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 a credit union 

is prohibited from engaging in business in 

more than one place or 

maintaining a branch 

office, under provisions 

of Art. 342-903 and 

Art. 2463, V.C.S. 

Upon reconsideration, Opinion No. WW-838 is ,withdrawn, 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 together by Articles of agreement and 

form a credit union and upon approval 

of the State Banking Board, may belating 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deposits may be made and withdrawn."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) 

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 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 detail, commercial banks provide a number 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 

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 associations 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 establishin 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 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. 

The statutes and the nature of the business conducted by 

commercial banks and credit unions respectively, clearly contemplate 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 drivein 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 public 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 contained 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 

REVIEWED FOR THE ATTORNEY GENERAL 

By: Leonard Passmore