GA Code § 7-1-658 (2021)
2021 Georgia Code|Title 7 - Banking and Finance|Chapter 1 - Financial Institutions|Article 3 - Credit Unions|Part 3 - Operation and Regulation|§ 7-1-658. Loans

  Credit unions may lend money to their members at reasonable rates of interest, which shall not exceed 1 1/4 percent each month on the unpaid balance, or such greater rates as shall be authorized for other financial institutions for such purposes as may be approved by the credit committee.   Loans shall be supervised as follows:   The credit committee shall have the general supervision of all loans to members. The credit committee shall hold such meetings as the business of the credit union may require and not less frequently than once each quarter to consider applications for loans. Reasonable notice of such meetings shall be given to all members of the committee. Actions of the credit committee shall be reported to the board in such form as the board shall prescribe at each regular meeting of the board. No loan shall be made unless it is approved by a majority of the entire committee, except as provided in this Code section;   The credit committee may appoint one or more employees to be loan officers and delegate to such persons the power to approve or disapprove loans to a borrower that do not in the aggregate exceed 5 percent of the net worth of the credit union subject to such limitations or conditions set forth in this Code section for loans generally and such further limitations and conditions as the credit committee prescribes. Records of loans approved shall be maintained in such form as the credit committee shall prescribe and shall be made available to the credit committee upon request. The credit committee may not appoint more than one of its members to be a loan officer. No person shall have the authority to disburse funds of the credit union for any loan which has been approved by such person;   In lieu of a credit committee, the board of directors may appoint one or more loan officers and delegate to such persons the power to approve or disapprove loans to a borrower that do not in the aggregate exceed 5 percent of the net worth of the credit union subject to such limitations or conditions set forth in this Code section for loans generally and such further limitations and conditions as the board may prescribe. All other duties of the credit committee as described in this article shall become the duties of the board of directors. Records of loans approved shall be maintained by the loan officers in such form as the board shall prescribe and a listing of all loans made, including the name of the borrower and the amount of the loan, shall be submitted to the board at each meeting; and   Members may appeal a credit decision made by a loan officer to the credit committee or to the board if denied by the credit committee. Where there is no credit committee, appeal shall be made to the board.     Loans may be made to officers, directors, and committee members of the credit union under the same general terms and conditions as to other members of the credit union; provided, however, that no officer, director, committee member, or employee shall participate in approving any loan in which he or she has a direct or indirect financial interest. The approval of all loans to officers, directors, and committee members of the credit union shall be reported to the board of directors at its next meeting.   As used in this Code section, the term "person" or "corporation" includes, but is not limited to, an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, or unincorporated organization.   No credit union shall be authorized to make loans to any one person or corporation where the aggregate of such loans and obligations together exceeds 5 percent of the net worth of the credit union unless each loan in excess of said 5 percent limit is approved in advance by the board of directors or the credit committee subject to the provisions set forth in subsections (f) and (g) of this Code section. Approval by the board of directors or credit committee shall be recorded in the formal minutes of the actions of the board or the credit committee by name of borrower, amount of loan, maturity of loan, general type of collateral, and such other information as required pursuant to the rules and regulations of the department. Any action required by this subsection may be taken as prescribed in Code Section 7-1-656, provided that the minutes of the proceedings of the board of directors or credit committee reflect such action and each director taking such action signs the minutes reflecting such action by no later than the next regular meeting of the board or credit committee attended by such director.   Except as provided in subsection (g) of this Code section, a credit union shall not directly or indirectly make loans or have obligations to any one person or corporation which in aggregate exceed 5 percent of the net worth of the credit union at the time of issuance of a binding commitment unless the entire amount of such loans and obligations is secured by good collateral or other ample security and does not exceed 25 percent of the net worth at the time of issuance of a binding commitment. Except as otherwise indicated in subsection (g) of this Code section, the purchase or discount of agreements for the payment of money or evidences of indebtedness shall be regarded as indirect loans to the person or corporation receiving the proceeds of such transactions. In estimating the legal lending limit for any one person or corporation, loans to related corporations, partnerships, and other entities shall be combined subject to regulations established by the department.   The limitations of subsection (f) of this Code section shall not apply to:   Obligations of and obligations guaranteed by:   The United States;   The State of Georgia or a public body thereof authorized to levy taxes;   Any state of the United States or any public body thereof if the obligations or guarantees are general obligations; or   Any agency of this state as defined in subparagraph (a)(1)(A) of Code Section 50-14-1;     Obligations to the extent secured by:   Obligations fully guaranteed by the United States;   Guaranties or commitments or agreements to take over or purchase made by any public body of the United States or any corporation owned directly or indirectly by the United States; or   Loan agreements between a local public agency or a public housing agency and an instrumentality of the United States pursuant to national housing legislation under which funds will be provided for payment of the obligations secured by such loan agreements;     Obligations with respect to the sale of federal or correspondent funds to financial institutions having their deposits insured to the same extent as that required of similar institutions chartered in this state; and   A renewal or restructuring of a loan as a new loan or extension of credit following the exercise by the credit union of reasonable efforts, consistent with safe and sound banking practices, to bring the loan into conformance with the lending limits of this Code section, unless:   New funds are advanced by the credit union to the borrower, except as permitted under this Code section;   A new borrower replaces the original borrower; or   The department determines that a renewal or restructuring was undertaken as a means to evade the credit union's lending limit.       The department may, by regulation not inconsistent with this Code section, prescribe definitions of and requirements for transactions included in or excluded from the indebtedness to which this Code section applies. The department may, by regulation or otherwise, specify that the liabilities of a group of one or more persons or corporations or both shall be considered as owed by one person or corporation for the purposes of this Code section because the borrowers within the group are related through common control or the group meets other criteria established by the department for the combination of indebtedness for legal lending limitation purposes.   Except as provided in subsection (e) of this Code section, approval of loans by the credit committee shall be evidenced, prior to disbursement of the loan proceeds, by a writing signed by a committee member stating that the committee has approved the loan. If the board appoints loan officers in lieu of a credit committee, it shall establish policies for approval of loans by those loan officers.    (Ga. L. 1925, p. 165, §§ 14, 18; Code 1933, §§ 25-115, 25-116; Ga. L. 1962, p. 74, § 2; Ga. L. 1968, p. 465, §§ 4, 5; Code 1933, § 41A-3109, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, §§ 4, 5; Ga. L. 1981, p. 1244, § 10; Ga. L. 1994, p. 1780, § 2; Ga. L. 2004, p. 458, § 5; Ga. L. 2018, p. 214, § 16/HB 780; Ga. L. 2020, p. 320, § 11/HB 781.)    The 2018 amendment,  effective May 3, 2018, substituted "directors, and committee members" for "directors, committee members, and employees" in the last sentence of subsection (c). See Editor's notes for applicability.    The 2020 amendment,  effective January 1, 2021, in paragraph (b)(2), inserted "to a borrower that do not in the aggregate exceed 5 percent of the net worth of the credit union" and "set forth in this Code section for loans generally and such further limitations and conditions" in the first sentence and deleted the former third sentence, which read: "All loans in excess of 50 percent of a credit union's maximum loan limitation or such lower limit as the credit committee shall establish shall be acted upon by the credit committee"; in paragraph (b)(3), in the first sentence, inserted "a borrower that do not in the aggregate exceed 5 percent of the net worth of the credit union" and "set forth in this Code section for loans generally and such further limitations and conditions" and substituted "may prescribe" for "prescribes"; added subsection (d); redesignated former subsection (d) as present subsection (e); substituted the present provisions of subsection (e) for the former provisions, which read: "No credit union shall be authorized to lend to any individual borrower on an unsecured loan more than 1 percent of the first $100,000.00 of its deposits and shares plus one-fourth of 1 percent of its deposits and shares over $100,000.00. No credit union shall be authorized to lend to any individual borrower on a secured loan more than 10 percent of the first $100,000.00 of its deposits and shares plus 4 percent of the next $1 million of its deposits and shares plus 2 percent of its deposits and shares over $1.1 million. Deposits and shares reflected in the statement of condition on the last calendar day of the preceding quarter, to the nearest $100,000.00, shall be used to establish loan limits for the subsequent calendar quarter, provided that where a credit union has less than $1 million in total shares and deposits, the nearest $1,000.00 shall be used to establish these limits. Any credit union may make loans up to $200.00 regardless of the amount of its shares and deposits. The amount loaned to any one borrower on an unsecured basis when added to the amount loaned to any one borrower on a secured basis shall not exceed the limitation set forth in this subsection for secured loans, such limitation being the maximum loan limit of the credit union."; deleted former subsection (e), which read: "For purposes of subsection (d) of this Code section:   "(1) 'Borrower' means the member who actually received the proceeds from a loan and shall not include any obligation which he may incur by being an endorser, guarantor, comaker, or similar obligor for another borrower;   "(2) 'Secured loan' means a loan for which adequate collateral is given. A secured loan may include a loan for which there is an endorser, guarantor, comaker, or similar obligor."; added subsections (f) through (h); redesignated former subsection (f) as present subsection (i); and substituted "Except as provided in subsection (e) of this Code section, approval" for "Approval" at the beginning of subsection (i).   Code Commission notes.   - Pursuant to Code Section 28-9-5, in 2004, "$1 million" was substituted for "$1,000,000.00" and "$1.1 million" was substituted for "$1,100,000.00" in two places in subsection (d).   Pursuant to Code Section 28-9-5, in 2020, an extra period was deleted in the middle of paragraph (b)(2).   Editor's notes.   - Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: "It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018."   Law reviews.   - For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978).   OPINIONS OF THE ATTORNEY GENERAL   Credit unions may make loans to members only.   - Credit unions may make loans to and exact interest rate permitted by former Code 1933, § 41A-3109 from members only. 1975 Op. Att'y Gen. No. 75-2.   Loans by banks.    - Authority contained in former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658) was limited to a designated type of loan, a loan by a credit union to a member, or shareholder; thus if a bank possesses any authority under former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-292) similar to that of credit unions under this section, the authority extends only to loans to shareholders of the bank. 1975 Op. Att'y Gen. No. 75-2.   Loans exceeding unsecured debt limit must be secured; secured debt limit may not be exceeded.   - All amounts loaned by credit unions in excess of unsecured debt limits established by subsection (d) of former Code 1933, § 41A-3109 must be secured by adequate collateral and in no event may that secured debt limit be exceeded. 1975 Op. Att'y Gen. No. 75-67.    Subsection (a) of former Code 1933,  §  41A-3109 was not violated by investment in small business administration guaranteed participations.  1976 Op. Att'y Gen. No. 76-12.    Neither former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658) nor former Code 1933, § 41A-3101 (see now O.C.G.A. § 7-1-650) prevented a credit union from investing in United States government guaranteed participations in small business administration loans. 1976 Op. Att'y Gen. No. 76-12.   Section does not give authority to banks.    - Former Code 1933, § 41A-1313 (see now O.C.G.A. § 7-1-658) did not permit banks to charge rates of interest authorized to other organizations by virtue of a special charter, including authority under former Code 1933, § 41A-1309 (see now O.C.G.A. § 7-1-658) establishing an interest rate which credit unions were authorized to exact. 1975 Op. Att'y Gen. No. 75-2.   RESEARCH REFERENCES   Am. Jur. 2d.   - 10 Am. Jur. 2d, Banks and Financial Institutions, §§ 5 et seq., 189.   C.J.S.   - 12A C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, §§ 127 et seq., 139 et seq., 152, 153.   ALR.   - Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee, or similar deposit, 93 A.L.R.3d 1156.