issues within the jurisdiction of the department.
(c) Function. Unless otherwise provided by law, an advisory committee’s responsibility is
limited to those matters about which advice or counsel is sought. An advisory committee will
have no authority to make rules or establish department policy.
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(d) Expiration of advisory committee. Unless expressly provided in this subchapter or other
law, an advisory committee will expire on the fourth anniversary of the date of its creation. The
date of creation shall be the effective date of the rule establishing the advisory committee.
(e) Membership and Quorum. The chairman may appoint a maximum of 24 individuals to
serve on an advisory committee. A majority of those individuals shall constitute a quorum.
Unless otherwise provided by specific statute, the appointments shall be balanced to ensure
representation of credit unions regulated by the department and consumers of services provided
by those credit unions. Each advisory committee shall include at least one department employee
as an ex officio member. This employee shall not be considered a committee member for
purposes of establishing the maximum number of members or for purposes of determining a
quorum.
(f) Term of members. Unless expressly provided in this subchapter or other law, each
member of an agency advisory committee will serve a term of four years. The terms may be
staggered. Members' terms will expire at the end of four years or upon the termination of the
advisory committee, whichever is earlier. Members may be reappointed. Members serve at the
will of the chairman and may be removed at any time by the chairman.
(g) Presiding officer. The presiding officer of each advisory committee shall be selected by
the members of the advisory committee from its membership. The chairman may make a
recommendation to the advisory committee regarding the presiding officer.
(h) Meetings. Meetings shall be subject to the requirements of Chapter 551 of the
Government Code. Each committee shall meet at least annually, but may meet as often as
necessary. The department ex officio member of each advisory committee shall work with the
presiding officer to schedule advisory committee meetings and provide adequate notice to
department staff and to other members.
(i) Reports. On or before October 1 of each year, each advisory committee shall submit a
report to the commission. Upon receipt of the report, the commission shall evaluate the advisory
committee's work, usefulness, and costs related to the committee's existence, including the cost
of department staff time spent in support of the committee's activities. Each report shall include
the following:
(1) a summary or minutes of meetings conducted during the previous fiscal year
(September 1-August 31);
(2) a summary of recommendations from the advisory committee; and
(3) other information determined by the advisory committee or the chairman to be
appropriate and useful.
(j) Expenses. Members of each advisory committee will serve without compensation or
reimbursement for travel or other out-of-pocket expenses.
(k) Rules. For each advisory committee appointed, the commission shall adopt rules that
address the purpose of the advisory committee and membership qualifications, including
experience requirements, geographic representation, and training requirements. Such rules may
also address the terms of service, operating procedures, and other standards to ensure the
effectiveness of an advisory committee appointed under this subchapter.
Source: The provisions of this §97.401 adopted to be effective March 14, 2010, 35 TexReg 1980; reviewed and
readopted to be effective February 15, 2013, 38 TexReg 1378.
133
Title 7
Part VIII. Joint Interpretations
Chapter 151
HOME EQUITY LENDING PROCEDURES
134
Chapter 151.
Procedures for Administrative Interpretation of Subsection (a), Section 50, Article XVI,
Texas Constitution, (The Home Equity Lending Law)
§151.1. Application for Interpretation.
(a) The Finance Commission and Credit Union Commission may on their own motion issue
interpretations of Section 50(a) (5)-(7), (e)-(p), and (t), Article XVI of the Texas Constitution.
(b) An interested person may submit a request for an interpretation of Section 50(a) (5)-(7),
(e)-(p), and (t), Article XVI of the Texas Constitution. All requests must:
(1) be directed to the general counsel for the Office of Consumer Credit
Commissioner who will promptly distribute it to the general counsels for the Department of
Banking, the Department of Savings and Mortgage Lending, and the Credit Union Department;
(2) contain an explicit statement that an interpretation approved by the Finance
Commission and Credit Union Commission is desired;
(3) contain the reference to the specific applicable section, subsection and paragraph
of the Texas Constitution of which the interpretation is requested;
(4) state with sufficient particularity the factual and legal context to which the
application of the provision is vague or ambiguous; and
(5) indicate the requestor’s opinion of how the legal issue should be resolved, the
basis for that opinion, an analysis of any relevant court decisions, and all prior interpretations to
which the request relates.
Source: The provisions of this §151.1 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9074; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§151.2. Review of Request.
(a) The request for interpretation shall be evaluated to determine:
(1) whether the requestor has complied with the requirements of §151.1(b);
(2) the significance and general application of the interpretation; and
(3) the ambiguity of the constitutional provision.
(b) Reasons for a denial of a request for interpretation will be stated in writing.
Source: The provisions of this §151.2 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§151.3. Initiation of Interpretation Procedure.
(a) If an interpretation is initiated, the requestor shall be notified in writing.
(b) To ensure that clear and concise formal interpretations are made, it may be necessary to
rephrase the original interpretation request. A requestor will be notified in writing if a request is
rephrased and a copy of the rephrased request shall be provided to the requestor.
(c) Copies of the request for interpretation will be sent to parties requesting advance notice
for their input.
135
(d) The parties requesting advance notice may provide their input indicating an opinion of
how the legal issue should be resolved, the basis for that opinion, an analysis of any relevant
court decisions and all prior interpretations to which the request relates.
(e) The input of the parties requesting advance notice will be considered.
Source: The provisions of this §151.3 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9073; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§151.4. Notice of Proposed Interpretation.
If the Finance Commission and the Credit Union Commission propose an interpretation, notice
of the proposed interpretation will be published in the Texas Register. The notice of the
proposed interpretation shall contain:
(1) A brief explanation of the proposed interpretation;
(2) The text of the proposed interpretation, except any portion omitted under Section
2002.014, Government Code, prepared in a manner to indicate any words to be added or deleted
from the current text;
(3) A reference to the section of the constitution interpreted; and
(4) A statement of whether the interpretation is inconsistent with any other interpretations
and an explanation of the justification for any inconsistency.
Source: The provisions of this §151.4 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§151.5. Public Comment.
Any person may submit comments, briefs or proposals pertaining to the proposed interpretation
not later than 30 days following the publication of the proposed interpretation in the Texas
Register. The Finance Commission and Credit Union Commission will allow the opportunity for
public comment and public hearing as required by Section 2001.029, Government Code.
Source: The provisions of this §151.5 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013,
4393.
§151.6. Action on Proposed Interpretation.
The Finance Commission and the Credit Union Commission may adopt or decline to adopt the
proposed interpretation or remand the proposed interpretation for modification, revision, or
additional comment. This action will be conducted at a public meeting.
Source: The provisions of this §151.6 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§151.7. Adoption of Interpretation.
The interpretation as finally adopted by the Finance Commission and Credit Union Commission,
will include:
136
(1) a reasoned justification for the interpretation as adopted consisting solely of:
(A) a summary of comments received from parties interested in the interpretation that
shows the names of interested parties or associations offering comment on the interpretation and
whether they were for or against its adoption;
(B) a summary of the factual basis for the interpretation as adopted which
demonstrates a rational connection between the factual basis for the interpretation and the
interpretation as adopted; and
(C) the reasons why the Finance Commission and Credit Union Commission disagree
with party submissions and proposals;
(2) a concise restatement of the particular constitutional provisions under which the
interpretation is adopted and of how the Finance Commission and Credit Union Commission
interpret the provisions as authorizing or requiring the interpretation; and
(3) a certification that the interpretation, as adopted, has been reviewed by legal counsel and
found to be a valid exercise of the Finance Commission’s and Credit Union Commission’s legal
authority.
Source: The provisions of this §151.7 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9074; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§151.8. Savings Clause and Severability.
The Finance Commission and Credit Union Commission intend that each provision of any
interpretation adopted under Chapters 151, 152, and 153 of this title is consistent with Chapter
2001, Government Code. The provisions of any interpretation adopted under Chapters 151, 152,
and 153 of this title are severable. If any provision of any interpretation adopted under Chapters
151, 152, and 153 of this title is determined to be inconsistent with Chapter 2001, Government
Code or otherwise invalid, all valid provisions are severable from the invalid part.
Source: The provisions of this §151.8 adopted to be effective January 7, 2004, 29 TexReg 83; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9074; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
137
Title 7
Part VIII. Joint Interpretations
Chapter 152
REPAIR, RENOVATION, AND NEW
CONSTRUCTION ON HOMESTEAD
PROPERTY
138
Chapter 152
Administrative Interpretation of Subsection (a), Section 50, Article XVI, Texas
Constitution, (Repair, Renovation, and New Construction on Homestead Property)
§152.1. Definitions.
Any reference to Section 50 in this interpretation refers to Article XVI, Texas Constitution,
Section 50. Words and terms have these meanings when used in this chapter, unless the context
indicates otherwise:
(1) Contract - A contract for work and material, that complies with the Texas
Constitution and the Texas Property Code, used to:
(A) construct new improvements;
(B) repair or renovate existing improvements; or
(C) both (A) and (B).
(2) Existing improvements - A pre-existing addition to a homestead that is physically
attached to the homestead.
(3) New improvements - An addition physically attached to a homestead:
(A) that does not exist on the homestead prior to the commencement of the use
of work and material to physically attach the new improvements to the homestead under Section
50(a)(5); and
(B) the construction of which will not involve:
(i) work on existing improvements
(ii) the use of material on existing improvements; or
(iii) physically attaching material to existing improvements.
(4) Material - Material used in constructing new improvements or repairing or
renovating existing improvements. Material alone is not improvements. Material used to
construct new improvements becomes a part of the new improvements once physically attached
to the new improvements. Likewise, material used to repair or renovate existing improvements
becomes a part of the existing improvements once physically attached to the existing
improvements.
(5) Owner - A person who has the right to possess, use, and convey, individually or
with the joinder of another person, all or part of the homestead.
(6) Physically attach – To permanently attach, affix, add to, or fasten onto.
(7) Repair or Renovate - Work and material used to:
(A) replace material physically attached to existing improvements whether or
not the new material is similar to or the same as the material being replaced (examples include
replacing flooring, roofing, built-in appliances, siding, windows, or other material that is
attached to existing improvements);
(B) physically attach material to existing improvements where there is no
previously attached material being replaced that is the same as or similar to the material being
attached (examples include attaching to existing improvements a new room, a built-in cabinet, or
a second story); and
(C) mend, remedy or upgrade all or a portion of existing improvements
without adding or replacing material to the existing improvements (examples include restoring
wood flooring or woodwork of an existing improvement where the work does not include
physically attaching material to the existing improvements, and removing flooring to expose
flooring underneath).
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(8) Title company - A title insurance company or an agent of a title insurance
company.
Source: The provisions of this §152.1 adopted to be effective July 7, 2005, 30 TexReg 3866.
§152.3. Requirements for Construction of New Improvements: Section 50(a)(5).
(a) Except as provided in Section 152.5(c) of this chapter, Section 50(a)(5)(A)-(D) does not
apply to the construction of new improvements on a homestead.
(b) A valid lien, under Section 50(a)(5), may be created on a homestead if the debt for the
work and material used for new improvements is contracted for in writing. Once the lien is
created, the homestead is not protected by Section 50 from forced sale for the payment of the
debt.
Source: The provisions of this §152.3 adopted to be effective July 7, 2005, 30 TexReg 3867.
§152.5. Requirements for Work and Material Used to Repair or Renovate: Section
50(a)(5)(A)-(D).
(a) Section 50(a)(5)(A)-(D) applies only to contracts and applications for work and material
used to repair or renovate existing improvements.
(b) If debt is incurred for work and material used to repair or renovate existing improvements
and the requirements of Section 50(a)(5)(A)-(D) have been met, a lien is established on the
homestead of a family, or of a single adult person, and it is not protected by Section 50 from
forced sale for the payment of the debt.
(c) If the application and contract are for both work and material used to repair or renovate
existing improvements and for work and material used in constructing new improvements, the
entire transaction is considered a contract to repair and renovate existing improvements and
compliance with the constitutional requirements of Section 50(a)(5)(A)-(D) is required to
establish a lien on the homestead.
Source: The provisions of this §152.5 adopted to be effective July 7, 2005, 30 TexReg 3867.
§152.7. Consent of Spouses in the Case of Family Homestead: Section 50(a)(5)(A).
(a) In the case of a family homestead, both spouses must consent in writing to the contract
for repair or renovation of existing improvements, regardless of whether the spouse has a
community property interest or other ownership interest in the homestead.
(b) In addition to the consent of both spouses of a family homestead, the lender or contractor,
at its option, may also require all other owners and their spouses to consent to the contract.
Source: The provisions of this §152.7 adopted to be effective July 7, 2005, 30 TexReg 3867.
§152.9. Five Day Waiting Period for a Contract Before Executing Work and Materials for
Repairs or Renovation: Section 50(a)(5)(C).
The contract for work and materials may not be executed before the fifth calendar day after the
owner makes written application for any extension of credit for the work and materials except as
provided in §152.13. To count the five days, the day after the application for extension of credit
140
is made is day one. If the fifth calendar day falls on a Sunday or federal legal public holiday,
then the contract for work and materials may not be executed until the next calendar day that is
not a Sunday or federal legal public holiday.
Source: The provisions of this §152.9 adopted to be effective March 3, 2005, 30 TexReg 1065.
§152.11. Three Day Right to Rescind Contract for Work and Materials for Repairs or
Renovation: Section 50(a)(5)(C).
The owner and owner's spouse may rescind the contract for work and materials within three
calendar days after execution by all parties of the contract for work and materials. To count the
three days, the day after the contract is executed is day one. The rescission period ends at
midnight of the third calendar day following the execution of the contract. If the third calendar
day falls on a Sunday or federal legal public holiday, then the right of rescission is extended to
midnight of the next calendar day that is not a Sunday or federal legal public holiday.
Source: The provisions of this §152.11 adopted to be effective March 3, 2005, 30 TexReg 1068.
§152.13. Health or Safety Reasons for Waiving the Five Day Waiting Period and the Three
Day Right to Rescind: Section 50(a)(5)(B) and (C).
(a) If the owner wants to waive the 5-day waiting period in §50(a)(5)(B) or the 3-day right of
rescission in §50(a)(5)(C), the owner must sign a statement that, at a minimum:
(1) describes how the conditions of the homestead property require immediate repair;
(2) describes how the conditions of the homestead property materially affect the
health and safety of the owner or the person residing in the homestead; and
(3) states that the owner is waiving the 5-day waiting period under §50(a)(5)(B), the
3-day period to rescind the contract for work and materials under §50(a)(5)(C), or both;
(b) Printed forms for this purpose are prohibited.
Source: The provisions of this §152.13 adopted to be effective March 3, 2005, 30 TexReg 1068.
§152.15. Place for Execution of Contract for Work and Material: Section 50(a)(5)(D).
(a) The persons granting or acknowledging the encumbrance of their homestead interest
must execute the contract for work and material used to repair or renovate existing improvements
at the permanent physical address of:
(1) the office or branch office of a third-party lender making an extension of credit
for the work and material;
(2) an attorney at law; or
(3) a title company.
(b) Execution of the contract may not occur at a mobile office located at:
(1) the homestead; or
(2) any other place not permitted by subsection (a) of this section.
Source: The provisions of this §152.15 adopted to be effective July 7, 2005, 30 TexReg 3867.
141
Title 7
Part VIII. Joint Interpretations
Chapter 153
HOME EQUITY LENDING
142
Chapter 153
Administrative Interpretation of Subsection (a), Section 50, Article XVI, Texas
Constitution, (The Home Equity Lending Law)
§153.1. Definitions.
Any reference to Section 50 in this interpretation refers to Article XVI, Texas Constitution,
unless otherwise noted. These words and terms have the following meanings when used in this
chapter, unless the context indicates otherwise:
(1) Balloon – an installment that is more than an amount equal to twice the average of
all installments scheduled before that installment.
(2) Business Day – All calendar days except Sundays and these federal legal public
holidays: New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving
Day, and Christmas Day.
(3) Closed or closing – the date when each owner and the spouse of each owner signs
the equity loan agreement or the act of signing the equity loan agreement by each owner and the
spouse of each owner.
(4) Consumer Disclosure – The written notice contained in Section 50(g) that must be
provided to the owner at least 12 days before the date the extension of credit is made.
(5) Cross-default provision– a provision in a loan agreement that puts the borrower in
default if the borrower defaults on another obligation.
(6) Date the extension of credit is made – the date on which the closing of the equity
loan occurs.
(7) Equity loan – An extension of credit as defined and authorized under the
provisions of Section 50(a)(6).
(8) Equity loan agreement – the documents evidencing the agreement between the
parties of an equity loan.
(9) Fair Market Value – the fair market value of the homestead as determined on the
date that the loan is closed.
(10) Force-placed insurance – insurance purchased by the lender on the homestead
when required insurance on the homestead is not maintained in accordance with the equity loan
agreement.
(11) Interest – As used in Section 50(a)(6)(E), “interest” means the amount determined
by multiplying the loan principal by the interest rate over a period of time.
(12) Lockout provision – a provision in a loan agreement that prohibits a borrower
from paying the loan early.
(13) Owner – A person who has the right to possess, use, and convey, individually or
with the joinder of another person, all or part of the homestead.
(14) Preclosing Disclosure – The written itemized disclosure required by Section
50(a)(6)(M)(ii).
(15) Three percent limitation – the limitation on fees in Section 50(a)(6)(E).
Source: The provisions of this §153.1 adopted to be effective January 7, 2004, 29 TexReg 84; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393; reviewed and amended to be effective January 1, 2015, 39 TexReg 10407.
143
§153.2. Voluntary Lien: Section 50(a)(6)(A).
An equity loan must be secured by a voluntary lien on the homestead created under a written
agreement with the consent of each owner and each owner's spouse.
(1) The consent of each owner and each owner's spouse must be obtained, regardless
of whether any owner's spouse has a community property interest or other interest in the
homestead.
(2) An owner or an owner's spouse who is not a maker of the note may consent to the
lien by signing a written consent to the mortgage instrument. The consent may be included in the
mortgage instrument or a separate document.
(3) The lender, at its option, may require each owner and each owner's spouse to
consent to the equity loan. This option is in addition to the consent required for the lien.
Source: The provisions of this §153.2 adopted to be effective January 7, 2004, 29 TexReg 84; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393; reviewed and readopted to be effective June 21, 2013, 38 TexReg 4393.
§153.3. Limitation on Equity Loan Amount: Section 50(a)(6)(B).
An equity loan must be of a principal amount that when added to the aggregate total of the
outstanding principal balances of all other indebtedness secured by valid encumbrances of record
against the homestead does not exceed 80 percent of the fair market value of the homestead on
the date the extension of credit is made. For example, on a property with a fair market value of
$100,000, the maximum amount of debt against the property permitted by Section 50(a)(6)(B) is
$80,000. Assuming existing debt of $30,000, the maximum amount of the equity loan debt is
$50,000.
(1) The principal amount of an equity loan is the sum of:
(A) the amount of the cash advanced; and
(B) the charges at the inception of an equity loan to the extent these charges
are financed in the principal amount of the loan.
(2) The principal balance of all outstanding debt secured by the homestead on the
date the extension of credit is made determines the maximum principal amount of an equity loan.
(3) The principal amount of an equity loan does not include interest accrued after the
date the extension of credit is made (other than any interest capitalized and added to the principal
balance on the date the extension of credit is made), or other amounts advanced by the lender
after closing as a result of default, including for example, ad valorem taxes, hazard insurance
premiums, and authorized collection costs, including reasonable attorney's fees.
(4) On a closed-end multiple advance equity loan, the principal balance also includes
contractually obligated future advances not yet disbursed.
Source: The provisions of this §153.3 adopted to be effective January 7, 2004, 29 TexReg 84; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21,2013, 38
TexReg 4393.
§153.4. Nonrecourse: Section 50(a)(6)(C).
An equity loan must be without recourse for personal liability against each owner and the spouse
of each owner, unless the owner or spouse obtained the extension of credit by actual fraud.
144
(1) If an owner or the spouse of an owner cosigns an equity loan agreement or
consents to a security interest, the equity loan must not give the lender personal liability against
an owner or an owner's spouse.
(2) A lender is prohibited from pursuing a deficiency except when the owner or
owner's spouse has committed actual fraud in obtaining an equity loan.
(3) To determine whether a lender may pursue personal liability, the borrower or
owner must have committed "actual fraud." To obtain personal liability under this section, the
deceptive conduct must constitute the legal standard of "actual fraud." Texas case law
distinguishes "actual fraud" from "constructive fraud." "Actual fraud" encompasses dishonesty of
purpose or intentional breaches of duty that are designed to injure another or to gain an undue
and unconscientious advantage.
Source: The provisions of this §153.4 adopted to be effective January 7, 2004, 29 TexReg 85; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.5. Three percent fee limitation: Section 50(a)(6)(E).
An equity loan must not require the owner or the owner's spouse to pay, in addition to any
interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or
service the extension of credit that exceed, in the aggregate, three percent of the original
principal amount of the extension of credit.
(1) Optional Charges. Charges paid by an owner or an owner's spouse at their sole
discretion are not fees subject to the three percent fee limitation. Charges that are not imposed or
required by the lender, but that are optional, are not fees subject to the three percent limitation.
The use of the word "require" in Section 50(a)(6)(E) means that optional charges are not fees
subject to the three percent limitation.
(2) Optional Insurance. Insurance coverage premiums paid by an owner or an owner's
spouse that are at their sole discretion are not fees subject to the three percent limitation.
Examples of these charges may include credit life and credit accident and health insurance that
are voluntarily purchased by the owner or the owner's spouse.
(3) Charges that are Interest. Charges an owner or an owner's spouse is required to
pay that constitute interest under §153.1(11) of this title (relating to Definitions) are not fees
subject to the three percent limitation.
(A) Per diem interest is interest and is not subject to the three percent limitation.
(B) Legitimate discount points are interest and are not subject to the three percent
limitation. Discount points are legitimate if the discount points truly correspond to a reduced
interest rate and are not necessary to originate, evaluate, maintain, record, insure, or service the
loan. A lender may rely on an established system of verifiable procedures to evidence that the
discount points it offers are legitimate. This system may include documentation of options that
the owner is offered in the course of negotiation, including a contract rate without discount
points and a lower contract rate based on discount points.
(4) Charges that are not Interest. Charges an owner or an owner's spouse is required
to pay that are not interest §153.1 (11) of this title are fees subject to the three percent limitation.
(5) Charges Absorbed by Lender. Charges a lender absorbs, and does not charge an
owner or an owner's spouse that the owner or owner's spouse might otherwise be required to pay
are unrestricted and not fees subject to the three percent limitation.
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(6) Charges to Originate. Charges an owner or an owner's spouse is required to pay to
originate an equity loan that are not interest under §153.1(11) of this title are fees subject to the
three percent limitation.
(7) Charges Paid to Third Parties. Charges an owner or an owner's spouse is required
to pay to third parties for separate and additional consideration for activities relating to
originating a loan are fees subject to the three percent limitation. Charges those third parties
absorb, and do not charge an owner or an owner's spouse that the owner or owner's spouse might
otherwise be required to pay are unrestricted and not fees subject to the three percent limitation.
Examples of these charges include attorneys' fees for document preparation and mortgage
brokers' fees to the extent authorized by applicable law.
(8) Charges to Evaluate. Charges an owner or an owner's spouse is required to pay to
evaluate the credit decision for an equity loan, that are not interest under §153.1(11) of this title,
are fees subject to the three percent limitation. Examples of these charges include fees collected
to cover the expenses of a credit report, survey, flood zone determination, tax certificate, title
report, inspection, or appraisal.
(9) Charges to Maintain. Charges paid by an owner or an owner's spouse to maintain
an equity loan that are not interest under §153.1(11) of this title are fees subject to the three
percent limitation if the charges are paid at the inception of the loan, or if the charges are
customarily paid at the inception of an equity loan but are deferred for later payment after
closing.
(10) Charges to Record. Charges an owner or an owner's spouse is required to pay for
the purpose of recording equity loan documents in the official public record by public officials
are fees subject to the three percent limitation.
(11) Charges to Insure an Equity Loan. Premiums an owner or an owner's spouse is
required to pay to insure an equity loan are fees subject to the three percent limitation. Examples
of these charges include title insurance and mortgage insurance protection.
(12) Charges to Service. Charges paid by an owner or an owner's spouse for a party to
service an equity loan that are not interest under §153.11(11) of this title are fees subject to the
three percent limitation if the charges are paid at the inception of the loan, or if the charges are
customarily paid at the inception of an equity loan but are deferred for later payment after
closing.
(13) Secondary Mortgage Loans. A lender making an equity loan that is a secondary
mortgage loan under Chapter 342 of the Texas Finance Code may charge only those fees
permitted in TEX. FIN. CODE, §§342.307, 342.308, and 342.502. A lender must comply with the
provisions of Chapter 342 of the Texas Finance Code and the constitutional restrictions on fees
in connection with a secondary mortgage loan made under Chapter 342 of the Texas Finance
Code.
(14) Escrow Funds. A lender may provide escrow services for an equity loan. Because
funds tendered by an owner or an owner's spouse into an escrow account remain the property of
the owner or the owner's spouse those funds are not fees subject to the three percent limitation.
Examples of escrow funds include account funds collected to pay taxes, insurance premiums,
maintenance fees, or homeowner's association assessments. A lender must not contract for a right
of offset against escrow funds pursuant to Section 50(a)(6)(H).
(15) Subsequent Events. The three percent limitation pertains to fees paid or contracted
for by an owner or owner's spouse at the inception or at the closing of an equity loan. On the date
the equity loan is closed an owner or an owner's spouse may agree to perform certain promises
during the term of the equity loan. Failure to perform an obligation of an equity loan may trigger
the assessment of costs to the owner or owner's spouse. The assessment of costs is a subsequent
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event triggered by the failure of the owner's or owner's spouse to perform under the equity loan
agreement and is not a fee subject to the three percent limitation. Examples of subsequent event
costs include contractually permitted charges for force-placed homeowner's insurance costs,
returned check fees, debt collection costs, late fees, and costs associated with foreclosure.
(16) Property Insurance Premiums. Premiums an owner or an owner's spouse is
required to pay to purchase homeowner's insurance coverage are not fees subject to the three
percent limitation. Examples of property insurance premiums include fire and extended coverage
insurance and flood insurance. Failure to maintain this insurance is generally a default provision
of the equity loan agreement and not a condition of the extension of credit. The lender may
collect and escrow premiums for this insurance and include the premium in the periodic payment
amount or principal amount. If the lender sells insurance to the owner, the lender must comply
with applicable law concerning the sale of insurance in connection with a mortgage loan.
Source: The provisions of this §153.5 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed
and readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective
June 21, 2013, 38 TexReg 4393; reviewed and amended to be effective January 1, 2015, 39 TexReg
10408.
§153.7. Prohibition on Prepayment Penalties: Section 50(a)(6)(G).
An equity loan may be paid in advance without penalty or other charge.
(1) A lender may not charge a penalty to a borrower for paying all or a portion of an
equity loan early.
(2) A lockout provision is not permitted in an equity loan agreement because it is
considered a prepayment penalty.
Source: The provisions of this §153.7 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.8. Security of the Equity Loan: Section 50(a)(6)(H).
An equity loan must not be secured by any additional real or personal property other than the
homestead. The definition of "homestead" is located at Section 51 of Article XVI, Texas
Constitution, and Chapter 41 of the Texas Property Code.
(1) A lender and an owner or an owner's spouse may enter into an agreement
whereby a lender may acquire an interest in items incidental to the homestead. An equity loan
secured by the following items is not considered to be secured by additional real or personal
property:
(A) escrow reserves for the payment of taxes and insurance;
(B) an undivided interest in a condominium unit, a planned unit development,
or the right to the use and enjoyment of certain property owned by an association;
(C) insurance proceeds related to the homestead;
(D) condemnation proceeds;
(E) fixtures; or
(F) easements necessary or beneficial to the use of the homestead, including
access easements for ingress and egress.
(2) A guaranty or surety of an equity loan is not permitted. A guaranty or surety is
considered additional property for purposes of Section 50(a)(6)(H). Prohibiting a guaranty or
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surety is consistent with the prohibition against personal liability in Section 50(a)(6)(C). An
equity loan with a guaranty or surety would create indirect liability against the owner. The
constitutional home equity lending provisions clearly provide that the homestead is the only
allowable collateral for an equity loan. The constitutional home equity provisions prohibit the
lender from contracting for recourse of any kind against the owner or owner's spouse, except for
provisions providing for recourse against the owner or spouse when the extension of credit is
obtained by actual fraud.
(3) A contractual right of offset in an equity loan agreement is prohibited.
(4) A contractual cross-collateralization clause in an equity loan agreement is
prohibited.
(5) Any equity loan on an urban homestead that is secured by more than ten acres is
secured by additional real property in violation of Section (50)(a)(H).
Source: The provisions of this §153.8 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed
and readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective
June 21, 2013, 38 TexReg 4393.
§153.9. Acceleration: Section 50(a)(6)(J).
An equity loan may not be accelerated because of a decrease in the market value of the
homestead or because of the owner's default under other indebtedness not secured by a prior
valid encumbrance against the homestead.
(1) An equity loan agreement may contain a provision that allows the lender to
accelerate the loan because of a default under the covenants of the loan agreement. Examples of
these provisions include a promise to maintain the property or not remove improvements to the
property that indirectly affects the market value of the homestead.
(2) A contractual cross-default clause is permitted only if the lien associated with the
equity loan agreement is subordinate to the lien that is referenced by the cross default clause.
Source: The provisions of this §153.9 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.10. Number of Loans: Section 50(a)(6)(K).
An equity loan must be the only debt secured by the homestead at the time the extension of credit
is made unless the other debt was made for a purpose described by Section 50(a)(1)-(a)(5) or
(a)(8).
(1) Number of Equity Loans. An owner may have only one equity loan at a time,
regardless of the aggregate total outstanding debt against the homestead.
(2) Loss of Homestead Designation. If under Texas law the property ceases to be the
homestead of the owner, then the lender, for purposes of Section 50(a)(6)(K), may treat what was
previously a home equity mortgage as a non-homestead mortgage.
Source: The provisions of this §153.10 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted effective June 21, 2013, 38
TexReg 4393.
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§153.11. Repayment Schedule: Section 50(a)(6)(L)(i).
Unless an equity loan is a home equity line of credit under Section 50(a)(6)(t), the loan must be
scheduled to be repaid in substantially equal successive periodic installments, not more often
than every 14 days and not less often than monthly, beginning no later than two months from the
date the extension of credit is made, each of which equals or exceeds the amount of accrued
interest as of the date of the scheduled installment.
(1) The two month time period contained in Section 50(a)(6)(L)(i) begins on the date
of closing.
(2) For purposes of Section 50(a)(6)(L)(i), a month is the period from a date in a
month to the corresponding date in the succeeding month. For example, if a home equity loan
closes on March 1, the first installment must be due no later than May 1. If the succeeding
month does not have a corresponding date, the period ends on the last day of the succeeding
month. For example, if a home equity loan closes on July 31, the first installment must be due
no later than September 30.
(3) For a closed-end equity loan to have substantially equal successive periodic
installments, some amount of principal must be reduced with each installment. This requirement
prohibits balloon payments.
(4) Section 50(a)(6)(L)(i) does not preclude a lender's recovery of payments as
necessary for other amounts such as taxes, adverse liens, insurance premiums, collection costs,
and similar items.
Source: The provisions of this §153.11 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9074; reviewed and readopted to be effective June 21, 203,
38 TexReg 4393.
§153.12. Closing Date: Section 50(a)(6)(M)(i).
An equity loan may not be closed before the 12th calendar day after the later of the date that the
owner submits an application for the loan to the lender or the date that the lender provides the
owner a copy of the required consumer disclosure. One copy of the required consumer
disclosure may be provided to married owners. For purposes of determining the earliest
permitted closing date, the next succeeding calendar day after the later of the date that the owner
submits an application for the loan to the lender or the date that the lender provides the owner a
copy of the required consumer disclosure is the first day of the 12-day waiting period. The
equity loan may be closed at any time on or after the 12
th
calendar day after the later of the date
that the owner submits an application for the loan to the lender or the date that the lender
provides the owner a copy of the required consumer disclosure.
(1) Submission of a loan application to an agent acting on behalf of the lender is
submission to the lender.
(2) A loan application may be given orally or electronically.
Source: The provisions of this §153.12 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9075; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
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§153.13. Preclosing Disclosure: Section 50(a)(6)(M)(ii).
An equity loan may not be closed before one business day after the date that the owner of the
homestead receives a copy of the loan application, if not previously provided, and a final
itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at
closing. If a bona fide emergency or another good cause exists and the lender obtains the written
consent of the owner, the lender may provide the preclosing disclosure to the owner or the lender
may modify the previously provided preclosing disclosure on the date of closing.
(1) For purposes of this section, the "preclosing disclosure" consists of a copy of the
loan application, if not previously provided, and a final itemized disclosure of the actual fees,
points, interest, costs, and charges that will be charged at closing.
(2) The copy of the loan application submitted to the owner in satisfaction of the
preclosing disclosure requirement must be the most current version at the time the document is
delivered. The lender is not obligated to provide another copy of the loan application if the only
difference from the version previously provided to the owner is formatting. The lender is not
obligated to give another copy of the loan application if the information contained on the more
recent application is the same as that contained on the application of which the owner has a copy.
(3) A lender may satisfy the disclosure requirement of providing a final itemized
disclosure of the actual fees, points, interests, costs, and charges that will be charged at closing
by delivery to the borrower of a properly completed Department of Housing and Urban
Development (HUD) disclosure Form HUD-1 or HUD-1A.
(4) Bona fide emergency.
(A) An owner may consent to receive the preclosing disclosure or a
modification of the preclosing disclosure on the date of closing in the case of a bona fide
emergency occurring before the date of the extension of credit. An equity loan secured by a
homestead in an area designated by Federal Emergency Management Agency (FEMA) as a
disaster area is an example of a bona fide emergency if the homestead was damaged during
FEMA's declared incident period.
(B) To document a bona fide emergency modification, the lender should
obtain a written statement from the owner that:
(i) describes the emergency;
(ii) specifically states that the owner consents to receive the preclosing
disclosure or a modification of the preclosing disclosure on the date of closing;
(iii) bears the signature of all of the owners entitled to receive the
preclosing disclosure; and
(iv) affirms the owner has received notice of the owner's right to
receive a final itemized disclosure containing all actual fees, points, costs, and charges one day
prior to closing.
(5) Good cause. An owner may consent to receive the preclosing disclosure or a
modification of the preclosing disclosure on the date of closing if another good cause exists.
(A) Good cause to modify the preclosing disclosure or to receive a subsequent
disclosure modifying the preclosing disclosure on the date of closing may only be established by
the owner.
(i) The term "good cause" as used in this section means a legitimate or
justifiable reason, such as financial impact or an adverse consequence.
(ii) At the owner's election, a good cause to modify the preclosing
disclosure may be established if:
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(I) the modification does not create a material adverse
financial consequence to the owner; or
(II) a delay in the closing would create an adverse consequence
to the owner.
(iii) The term "de minimis" as used in this section means a very small
or insignificant amount.
(B) At the owner's election, a de minimis good cause standard may be
presumed if:
(i) the total actual disclosed fees, costs, points, and charges on the
date of closing do not exceed in the aggregate more than the greater of $100 or 0.125 percent of
the principal amount of the loan (e.g. 0.125 percent on a $80,000 principal loan amount equals
$100) from the initial preclosing disclosure; and
(ii) no itemized fee, cost, point, or charge exceeds more than the
greater of $100 or 0.125 percent of the principal amount of the loan than the amount disclosed in
the initial preclosing disclosure.
(C) To document a good cause modification of the disclosure, the lender
should obtain a written statement from the owner that:
(i) describes the good cause;
(ii) specifically states that the owner consents to receive the preclosing
disclosure on the date of closing;
(iii) bears the signature of all of the owners entitled to receive the
preclosing disclosure; and
(iv) affirms the owner has received notice of the owner's right to
receive a final itemized disclosure containing all fees, costs, points, or charges one day prior to
closing.
(6) An equity loan may be closed at any time during normal business hours on the
next business day following the calendar day on which the owner receives the preclosing
disclosure or any calendar day thereafter.
(7) The owner maintains the right of rescission under Section 50(a)(6)(Q)(viii) even
if the owner exercises an emergency or good cause modification of the preclosing disclosure.
Source: The provisions of this §153.13 adopted to be effective June 29, 2006, 31 TexReg 5080; amended to be
effective November 9, 2006, 31 TexReg 9022; reviewed and amended to be effective November 13, 2008, 33 TexReg
9075; reviewed and readopted to be effective June 21, 2013, 38 TexReg 4393.
§153.14. One Year Prohibition: Section 50(a)(6)(M)(iii).
An equity loan may not be closed before the first anniversary of the closing date of any other
equity loan secured by the same homestead property.
(1) Section 50(a)(6)(M)(iii) prohibits an owner who has obtained an equity loan from:
(A) refinancing the equity loan before one year has elapsed since the loan's
closing date; or
(B) obtaining a new equity loan on the same homestead property before one
year has elapsed since the previous equity loan's closing date, regardless of whether the previous
equity loan has been paid in full.
(2) Section 50(a)(6)(M)(iii) does not prohibit modification of an equity loan before
one year has elapsed since the loan's closing date. A modification of a home equity loan occurs
when one or more terms of an existing equity loan is modified, but the note is not satisfied and
replaced. A home equity loan and a subsequent modification will be considered a single
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transaction. The home equity requirements of Section 50(a)(6) will be applied to the original
loan and the subsequent modification as a single transaction.
(A) A modification of an equity loan must be agreed to in writing by the
borrower and lender, unless otherwise required by law. An example of a modification that is not
required to be in writing is the modification required under the Soldiers' and Sailors' Civil Relief
Act.
(B) The advance of additional funds to a borrower is not permitted by
modification of an equity loan.
(C) A modification of an equity loan may not provide for new terms that
would not have been permitted by applicable law at the date of closing of the extension of credit.
(D) The 3% fee cap required by Section 50(a)(6)(E) applies to the original
home equity loan and any subsequent modification as a single transaction.
Source: The provisions of this §153.14 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9076; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§153.15. Location of Closing: Section 50(a)(6)(N).
An equity loan may be closed only at an office of the lender, an attorney at law, or a title
company. The lender is anyone authorized under Section 50(a)(6)(P) that advances funds directly
to the owner or is identified as the payee on the note.
(1) An equity loan must be closed at the permanent physical address of the office or
branch office of the lender, attorney, or title company. The closing office must be a permanent
physical address so that the closing occurs at an authorized physical location other than the
homestead.
(2) Any power of attorney allowing an attorney-in-fact to execute closing documents
on behalf of the owner or the owner's spouse must be signed by the owner or the owner's spouse
at an office of the lender, an attorney at law, or a title company. A lender may rely on an
established system of verifiable procedures to evidence compliance with this paragraph. For
example, this system may include one or more of the following:
(A) a written statement in the power of attorney acknowledging the date
and place at which the power of attorney was executed;
(B) an affidavit or written certification of a person who was present when
the power of attorney was executed, acknowledging the date and place at which the power of
attorney was executed; or
(C) a certificate of acknowledgement signed by a notary public under
Chapter 121, Civil Practice and Remedies Code, acknowledging the date and place at which the
power of attorney was executed.
(3) The consent required under Section 50(a)(6)(A) must be signed by the owner and
the owner's spouse, or an attorney-in-fact described by paragraph (2) of this subsection, at an
office of the lender, an attorney at law, or a title company.
Source: The provisions of this §153.15 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
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§153.16. Rate of Interest: Section 50(a)(6)(O).
A lender may contract for and receive any fixed or variable rate of interest authorized under
statute.
(1) An equity loan that provides for interest must comply with constitutional and
applicable law. Interest rates on certain first mortgages are not limited on loans subject to the
federal Depository Institutions Deregulation and Monetary Control Act of 1980 and the
Alternative Mortgage Transaction Parity Act. Chapter 342 of the Texas Finance Code provides
for a maximum rate on certain secondary mortgage loans. Chapter 124 of the Texas Finance
Code and federal law provide for maximum rates on certain mortgage loans made by credit
unions. These statutes operate in conjunction with Section 50(a) and other constitutional
sections.
(2) An equity loan must amortize and contribute to amortization of principal.
(3) The lender may contract to vary the scheduled installment amount when the
interest rate adjusts on a variable rate equity loan. A variable-rate loan is a mortgage in which the
lender, by contract, can adjust the mortgage's interest rate after closing in accordance with an
external index.
(4) The scheduled installment amounts of a variable rate equity loan must be:
(A) substantially equal between each interest rate adjustment; and
(B) sufficient to cover at least the amount of interest scheduled to accrue
between each payment date and a portion of the principal.
(5) An equity loan agreement may contain an adjustable rate of interest that provides
a maximum fixed rate of interest pursuant to a schedule of steps or tiered rates or provides a
lower initial interest rate through the use of a discounted rate at the beginning of the loan.
Source: The provisions of this §153.16 adopted to be effective January 7, 2004, 29 TexReg 86; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.17. Authorized Lenders: Section 50(a)(6)(P).
An equity loan must be made by one of the following that has not been found by a federal
regulatory agency to have engaged in the practice of refusing to make loans because the
applicants for the loans reside or the property proposed to secure the loans is located in a certain
area: a bank, savings and loan association, savings bank, or credit union doing business under the
laws of this state or the United States; a federally chartered lending instrumentality or a person
approved as a mortgagee by the United States government to make federally insured loans; a
person licensed to make regulated loans, as provided by statute of this state; a person who sold
the homestead property to the current owner and who provided all or part of the financing for the
purchase; a person who is related to the homestead owner within the second degree of affinity
and consanguinity; or a person regulated by this state as a mortgage broker.
(1) An authorized lender under Chapter 341, Texas Finance Code, must meet both
constitutional and statutory qualifications to make an equity loan.
(2) A HUD-approved mortgagee is a person approved as a mortgagee by the United
States government to make federally insured loans. Approved correspondents to a HUD-
approved mortgage are not authorized lenders of equity loans unless qualifying under another
section of (a)(6)(P).
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(3) A non-depository lender or broker that makes, negotiates, arranges, or transacts a
secondary mortgage loan that is governed by Chapter 342, Texas Finance Code, must comply
with the licensing provisions of Chapter 342, Texas Finance Code.
(4) A lender who does not meet the definition of Section 50(a)(6)(P)(i), (ii), (iv), (v),
or (vi), must obtain a regulated loan license under Chapter 342 of the Texas Finance Code to
meet the provisions of subsection (iii).
Source: The provisions of this §153.17 adopted to be effective January 7, 2004, 29 TexReg 87; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.18. Limitation on Application of Proceeds: Section 50(a)(6)(Q)(i).
An equity loan must be made on the condition that the owner of the homestead is not required to
apply the proceeds of the extension of credit to repay another debt except debt secured by the
homestead or debt to another lender.
(1) The lender may not require an owner to repay a debt owed to the lender, unless it
is a debt secured by the homestead. The lender may require debt secured by the homestead or
debt to another lender or creditor be paid out of the proceeds of an equity loan.
(2) An owner may apply for an equity loan for any purpose. An owner is not
precluded from voluntarily using the proceeds of an equity loan to pay on a debt owed to the
lender making the equity loan.
Source: The provisions of this §153.18 adopted to be effective June 29, 2006, 31 TexReg 5080; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.20. No Blanks in Any Instrument: Section 50(a)(6)(Q)(iii).
A home equity loan must be made on the condition that the owner of the homestead not sign any
instrument in which blanks are left to be filled in.
(1) This Section of the Constitution prohibits the owner of the homestead from
signing any instrument in which blanks are "left to be filled in". This Section is intended to
prohibit a person other than the owner from completing one or more blanks in an instrument after
the owner has signed the instrument and delivered it to the lender, thereby altering a party's
obligation created in the instrument. Not all documents or records executed in connection with
an equity loan are instruments, and not all blanks contained in an instrument are "blanks that are
left to be filled in" as contemplated by this Section.
(2) As used in this Section, the term instrument means a document or record that
creates or alters a legal obligation of a party. A disclosure required under state or federal law is
not an instrument if the disclosure does not create or alter the obligation of a party.
(3) If at the time the owner signs an instrument, a blank is completed or box checked
which indicates the owner's election to select one of multiple options offered (such as an election
to select a fixed rate instead of an adjustable rate) and the owner therefore by implication has
excluded the non-selected options, the instrument does not contain "blanks left to be filled in"
when the non-selected option is left blank.
Source: The provisions of this §153.20 adopted to be effective June 29, 2006, 31 TexReg 5080; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
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§153.22. Copies of Documents: Section 50(a)(6)(Q)(v).
At closing, the lender must provide the owner with a copy of the final loan application and all
executed documents that are signed by the owner at closing in connection with the equity loan.
One copy of these documents may be provided to married owners. This requirement does not
obligate the lender to give the owner copies of documents that were signed by the owner prior to
or after closing.
Source: The provisions of this §153.22 adopted to be effective January 7, 2004, 29 TexReg 87, reviewed and
amended to be effective July 10, 2008, 33 TexReg 5295; reviewed and amended to be effective June 20, 2008, 33
TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38 TexReg 4393.
§153.24. Release of Lien: Section 50(a)(6)(Q)(vii).
The lender must cancel and return the note to the owner and give the owner a release of lien or a
copy of an endorsement and assignment of the lien to another lender refinancing the loan within
a reasonable time after termination and full payment of the loan. The lender or holder, at its
option, may provide the owner a release of lien or an endorsement and assignment of the lien to
another lender refinancing the loan.
(1) The lender will perform these services and provide the documents required in
50(a)(6)(Q)(vii) without charge.
(2) This section does not require the lender to record or pay for the recordation of the
release of lien.
(3) Thirty days is a reasonable time for the lender to perform the duties required
under this section.
(4) An affidavit of lost or imaged note, or equivalent, may be returned to the owner in
lieu of the original note, if the original note has been lost or imaged.
Source: The provisions of this §153.24 adopted to be effective January 7, 2004, 29 TexReg 87; reviewed and
readopted to be effective June 20, 2008 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.25. Right of Rescission: Section 50(a)(6)(Q)(viii).
The owner of the homestead and any spouse of the owner may, within three days after the
extension of credit is made, rescind the extension of credit without penalty or charge.
(1) This provision gives the owner's spouse, who may not be in record title or have
community property ownership, the right to rescind the transaction.
(2) The owner and owner's spouse may rescind the extension of credit within three
calendar days. If the third calendar day falls on a Sunday or federal legal public holiday then the
right of rescission is extended to the next calendar day that is not a Sunday or federal legal public
holiday.
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(3) A lender must comply with the provisions of the Truth-in-Lending Act permitting
the borrower three business days to rescind a mortgage loan in applicable transactions. Lender
compliance with the right of rescission procedures in the Truth-in-Lending Act and Regulation
Z, satisfies the requirements of this section if the notices required by Truth-in-Lending and
Regulation Z are given to each owner and to each owner's spouse.
Source: The provisions of this §153.25 adopted to be effective January 7, 2004, 29 TexReg 87; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.41. Refinance of a Debt Secured by a Homestead: Section 50(e).
A refinance of debt secured by a homestead and described by any subsection under Subsections
(a)(1)-(a)(5) of Section 50 of the Texas Constitution that includes the advance of additional funds
may not be secured by a valid lien against the homestead unless: (1) the refinance of the debt is
an extension of credit described by Subsection (a)(6) or (a)(7) of Section 50 of the Texas
Constitution; or (2) the advance of all the additional funds is for reasonable costs necessary to
refinance such debt or for a purpose described by Subsection (a)(2), (a)(3), or (a)(5) of Section
50 of the Texas Constitution.
(1) Reasonableness and necessity of costs relate to the type and amount of the costs.
(2) In a secondary mortgage loan, reasonable costs are those costs which are lawful in
light of the governing or applicable law that authorizes the assessment of particular costs. In the
context of other mortgage loans, reasonable costs are those costs which are lawful in light of
other governing or applicable law.
(3) Reasonable and necessary costs to refinance may include reserves or impounds
(escrow trust accounts) for taxes and insurance, if the reserves comply with applicable law.
Source: The provisions of this §153.41 adopted to be effective January 7, 2004, 29 TexReg 87; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.51. Consumer Disclosure: Section 50(g).
An equity loan may not be closed before the 12th day after the lender provides the owner with
the consumer disclosure on a separate instrument.
(1) If a lender mails the consumer disclosure to the owner, the lender shall allow a
reasonable period of time for delivery. A period of three calendar days, not including Sundays
and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and
delivery.
(2) Certain provisions of the consumer disclosure do not contain the exact identical
language concerning requirements of the equity loan that have been used to create the
substantive requirements of the loan. The consumer notice is only a summary of the owner's
rights, which are governed by the substantive terms of the constitution. The substantive
requirements prevail regarding a lender's responsibilities in an equity loan transaction. A lender
may supplement the consumer disclosure to clarify any discrepancies or inconsistencies.
(3) A lender may rely on an established system of verifiable procedures to evidence
compliance with this section.
(4) A lender whose discussions with the borrower are conducted primarily in Spanish
for a close-end loan may rely on the translation of the consumer notice developed under the
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requirements of Texas Finance Code, §341.502. Such notice shall be made available to the
public through publication on the Finance Commission’s webpage.
(5) If the owner has executed a power of attorney described by §153.15(2) of this title
(relating to Location of Closing: Section 50(a)(6)(N)), then the lender may provide the consumer
disclosure to the attorney-in-fact instead of providing it to the owner.
Source: The provisions of this §153.51 adopted to be effective January 7, 2004, 29 TexReg 87; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9076; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§153.82. Owner Requests for HELOC Advance: Section 50(t)(1).
A home equity line of credit (HELOC) is a form of an open-end account that may be debited
from time to time, under which credit may be extended from time to time and under which the
owner requests advances, repays money, and reborrows money. Any owner who is also a named
borrower on the HELOC may request an advance. A HELOC agreement may contain provisions
that restrict which borrowers may request an advance or require all borrowers to consent to the
request.
Source: The provisions of this §153.82 adopted to be effective March 11, 2004, 29 TexReg 2310; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.84. Restrictions on Devices and Methods to Obtain a HELOC Advance: Section
50(t)(3).
A HELOC is a form of an open-end account that may be debited from time to time, under which
credit may be extended from time to time and under which an owner is prohibited from using a
credit card, debit card, or similar device, or preprinted check unsolicited by the borrower to
obtain a HELOC advance.
(1) A lender may offer one or more non-prohibited devices or methods for use by the
owner to request an advance. Permissible methods include contacting the lender directly for an
advance, telephonic fund transfers, and electronic fund transfers. Examples of devices that are
not prohibited include prearranged drafts, preprinted checks requested by the borrower, or
written transfer instructions. Regardless of the permissible method or device used to obtain a
HELOC advance, the amount of the advance must comply with:
(A) the advance requirements in Section 50(t)(2);
(B) the loan to value limits in Section 50(t)(5); and
(C) the debit or advance limits in Section 50(t)(6).
(2) A borrower may from time to time specifically request preprinted checks for use
in obtaining a HELOC advance but may not request the lender to periodically send preprinted
checks to the borrower. A borrower may use a check reorder form, which may be included with
preprinted checks, as a means of requesting a specific number of preprinted checks.
(3) An owner may, but is not required to, make in-person contact with the lender to
request preprinted checks or to obtain a HELOC advance.
Source: The provisions of this §153.84 adopted to be effective March 11, 2004, 29 TexReg 2310; reviewed and
amended to be effective July 10, 2008, 33 TexReg 5295; reviewed and amended to be effective June 20, 2008, 33
TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38 TexReg 4393.
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§153.85. Time the Extension of Credit is Established: Section 50(t)(4).
(a) A HELOC is a form of an open-end account that may be debited from time to time, under
which credit may be extended from time to time and under which fees described in Section
50(a)(6)(E) are charged and collected only at the time the extension of credit is established and
no fee is charged or collected in connection with any debit or advance.
(b) For the purpose of this section, the time the extension of credit is established for a
HELOC refers to the date of closing.
Source: The provisions of this §153.85 adopted to be effective March 11, 2004, 29 TexReg 2310; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.86. Maximum Principal Amount Extended under a HELOC: Section 50(t)(5).
A HELOC is a form of an open-end account that may be debited from time to time, under which
credit may be extended from time to time and under which the maximum principal amount that
may be extended under the account, when added to the aggregated total of the outstanding
principal balances of all indebtedness secured by the homestead on the date the extension of
credit is established, cannot exceed 80 percent of the fair market value of the homestead on the
date the extension of credit is made.
(1) At the time the initial or subsequent advance is made, the principal amount of the
advance must comply with Section 50(t)(5). The following amounts when added together must
be equal to or less than 80 percent of the fair market value:
(A) the amount of the advance;
(B) the amount of the principal balance of the HELOC at the time of the
advance; and
(C) the principal balance outstanding of all other debts secured by the
homestead on the date of the closing of the HELOC.
(2) An advance under Section 50(t)(5) must meet the requirements of Section
50(t)(2).
(3) The maximum principal balance of the HELOC that may be outstanding at any
time must be determined on the date of closing and will not change through the term of the
HELOC.
(4) For purposes of calculating the limits and thresholds under Section 50(t)(5) and
(6), the outstanding principal balance of all other debts secured by the homestead is the principal
balance outstanding of all other debts secured by the homestead on the date of the closing of the
HELOC.
Source: The provisions of this §153.86 adopted to be effective March 11, 2004, 29 TexReg 2310; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.87. Maximum Principal Amount of Additional Advances under a HELOC: Section
50(t)(6).
A HELOC is a form of an open-end account that may be debited from time to time, under which
credit may be extended from time to time and under which no additional debits or advances can
be made if the total principal amount outstanding exceeds an amount equal to 50 percent of the
fair market value of the homestead as determined on the date the account is established.
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(1) A subsequent advance may be made only when the outstanding principal amount
of the HELOC is 50 percent or less of the fair market value.
(2) A subsequent advance is prohibited if the outstanding principal amount of the
HELOC exceeds 50 percent of the fair market value.
(3) If the outstanding principal amount exceeds 50 percent of the fair market value
and then is repaid to an amount equal to or below the 50 percent of the fair market value,
subsequent advances are permitted subject to the requirements of Sections 50(t)(2) and (5).
Source: The provisions of this §153.87 adopted to be effective March 11, 2004, 29 TexReg 2311; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.88. Repayment Terms of a HELOC: Section 50(t)(8).
(a) A HELOC is a form of an open-end account that may be debited from time to time, under
which credit may be extended from time to time and under which repayment is to be made in
regular periodic installments, not more often than every 14 days and not less often than monthly,
beginning not later than two months from the date the extension of credit is established, and
during the period during which the owner may request advances, each installment equals or
exceeds the amount of accrued interest; and after the period during which the owner may request
advances, installments are substantially equal.
(b) Repayment of a HELOC is not required to begin until two months after the initial
advance. For example, if an advance is not made at the time of closing, the repayment period is
not required to begin until after the first advance. If there is no outstanding balance, then a
payment is not required.
(c) Nothing in this section prohibits a borrower from voluntarily making payments on a
schedule that is more frequent or earlier than is required by a lender.
Source: The provisions of this §153.88 adopted to be effective March 11, 2004, 29 TexReg 2311; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.91. Adequate Notice of Failure to Comply.
(a) A borrower notifies a lender or holder of its alleged failure to comply with an obligation
by taking reasonable steps to notify the lender or holder of the alleged failure to comply. The
notification must include a reasonable:
(1) identification of the borrower;
(2) identification of the loan; and
(3) description of the alleged failure to comply.
(b) A borrower is not required to cite in the notification the section of the Constitution that
the lender or holder allegedly violated.
Source: The provisions of this §153.91 adopted to be effective November 11, 2004, 29 TexReg 10259; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
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§153.92. Counting the 60-Day Cure Period.
(a) For purposes of Section 50(a)(6)(Q)(x), the day after the lender or holder receives the
borrower's notification is day one of the 60-day period. All calendar days thereafter are counted
up to day 60. If day 60 is a Sunday or federal legal public holiday, the period is extended to
include the next day that is not a Sunday or federal legal public holiday.
(b) If the borrower provides the lender or holder inadequate notice, the 60-day period does
not begin to run.
Source: The provisions of this §153.92 adopted to be effective November 11, 2004, 29 TexReg 10259; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.93. Methods of Notification.
(a) At closing, the lender or holder may make a reasonably conspicuous designation in
writing of the location where the borrower may deliver a written or oral notice of a violation
under 50(a)(6)(Q)(x). The designation may include a mailing address, physical address, and
telephone number. In addition, the lender or holder may designate an email address or other
point of contact for delivery of a notice.
(b) If the lender or holder chooses to change the designated delivery location as provided in
subsection (a) of this section, the address change does not become effective until the lender or
holder sends conspicuous written notice of the address change to the borrower.
(c) The borrower may always deliver written notice to the registered agent of the lender or
holder even if the lender or holder has named a delivery location.
(d) If the lender or holder does not designate a location where the borrower may deliver a
notice of violation, the borrower may deliver the notice to any physical address or mailing
address of the lender or holder.
(e) Delivery of the notice by borrower to lender or holder's designated delivery location or
registered agent by certified mail return receipt or other carrier delivery receipt, signed by the
lender or holder, constitutes a rebuttable presumption of receipt by the lender or holder.
(f) If the borrower opts for a location or method of delivery other than set out in subsection
(e), the borrower has the burden of proving that the location and method of delivery were
reasonably calculated to put the lender or holder on notice of the default.
Source: The provisions of this §153.93 adopted to be effective March 3, 2005, 30 TexReg 1068; reviewed and
adopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.94. Methods of Curing a Violation Under Section 50(a)(6)(Q)(x)(a)-(e).
(a) The lender or holder may correct a failure to comply under Section 50(a)(6)(Q)(x)(a) –
(e), on or before the 60th day after the lender or holder receives the notice from an owner, if the
lender or holder delivers required documents, notices, acknowledgements, or pays funds by:
(1) placing in the mail, placing with other delivery carrier, or delivering in person the
required documents, notices, acknowledgements, or funds;
(2) crediting the amount to borrower's account; or
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(3) using any other delivery method that the borrower agrees to in writing after the
lender or holder receives the notice.
(b) The lender or holder has the burden of proving compliance with this section.
Source: The provisions of this §153.94 adopted to be effective November 11, 2004, 29 TexReg 10259; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
§153.95. Cure a Violation Under Section 50(a)(6)(Q)(x).
(a) If the lender or holder timely corrects a violation of Section 50(a)(6) as provided in
Section 50(a)(6)(Q)(x), then the violation does not invalidate the lien.
(b) A lender or holder who complies with Section 50(a)(6)(Q)(x) to cure a violation before
receiving notice of the violation from the borrower receives the same protection as if the lender
had timely cured after receiving notice.
(c) A borrower's refusal to cooperate fully with an offer that complies with Section
50(a)(6)(Q)(x) to modify or refinance an equity loan does not invalidate the lender's protection
for correcting a failure to comply.
Source: The provisions of this §153.95 adopted to be effective November 11, 2004, 29 TexReg 10259; reviewed and
amended to be effective November 13, 2008, 33 TexReg 9077; reviewed and readopted to be effective June 21, 2013,
38 TexReg 4393.
§153.96. Correcting Failures Under Section 50(a)(6)(Q)(x)(f).
(a) To correct a failure to comply under Section 50(a)(6)(Q)(x)(f), on or before the 60th day
after the lender or holder receives the notice from the borrower the lender or holder may:
(1) refund or credit the $1,000 to the account of the borrower; and
(2) make an offer to modify or an offer to refinance the extension of credit on the
terms provided in Section 50(a)(6)(Q)(x)(f) by placing the offer in the mail, other delivery
carrier, or delivering the offer in person to the owner.
(b) To correct a failure to comply under Section 50(a)(6)(Q)(x)(f):
(1) the lender or holder has the option to either refund or credit $1,000; and
(2) the lender or holder and borrower may:
(A) modify the equity loan without completing the requirements of a
refinance; or
(B) refinance with an extension of credit that complies with Section 50(a)(6).
(c) The lender or holder has the burden of proving compliance with this section.
(d) After the borrower accepts an offer to modify or refinance, the lender must make a good
faith attempt to modify or refinance within a reasonable time not to exceed 90 days.
Source: The provisions of this §153.96 adopted to be effective November 11, 2004, 29 TexReg 10260; reviewed and
readopted to be effective June 20, 2008, 33 TexReg 5352; reviewed and readopted to be effective June 21, 2013, 38
TexReg 4393.
