AUSTIN, Texas – State chartered credit unions seeking to convert to mutual savings institutions must now meet new disclosure requirements. The Texas Credit Union Commission voted unanimously at its regularly scheduled meeting June 9 to enact new rules regarding credit union conversions.
Proposed by the Texas Credit Union Department and supported by the Texas Credit Union League, the rules require credit unions seeking to convert to a mutual savings institution to provide early notification to the membership prior to a board vote on the issue. Additionally, credit unions must now clearly define on a conversion ballot that a "yes" vote means the credit union will convert to a mutual savings institution, and a "no" vote means the credit union will remain a credit union.
The commission, as part of its regular process to review the relevance and applicability of TCUD rules, voted to repeal Rule 7 Texas Administrative Code 91.1004 and establish new rules 91.1005 through 91.1008. The first two rules apply to financial institutions converting to a Texas credit union and to credit unions converting to a federal or out-of-state credit union. Rules 91.1007 and 91.1008 apply to mutual savings institution conversions and conversion voting procedures:
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* 91.1007-Requires credit union member notification at least 30 days prior to a board's final vote to convert to a mutual savings institution, requires information about the conversion to be posted on an Internet Web site, and requires a written comment period for members.
* 91.1008-Requires disclosure to be included on the voting ballot explaining that a vote of "yes" means the not-for-profit credit union will convert to a mutual savings institution and a "no" vote means the credit union will remain a not-for-profit financial cooperative, requires a statement on the ballot that the conversion will be decided by a majority of credit union members who vote on the issue, requires a statement on the ballot that once a vote is cast, it may not be changed, and requires the name of the credit union and the name of the proposed institution both be included on the ballot.
TCUC Chair Gary Janacek was pleased with input the commission received from credit unions about the new conversion rules and the outcome of the vote. "We were able to enact clear and concise rules that will allow credit union members to be involved in the process early on, opening the lines of communication and allowing the board to do their fiduciary duties," Janacek said. "Under the new rules, the TCUC will receive the notice of intentions [from a credit union seeking to convert] in a timely manner. The new rules are a win-win for all."
Texas Credit Union Commissioner Harold Feeney said, "We [TCUD] think the new rules strike a balance between providing credit union members with the necessary information and allowing credit unions to conduct authorized activities, without unduly burdening the credit unions." The Texas Credit Union League was "delighted" with the outcome of the vote, according to the TCUL President/CEO Dick Ensweiler.
"We in the credit union industry feel very strongly that credit unions are the best choice for consumers. As not-for-profit cooperatives, credit unions are able to offer better service, lower fees and higher rates of return on checking and savings accounts. And if a credit union chooses to become a mutual savings bank, it's important that the members receive full disclosure as to what it will ultimately mean for the institution and their money," said Ensweiler.
"TCUD and the Commission deserve applause for developing and approving respectively the new conversion rules, which enable members to better understand the conversion process and its implications," said Buddy Gill, TCUL chief advocacy officer. "It is imperative that the credit union membership understand what is at stake and what it means for the future of their credit union. The new rules ensure that credit union members will receive full and accurate disclosure allowing them to make informed decisions when casting their votes."
As of June 2006, there were 223 state chartered credit unions with approximately $18 billion in assets serving 2.7 million Texans. In the past decade, three Texas credit unions have converted to a mutual savings institution. [email protected]
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