CHAPTER 124. LOANS AND INVESTMENTS
FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE D. CREDIT UNIONS
CHAPTER 124. LOANS AND INVESTMENTS
SUBCHAPTER A. GENERAL PROVISIONS CONCERNING LOANS TO MEMBERS
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 124.002. LIMITATIONS ON INTEREST RATES. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 124.004. WRITTEN INSTRUMENT REQUIRED. A credit union loan
must be evidenced by a written instrument.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER B. OPEN-END CREDIT PLAN OR LINE OF CREDIT
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER C. LOAN EXPENSES
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER D. LOAN PAYMENTS
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER E. LOANS TO DIRECTORS, EMPLOYEES, AND CREDIT COMMITTEE
MEMBERS
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2003, 78th Leg., ch. 533, Sec. 38, eff. Sept. 1,
2003.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2003, 78th Leg., ch. 533, Sec. 39, eff. Sept. 1,
2003.
Sec. 124.204. PRIOR APPROVAL REQUIRED. The board must give its
approval before the credit union permits a director, senior
management employee, or member of the credit committee to act as
comaker, guarantor, or endorser of a loan to a member if the
amount of the loan or aggregate of outstanding loans to the
comaker, guarantor, or endorser is greater than the sum of:
(1) $10,000 or a higher amount established by commission rule;
and
(2) the amount of the shares and deposits pledged for the loan.
Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.
Amended by Acts 2003, 78th Leg., ch. 533, Sec. 40, eff. Sept. 1,
2003.
SUBCHAPTER F. ILLEGAL LOANS
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER G. LOAN PROGRAMS
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
SUBCHAPTER H. INVESTMENT OF MONEY
Sec. 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, Sec. 1, eff. Sept. 1, 1997.
Sec. 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, Sec. 1, eff. Sept. 1, 1997.