                                                    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:




                                               -2168-
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)




                                                 -2169-
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


                                            -2171-
