                     THE      ATTORNEY                 GENERAL
                                    OF     -XAS


   W’ILL   WILSON
AlTORNEY      GENERAI.
                                      March 8,     1961


     Hon. J. M. Falkner                               Opinion   No. WW-838-A
     Banking Commissioner
     of Texas                                         Re:   Whether a credit     union
     Department of Banking                                  is prohibited    from en-
     Austin 14, Texas                                       gaging in business     in
                                                            more than one place or
                                                            maintaining    a branch
                                                            office,   under provisions
                                                            of Art. 342-903 and
                                                            Art. 2463, V.C.S.
     Dear Mr. Falkner:

                Upon reconsideration,       Opinion     No. WW-838 is ,withdrawn,
     and this     opinion   substituted     in lieu     thereof.

               You have requested     the opinion  of this office as to the
     authority    of a credit   union incorporated    under the provisions
     of Article    2463, V.C.S.,    to engage in business   in more than
     one place or maintain a branch office.
                Article    2463, V.C.S.,    is   in part    as follows:

                      "Ten (10) or more residents    of this
                      State may associate  themselves   to-
                      gether by Articles  of agreement and
                      form a credit  union and upon approval
                      of the State Banking Board, may be-


                       lating   State banks as may be applicable
                      'co the transaction       of business  as herein
                       authorized    to be done...     "(Emphasis
                       supplied   through-out).

               Article    2462, V.C.S.,     provides that       a credit  union
     "may receive      the savings    of its members in         payment for shares
     or as de osits          It may lend mone to its            me%bers within
     the +*"
           limits    an subject    to dictions                  provided  by
     law...."

              Article  2466, V.C.S.,      provides   that the by-laws  of the
     credit   union "shall   prescribe...6.        The conditions  on which
     deposits   may be made and withdrawn."
                                                                                         .




Hon. J.    M. Falkner,     page 2 (WW-838-A)



          While it is immediately          apparent from the above provi-
sions that credit         unions exercise       two of the most important
functions     of banking,      the receiving       of deposits      and the lending
of money, it must be recognized              that credit      unions or asso-
ciations     are not “banks” as that term Is defined                 in the Texas
Banking Code of 1943 (Article             342-101 et seq.,        V.C.S.)   or as
that term is commonly used and understood.                    Furthermore,       the
operations      of a credit     union in receiving          deposits   or lending
money are substantially          different      from the corresponding,
operations      of a commercial       bank, and in fact,         the functi’ns
and underlying      concept     of a credit       union are basically       8,ifferent
from those of a commercial            bank.    For example, a bank qerves
the general      public,    whereas a credit        union is organized         “for
the purpose of promoting          thrift     among its members” (Art.            2461),
and may lend money to members only (Art. 2462).                      The by-laws       of
a credit     union are required        to prescribe       the conditions       of
residence     or occupation      which qualify        persons for membership
(Art. 2466), which is usually             employment by or in a specified
corporation      or governmental       unit.      Without going into great de-
tail,    commercial      banks provide     a number of functions          and ser-
vices    which credit      unions cannot,       such as the transfer         of funds
by drafts     or bills     of exchange,      the providing       of checking      accoun is,
trust departments         and safety     deposit     boxes.

         Banks, of course,      serve as depositories     for both private
and public   funds,    whereas the capital,     deposits    and surplus   funds
of a credit    association    which are not lent to its members must be
deposited   in state or national      banks or savings      and loan asso-
ciations   or trust companies approved by the Banking Commissioner,
or Invested    in certain    government bonds (Art,      2462 and 247.5).
          The fact that credit       unions do not serve as depositories
for their     own funds points      up another distinction         between banks
and credit     unions,    namely, ,the location     and type of place In
which each transacts        its authorized     business,      A state bank is
authorized     by Article     342-501 to invest     a specified       percentage
of its capital      and surplus     In a domicile,     including      land and
building,     plus an additional      amount In furniture        and fixtures.
Additionally,      Article    342-903 specifically       provides:

                “No state,   national   or private  bank shall
                engage in business    in more than one place,
                maintain   any branch office    or cash checks
                or receive   deposits   except in its own
                banking house.. . . ”

        There is no provision      in the basic legislation    estab-
lishin   and governing    credit   unions (Articles   2461 through 2484b,
V.C.S. 7 which specIfIcally      authorizes  or prohibits   a credit
Hon. J.   M. Falkner,    page   3 (Ww-838-A)



union from engaging In business          in more than one place or
maintaining     a branch office.      The question     thus presented    f$r
determination     Is whether that part of Article          2403 reading      ...
may become a corporation        upon complying     with such provisions
of the law regulating       State banks as may be applicable          to
the transaction      of business    as herein authorized       to be done"
makes the law prohibiting        a State bank from engaging In
business    in more than one place or cashing          checks or receiving
deposits    except in Its own banking house applicable            to the trans-
action   of business    authorized    to be done by credit       unions.    We
have concluded      that the restriction      against   engaging in business
in more than one place contained           in the Banking Code is not ap-
plicable    to the business     transacted    by credit    unions incorporated
under the provisions      of Article     2463.
         The statutes     and the nature of the business        conducted     by
commercial      banks and credit   unions respectively,      clearly     contem-
plate that a commercial        bank will conduct Its functions         in a
specific     structure{,  its banking house, and indeed In everyday
language the word        bank" brings   to mind the massive columns,
granite    or marble facade and austere      dignity    of the buildings
favored    in previous    years or the glass and aluminum, the drive-
in windows and contemporary        atmosphere of more recent         design.
A credit     union,   on the other hand, ordinarily      serves Its members
from an office       or space rented or set aside in the plant or pub-
lic building      housing its members.     Indeed,   the instruction        sheet
furnished     by the State Banking Department to those planning              on
organizing      a credit  union suggests:

               "Solicit    the assistance    of the sponsoring
               company or employer,       and if possible,
               arrange....    for office   space or othtr
               quarters    for your credit     union....

          It is easy to imagine that a credit       union sponsored     by a
company with more than one plant would have difficulty             serving
its members if it could not maintain         some type of facility,       or
transact    business   at the various   plants where a part of the
members work.       It is difficult   to conceive   of any such activity
on the part of credit      unions resulting     In the concentration      of
financial    power which the provision      against  branch banking con-
tained in Article      16, Sec. 16 of our Constitution      was apparently
designed    to guard against.

         We therefore     conclude   that the basic differences    in the
business    transacted   by a commercial    bank and a credit    union make
inapplicable     to credit    unions that portion   of the Banking Code
prohibiting     a State bank from engaging in business        in more than
one place.
Hon. J.   M. Falkner,   page 4 (WW-838-A)



                             SUMMARY:

              A credit    union is not prohibited     from
              engaging in business      in more than one
              place or maintaining      a branch office
              under provisions      of Article  342-903
              and Article     2463, V.C.S.




                             Very truly     yours,



                             WILL WILSON
                             Attorney General




                                  As'sistant,        ':' ,' '.

APPROVED:

OPINION COMMITTEE
W. V. Geppert, Chairman

Arthur Sandlln
W. Ray Scruggs
Robert T. Lewis

REVIEWEDFOR THE ATTORNEYGENERAL
By:  Leonard Passmore
