1. (a) Definition. When used in this section, a credit union service organization (CUSO) is an organization whose primary purpose is to strengthen or advance the credit union movement, serve or otherwise assist credit unions or their operations, or provide services authorized by subsection (f) of this section to members of credit unions.

2. (b) A credit union by itself, or with other parties, may only organize, invest in or make loans to a CUSO which is structured and operated in a manner that demonstrates to the public that it maintains a legal existence separate from the credit union. A credit union and a CUSO must operate so that:

   1. (1) their respective business transactions, accounts, and records are not intermingled;
   2. (2) each observes the formalities of their separate corporate or other organizational procedures;
   3. (3) each is adequately financed as a separate unit in light of normal obligations reasonably foreseeable in a business of its size and character;
   4. (4) each is held out to the public as a separate enterprise; and
   5. (5) unless the credit union has guaranteed a loan to the CUSO, all borrowings by the CUSO indicate that the credit union is not liable.
3. (c) Notice. A credit union shall provide written notice to the commissioner of its intent to make an initial investment in or make an initial loan to a CUSO at least 15 days prior to commencing efforts to effect such activity. The credit union shall provide any additional information reasonably requested by the commissioner.
4. (d) Limitations. The board of directors of a credit union that organizes, invests in, or lends to any CUSO shall establish, in writing, the maximum amount of the credit union's assets, relative to the credit union's net worth, that will be invested in or loaned to any one CUSO. Investments and loans described in this section shall not, in the aggregate, exceed 10% of the total assets of the credit union, unless the credit union receives the prior written approval of the commissioner. The amount of loans to CUSOs, cosigned, endorsed, or otherwise guaranteed by the credit union, shall be included in the aggregate for the purpose of determining compliance with the limitations set forth in this section.

5. (e) Prohibitions. No credit union may invest in or make loans to a CUSO:

   1. (1) if any officer, director, committee member, or employee of such credit union or any member of the immediate family of such persons owns or makes an investment in or has made or makes a loan to the CUSO;
   2. (2) unless the organization is structured as a corporation, limited liability company, registered limited liability partnership, or limited partnership and the credit union has obtained a written legal opinion that the CUSO is established in a manner that will limit the credit union's potential exposure to not more than the loss of funds invested in or loaned to such CUSO;
   3. (3) if the CUSO engages in any revenue producing activity other than the performance of services for credit unions or members of credit unions, and such activity equals or exceeds one half (1/2) of the CUSO's total revenue; or
   4. (4) unless prior to investing in or making a loan to a CUSO the credit union obtains a written agreement which requires the CUSO to follow GAAP, render financial statements to the credit union at least quarterly, and provide the department, or its representatives, complete access to the CUSO's books and records at reasonable times without undue interference with the business affairs of the CUSO.

6. (f) Permissive activities and services. A CUSO shall be engaged in providing products and services that include, but are not limited to:

   1. (1) operational services including credit and debit card services, cash services, wire transfers, audits, ATM and other EFT services, share draft and check processing and related services, shared service center operations, electronic data processing, development, sale, lease, or servicing of computer hardware and software, alternative methods of financing and related services, other lending related services, and any other services or activity, including consulting, related to the operations of credit unions;
   2. (2) financial services including financial planning and counseling, securities brokerage and dealer activities, estate planning, tax services, insurance services, administering retirement, deferred compensation and other employee or business benefit plans, or any other service deemed economically beneficial or attractive to the members of the participating credit union or credit unions;
   3. (3) Internet based or related services including sale and delivery of products to credit unions or members of credit unions; or
   4. (4) any other service or activity approved, in writing, by the commissioner.
7. (g) Compensation. Unless the participating credit unions' boards of directors have determined that a conflict of interest exists, senior management staff and employees of a credit union may receive compensation from a CUSO affiliated with their credit union provided the individual provides fair and full disclosure initially and annually thereafter to the boards of participating credit unions and non-credit union parties.
8. (h) Examination fee. If a CUSO is requested by the commissioner to make its books and records available for inspection and examination, the CUSO shall pay a supplemental examination fee as prescribed in §97.113(d) of this title (relating to Supplemental Examinations). The commissioner may waive the supplemental examination fee or reduce the fee as he deems appropriate.
9. (i) Exclusion. A credit union which has a net worth ratio greater than six percent (6%) and is deemed adequately capitalized by its insuring organization may invest in or make loans to a CUSO that is not limited by the restriction set forth in subsection (e)(3) of this section; provided the activities of the CUSO are exclusively limited to activities which could be conducted directly by a credit union or are incidental to the conduct of the business of a credit union. Notwithstanding this exclusion, all other provisions of the act and this chapter applicable to a CUSO apply. In the event a credit union's net worth or capital declines below the required thresholds, the credit union may not renew, extend the maturity of, or restructure an existing loan, advance additional funds or increase the investment in the CUSO without the prior written approval of the commissioner.

Source Note:The provisions of this §91.801 adopted to be effective March 8, 1984, 9 TexReg 1155; amended to be effective August 7, 1984, 9 TexReg 4028; amended to be effective March 8, 1994, 19 TexReg 1327; amended to be effective May 13, 1999, 24 TexReg 3473; amended to be effective August 14, 2000, 25 TexReg 7635.