FINANCE CODE
CHAPTER 124. LOANS AND INVESTMENTS
SUBCHAPTER A. GENERAL PROVISIONS CONCERNING LOANS TO MEMBERS
§ 124.001. AUTHORIZATION. A credit union may make a
loan to a member:
(1) in accordance with rules adopted by the
commission;
(2) for a purpose the credit union approves; and
(3) on security and terms the credit union requires.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.002. LIMITATIONS ON INTEREST RATES.
See, also, italicized material following text of this section
The interest rate on a loan to a member may not exceed:
(1) 1-1/2 percent per month on the unpaid balance; or
(2) a higher rate authorized by law, including a rate
authorized by Chapter 303.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
Amendment by Acts 1997, 75th Leg., ch. 1396, § 43
V.T.C.A., Government Code § 311.031(c) provides, in part, that
the repeal of a statute by a code does not affect an amendment of the
statute by the same legislature which enacted the code and that the
amendment is preserved and given effect as part of the code
provision.
Section 43 of Acts 1997, 75th Leg., ch. 1396, eff. Sept. 1, 1997,
amends Vernon's Ann.Civ.St. art. 2461-7.01 [now this section]
without reference to the repeal of said article by Acts 1997, 75th
Leg., ch. 1008, § 6. As so amended, art. 2461-7.01 reads:
"If made in accordance with rules adopted by the commission, a
credit union may make loans to members for such purposes as it may
approve and on such security and terms as it may require, at rates
of interest not exceeding one and one-half percent per month on the
unpaid balance, or higher rates otherwise authorized by law,
including the rates authorized by Chapter 1D, Title 79, Revised
Statutes. Chapter 15 and Subtitle 2, Title 79, Revised Statutes, do
not apply to a credit union loan or extension of credit unless the
agreement evidencing that transaction specifically provides
otherwise. Every loan must be evidenced by a written instrument."
§ 124.003. LIMITATIONS ON LOANS. A credit union may not
make a loan to a member or a business interest of the member if the
loan would cause the aggregate amount of loans to the member and the
member's business interests to exceed:
(1) an amount equal to 10 percent of the credit union's
total assets; or
(2) a lesser amount established by commission rule.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.004. WRITTEN INSTRUMENT REQUIRED. A credit union
loan must be evidenced by a written instrument.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.005. APPLICABILITY OF OTHER LAW. Subtitle B,
Title 4, does not apply to a credit union loan or extension of
credit unless the agreement that evidences the transaction
specifically provides otherwise.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER B. OPEN-END CREDIT PLAN OR LINE OF CREDIT
§ 124.051. OPEN-END CREDIT PLAN. A credit union may
enter into a written agreement with a member under which:
(1) the member is allowed to borrow money from time to
time; and
(2) interest may from time to time be computed on the
unpaid balance.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.052. LINE OF CREDIT. A credit union may approve
in advance a line of credit and grant advances to a member within
the limit of the extension of credit.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.053. ADDITIONAL LOAN APPLICATION NOT
REQUIRED. An additional loan application is not required under an
open-end credit plan under Section 124.051 or line of credit under
Section 124.052 if the aggregate obligation does not exceed a limit
of the extension of credit the credit union establishes.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER C. LOAN EXPENSES
§ 124.101. BORROWER PAYMENT OF LOAN EXPENSES. A credit
union may require a member to pay all reasonable expenses and fees
incurred in connection with making, closing, disbursing,
extending, readjusting, or renewing a loan, whether or not those
expenses or fees are paid to third parties.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.102. COLLECTION OF LOAN EXPENSES. A payment
authorized by Section 124.101 may be:
(1) collected by the credit union and:
(A) retained by the credit union; or
(B) paid to a person rendering a service in
connection with the payment; or
(2) paid directly by the member to the third party to
whom it is payable.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.103. CHARACTER OF EXPENSE OR FEE. An expense or
fee authorized by Section 124.101 is not interest.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER D. LOAN PAYMENTS
§ 124.151. PREPAYMENT PRIVILEGE. A loan may be prepaid
in whole or in part, without penalty, during regular working hours
on any day on which the credit union is open for business, except as
provided by Section 124.152.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.152. CONDITIONS FOR PREPAYMENT OF LOAN SECURED BY
REAL PROPERTY. A credit union may require a partial prepayment
that is made on a loan secured by a lien or mortgage on or other type
of security interest in real property to be made:
(1) on the date monthly installments are due; and
(2) in the amount of that part of one or more monthly
installments that would be applicable to principal.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.153. PENALTY FOR LATE PAYMENT. (a) A credit
union, in accordance with its bylaws, may charge a member a penalty
when a loan payment is past due.
(b) A credit union may charge only one penalty on each past
due payment.
(c) A penalty under this section is not interest.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER E. LOANS TO DIRECTORS, EMPLOYEES, AND CREDIT COMMITTEE
MEMBERS
§ 124.201. AUTHORIZATION. Only if done in accordance
with limitations imposed by Section 124.202, a credit union may
make a loan or extend a line of credit to:
(1) a director, senior management employee, or member
of the credit committee; or
(2) the immediate family of the director, senior
management employee, or member of the credit committee.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 533, § 38, eff. Sept. 1, 2003.
§ 124.202. CONDITIONS OF LOANS. A loan or extension of
a line of credit under Section 124.201:
(1) must comply with this subtitle and rules adopted
under this subtitle with respect to loans to other borrowers;
(2) may not be on terms more favorable than those
extended to other borrowers; and
(3) must be approved by the board before the credit
union makes or agrees to make the loan if the aggregate amount of
the loan and other outstanding loans to the person, the person's
business interests, and the person's immediate family is greater
than the sum of:
(A) $10,000 or a higher amount established by
commission rule; and
(B) the amount of the shares and deposits pledged
for the loan.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.203. AUTHORIZATION TO ACT AS COMAKER, GUARANTOR,
OR ENDORSER. A credit union may permit a director, senior
management employee, or member of the credit committee to act as
comaker, guarantor, or endorser of a loan to a member only in
accordance with limitations imposed by Section 124.204.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 533, § 39, eff. Sept. 1, 2003.
§ 124.204. PRIOR APPROVAL REQUIRED. The board must give
its approval before the credit union permits a director, senior
management employee, or member of the credit committee to act as
comaker, guarantor, or endorser of a loan to a member if the amount
of the loan or aggregate of outstanding loans to the comaker,
guarantor, or endorser is greater than the sum of:
(1) $10,000 or a higher amount established by
commission rule; and
(2) the amount of the shares and deposits pledged for
the loan.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2003, 78th Leg., ch. 533, § 40, eff. Sept. 1, 2003.
SUBCHAPTER F. ILLEGAL LOANS
§ 124.251. ILLEGALITY OF LOAN NOT A DEFENSE. The
illegality of a loan is not a defense in a credit union's action to
recover on the loan.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.252. ILLEGALITY OF LOAN NOT A BAR TO ENFORCEMENT OR
COLLECTION. The illegality of a loan does not prevent enforcement
of the loan agreement against or collection of the loan from a
person who is otherwise liable on the loan, including:
(1) the borrower; or
(2) a guarantor or surety.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER G. LOAN PROGRAMS
§ 124.301. PARTICIPATION LOANS. A credit union may
market and sell participations in loans to members originated by
the credit union to another credit union, corporation, or financial
organization.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.302. GOVERNMENT LOAN PROGRAMS. A credit union may
participate in:
(1) a guaranteed loan program of the United States
government or a state government; and
(2) another government loan program approved by the
commission.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER H. INVESTMENT OF MONEY
§ 124.351. PERMITTED INVESTMENTS. (a) A credit union
may invest money not used in loans to members in:
(1) capital shares, obligations, participation
certificates, or common or preferred stock of an agency,
association, or company, subject to Section 124.352(a);
(2) loans to a national or state credit union
association or corporation of which the credit union is a member;
(3) obligations, bonds, notes, or other evidences of
indebtedness of a state or political subdivision of a state;
(4) certificates of deposit or other accounts issued
by a state or national bank, savings and loan association, savings
association, or mutual savings bank;
(5) securities, obligations, participations, or other
instruments of or issued by the United States, or in a trust
established for investing directly or collectively in those
investments;
(6) loans to, shares of, or deposits in another credit
union, a central credit union, a corporate credit union, a central
liquidity facility established under state or federal law, a trust,
or an organization established for lending directly or collectively
to credit unions;
(7) securities, obligations, participations, or other
instruments fully or partially guaranteed as to principal,
interest, or both by the United States, or in a trust established
for investing directly or collectively in those investments;
(8) participation loans with another credit union,
corporation, credit organization, or financial organization;
(9) notes receivable, loans to members, or other
assets of a credit union operating under this subtitle or the
Federal Credit Union Act (12 U.S.C. Section 1751 et seq.); and
(10) other investments authorized by rules adopted by
the commission that satisfy Subsection (b).
(b) A rule adopted under Subsection (a)(10) must be
responsive to:
(1) changes in economic conditions or competitive
practices; and
(2) the need for safety and soundness of credit union
investments.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 124.352. LIMITATIONS ON INVESTMENTS. (a) An
investment under Section 124.351(a)(1) may be made only if:
(1) the membership or ownership of the agency,
association, or company is restricted to credit unions and their
members or organizations of credit unions; and
(2) the agency, association, or company is designed
primarily to serve or otherwise assist credit union operations.
(b) An investment under Section 124.351(a)(1) or (2) in any
one agency, association, or company may not exceed the lesser of the
amount equal to:
(1) five percent of the credit union's total assets;
or
(2) its reserves and undivided earnings.
(c) Notwithstanding Subsection (a), the commission by rule
may authorize an investment under Section 124.351(a)(1) in an
agency, association, or company:
(1) whose membership or ownership is not restricted to
credit unions and their members or organizations of credit unions;
or
(2) that is not designed primarily to serve or
otherwise assist credit union operations.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
