ENE
AUSTIN II.TEXAS
June 15, 1965
Ron. J. M. Falkner Opinion No. c-456
Ranking Commissioner
of Texas Re: Whether the Banking
Department of Ranking Commissioner may approve
Austin, Texas an amendment to the
bylaws of a State credit
union authorizing the
following purpose: "The
purpose of this Credit
Union Is to promote
thrift among its members,
by affording them an
opportunity for accumu-
lating their savings; and
by means of loans to mem-
bers, and serving as a
depository for other
credit unions with a pur-
pose of orderly inter-
change of funds between
credit unions, to create
a source of credit for
provident or productive
Dear Mr. Falkner: purposes or urgent needs.
You have requested the opinion of this office as to the auth-
ority of the Banking Commissioner , under Article 2475, Vernon's Civil
Statutes, to approve as a depository for other credit unions with-
in this State, a credit union, incorporated under the provisions of
Article 2463, Vernon's Clvll Statutes , which has as a purpose the
orderly Interchange of funds between credit unions.
This specific question has never been the subject of a reported
decision by the courts of this State, nor of any prior opinions of
the Attorney General's Office. Therefore, the answer to your inquiry
must be resolved solely upon the basis of the proper interpretation
of the applicable statutes, notably Articles 2461 through 2484c,
Vernon's Civil Statutes.
Article 2475, pertaining to "Denosltorles," reads as follows:
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Honorable J. M. Falkner, page 2 (c-456 )
“The capital, deposits, and surplus funds of
the Association shall be either lent to the mem-
bers for such purposes and upon such security
as the directors of the Credit Union shall approve,
or deposited to the credit of the Association in
State or National Hanks, and In savings banks.
or trust companies, or in any agency now,or to
be provided, either %y State or Federal Law, whose
purpose is the orderly interchange of funds between
Credit Unions, incorporated under th 1 f this
State or under the laws of the Unite: S~~~e~ of
America, located in this State; such depositories
to be approved by the Banking Commissioner, or such
funds may be lent as provided in Section 1 of this
Act. ” (Emphasis added)
Article 2461, entitled “Credit Unions Defined,” reads in
part as follows:
“The credit union is hereby defined as a co-
operative association organized for the purpose
of promoting thrift among its members and creating
a source of credit for provident and productive
purposes. . . .‘I
The first ,polnt to be consldered is whether a “credit union,”
as defined by Article 2461, can be “an agency . . . whose purpose
is the orderly exchange of funds between credit unions,” and hence
eligible as a depository under Article 2475.
To say that a credit union can be classified as such an agency
would be to ignore both theclear wording of Article 2461 and the
whole basic theory and purpose of credit unions generally. The
opinion of the Court in Tabco Federal Credit Union v. Goldstein,
No. 2836, June 22, 1964, [Circuit Court, Baltimore County, Md
not appealed, hence not published), enunciates thisbasic theo;y
quite succinctly when it says, In regard to federal credit unions,
that:
“The first federal function performed by these
institutions . . . is that of providing cooperative
credit facilities on a national scale for small
borrowers and the protection of those borrowers
credit on liberal terms and rates of
interest,
by provi Emphasis added)
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Honorable J. M. Falkner, page 3 (c- 456)
It is obvious throughout both the federal and Texas credit
union statutes, which track each other very closely, and through-
out the history of credit unions generally that this is a correct
statement of the basic purpose of credit unions.
It is certainly true that credit unions can have additional
functions, but only so long as they are subordinate and supplementary
to this basic purpose. To say that a credit union under Art. 2461
would be such an agency as is referred to In Art’. 2475 would be to
say that a credit union 1n Texas could~ have as its only purpose to
serve as a depository and “clearifiuse” for other credit unions,
i.e., it would be possible to have, within the discretion of the
Banking Commissioner, a “super” credit union whose only members
would be other credit unions and whose only direct purpose would
be to serve other credit unions. This would be a concept completely
foreign to the manifest intent of the State’s credit union laws
and one in which--most importantly--the basic purpose and function
of a credit union would be subverted or ellmlnated altogether.
Even if it were held that a credit union in Texas could be
an agency “whose purpose is the orderly exchange of funds between
credit unions” and hence an eligible depository for funds of credit
unions under Art. 2475, the question would still remain of whether
or not a credit union can have as a member another credit union, since
Section 1 of Article 2472 provides that: “A credit union may receive
the savings of its members In payment for shares or as deposits.”
(Emphasis added) Nowhere in the statutes is a credit union authorized
to receive deposits from other than members. Throughout the credit
union statutesSand tiertainly including Article 2463, there is the
clear implication that on1 real, living individuals are thought of
as potential members. Tf$ s conclusion is also supported by the basic
purpose of credit unions, as enunciated above, so that the overall
conclusion seems inescapable that one credit union cannot be a member
of another credit union.
A further argument against the idea that a credit union can,
under the Texas statutes, be an agency ‘whose purpose is the orderly
interchange of funds between credit unions” is found In the fact that
as recently as 1963 the Legislature amended Section 8 of Article 2462
to set up the present provision that a credit union may loan up to
25% of its capital and surplus to other credit unions. This orovision,
together with the provision in Section 1 of Article 2462, that allows
a credit union to borrow amounts up to 5C$ of Its capital and surplus
indicates that the Legislature attempted to provide directly and in
clear language for financial dealings between credit unions. Further,
the fact that the Legislature found it necessary to include a special
-2170-
Honorable J. M. Falkner, page 4 (C- 456)
provision to allow pne credit union to make a loan to another clearly
indicates that the Leaislature did not, and does not, intend that one
credit union be a member of another.
In view of all the above factors, we can only conclude that your
question must be answered In the negative. This conclusion is further
strengthened by the fact that any other conclusion is possible only
upon the basis of rather tortured interpretations of the language of
the statutes and since the credit union statutes were amended as
recently as 1963, it is only reasonable to assume that had the Leg-
islature wished to provide that one credit union can be a depository
for another they could, and would, at that time have said so in
unequivocal language.
SUMMARY
Under the provisions of Article 247.5 and other
statutes applying to credit unions, the Banking
Commissioner may not approve a credit union as a
depository for other credit unions within this
State.
Very truly yours,
Waggoner Carr
Attorney General of Texas
JNS:nr
APPROVEDBY:
OPINION COMMITTEE
George W. Gray III, Acting Chairman
Paul W. Phy
Charles Swanner
John Reeves
Wade Anderson
APPROVEDFOR THEAT'IORNEYGEXERAL
BY: T. B. Wright
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