HBA-TYH H.B. 3512 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3512 By: Marchant Financial Institutions 3/26/1999 Introduced BACKGROUND AND PURPOSE Texas has long enjoyed a dual chartering system for credit unions. State and federal credit unions exist side by side and are similar in form and in the powers that they can exercise. The Texas Credit Union Act has also had what is known as a "wild card" provision for many years. The purpose of the wild card is to keep state credit unions competitive with their federal counterparts and provide the most current services and facilities for their members. H.B. 3512 removes the requirement for a specific rule authorizing state chartered credit unions to engage in activities authorized for federal credit unions. The credit union commissioner retains the authority to ensure safe and sound activity, and the Credit Union Commission retains its authority to adopt rules regulating the activities of state chartered credit unions. This allows the state credit unions to adjust to any developments or rulings on the federal level without waiting for specific authorization by rule, as is now required. Texas credit unions have been accepting funds for deposit by trustees for several years. With the advent of the living trust, more members are moving their funds into such trusts. A provision in current law requires the credit union to obtain the name of every beneficiary of the trust. This was done so that an insurer of the funds could determine the amount of deposit insurance and to whom it would be payable in the event of a failure of the credit union. Many of these trust accounts have numerous beneficiaries and alternate beneficiaries. This can cause confusion for the trustees opening these accounts and unnecessarily invades their privacy. An additional problem concerns who must meet the membership requirement for opening the account. This is contingent upon whether the account is revocable or irrevocable. The credit union is merely a stakeholder in this process, but it is not entitled to rely on the representations of the trustee. A credit union merely acts as a depository in these transactions. H.B. 3512 removes the requirement to obtain the names of the beneficiaries and allows the credit union to rely on the representations of the trustee, who is the fiduciary in the transaction, as to the status of the trust. Under current law, in order for a person to gain access to a credit union member's safe deposit box before or after that member's death, that person has to be a joint holder of the safe deposit box regardless of whether that person had any interest or property in the box. This requires the member to subject another person to liability for box charges. H.B. 3512 gives the holders of credit union safe deposit boxes the ability to authorize other persons to access the box on their behalf. The member would have the ability to prevent anyone else from accessing the box by indicating authorized persons in the safe deposit box contract. This would allow credit union members the same flexibility provided customers of other safe deposit box providers. H.B. 3512 also includes savings banks in the definition of financial institutions and reinstates the "Purposes" provision in the Texas Credit Union Act. This language is identical to the language deleted by the nonsubstantive changes made by H.B. 10 creating the Finance Code during the 75th Legislature. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill modifies rulemaking authority previously delegated to the Credit Union Commission in SECTION 3 (Section 123.003, Finance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 15.204(c), Finance Code, to include savings banks in the definition of "financial institutions." SECTION 2. Amends Chapter 121, Finance Code, by adding Section 121.0015, as follows: Sec. 121.0015. PURPOSES. Sets forth the purposes of this Act. SECTION 3. Amends Section 123.003, Finance Code, to delete rulemaking authority that was expressly delegated to the Credit Union Commission and to make conforming changes. SECTION 4. Amends Section 125.301, Finance Code, to authorize a credit union to rely on any information provided by the trustee to determine whether a trust is revocable or irrevocable. Deletes the requirement that the name of each beneficiary be disclosed to the credit union when a trust account is opened. SECTION 5. Amends Section 125.503, Finance Code, as follows: Sec. 125.503. New Title: ACCESS BY MORE THAN ONE PERSON. Requires a credit unit, in the absence of a contract to the contract, to allow each holder of a safe deposit box jointly held in the name of two or more persons or a person other than the lessee designated in the lease agreement access to the box and removed of its contents. Makes conforming changes. SECTION 6. Effective date: September 1, 1999. SECTION 7. Emergency clause.