### THE ATTORNEY GENERAL OF -XAS

W’ILL WILSON AlTORNEY GENERAI. March 8, 1961

Hon. J. M.Falkner Banking Commissioner of Texas Department of Banking Austin 14, Texas

Dear Mr. Falkner: Opinion No. WW-838-A Re: Whether acredit union is prohibited from engaging in business in more than one place 

### or maintaining abranch office, under provisions of Art. 342-903 and Art. 

### 2463,V.C.S. Uponreconsideration, Opinion No. 

### WW-838is ,withdrawn, and this opinion substituted in lieu thereof.

Youhave requested the opinion of this office as to the authority of acredit 

### union incorporated under the provisions of Article 

### 2463,V.C.S., to engage in business in more than 

### one place or maintain abranch office.

Article 

### 2463,V.C.S., is in part as follows: "Ten (10) or more residents of this State mayassociate themselves together by Articles of agreement and form a credit union andupon approval of the State Banking Board, maybelating State banks as maybe applicable 'co the transaction of business as herein authorized to be done... "(Emphasis supplied through-out). Article 2462, V.C.S., provides that acredit union "mayreceive the savings of its members in payment for shares or as de osits +*" It maylend mone to its me%bers within the limits an subject todictions provided by law...." Article 2466, V.C.S., provides that the by-laws of the credit union "shall prescribe...6. Theconditions onwhich deposits maybe madeandwithdrawn.".

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

is,

While it is immediately apparent from the above provisions 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 associations 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 andunderstood. Furthermore, the operations of a credit union in receiving deposits or lending money are substantially different from the corresponding, operations of acommercial bank, andin fact, the functi’ns 8 and underlying concept of acredit union are basically ,ifferent from those of a commercial bank. For example, abank qerves the general public, whereas acredit union is organized “for the purpose of promoting thrift amongits members” (Art. 2461), andmaylend money to members only (Art. 

### 2462). Theby-laws of acredit 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 aspecified corporation or governmental unit. Without going into great detail, commercial banks provide anumber of functions and services which credit unions cannot, such as the transfer of funds by drafts or bills of exchange, the providing of checking accoun trust departments and safety deposit boxes.

Banks, of course, serve as depositories for both private andpublic funds, whereas the capital, deposits and surplus funds of acredit association which are not lent to its members must be deposited in state or national banks or savings and loan associations or trust companies approved bythe Banking Commissioner, or Invested in certain government bonds (Art, 

### 2462and247.5).

Thefact that credit unions donot serve as depositories for their ownfunds points upanother distinction between banks and credit unions, namely, ,the location and type of place In which each transacts its authorized business, Astate bank is authorized by Article 342-501 to invest aspecified percentage of its capital and surplus In adomicile, including land and building, plus anadditional amount In furniture andfixtures. Additionally, Article 342-903 specifically provides:

“Nostate, 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 noprovision in the basic legislation establishin andgoverning credit unions (Articles 

### 2461through 2484b, V.C.S. 7which specIfIcally authorizes or prohibits acreditHon. J. M.Falkner, page 3 (Ww-838-A)

union from engaging In business in more than one place or maintaining abranch office. Thequestion thus presented f$r determination Is whether that part of Article 2403 reading

... maybecome acorporation upon complying with such provisions of the law regulating State banks as maybe applicable to the transaction of business as herein authorized to be done" makes the law prohibiting aState bank from engaging In business in more than one place or cashing checks or receiving deposits except in Its ownbanking house applicable to the transaction 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 applicable to the business transacted by credit unions incorporated under the provisions of Article 

### 2463.

Thestatutes and the nature of the business conducted by commercial banks and credit unions respectively, clearly contemplate that acommercial 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 drivein windows and contemporary atmosphere of more recent design. Acredit union, on the other hand, ordinarily serves Its members from an office or space rented or set aside in the plant or public building housing its members. Indeed, the instruction sheet furnished by the State Banking Department to those planning on organizing acredit 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 acredit 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 apart 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 contained in Article 

### 16,Sec. 

### 16of our Constitution was apparently designed to guard against.

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

SUMMARY: Acredit union is not prohibited from engaging in business 

### in more than one place or maintaining abranch office under provisions of Article 342-903 and Article 

### 2463, V.C.S.

Very truly yours,

WILLWILSON Attorney General

As'sistant, ':',''. APPROVED: OPINIONCOMMITTEE W.V. Geppert, Chairman Arthur Sandlln W.Ray

### Scruggs Robert T. Lewis REVIEWED

FORTHEATTORNEY GENERAL By: Leonard Passmore