Texas Credit Union Department

The Texas Credit Union Department is a state agency with responsibility for supervising and regulating state-chartered credit unions. 

Second to Illinois, Texas has more state-chartered credit unions than any other state, and ranks fourth in credit union membership and sixth in total assets (as of 2019).

Credit unions are similar to banks but they are nonprofit corporations organized and owned by member depositors, not private shareholders. 

The Credit Union Department has a dual mission of “safeguarding the public interest” and “protecting the financial interests of credit union members” on the one hand, while also “promoting public confidence in credit unions” on the other hand. 

Regulations 

Credit unions doing business in Texas are required to have share insurance protection on their accounts. In most credit unions, members have federal share insurance through the National Credit Union Administration, which is backed by the “full faith and credit of the United States Government.”

As of 2020, the NCUSIF provided credit union members up to $250,000 in coverage for their individual share and deposit accounts. 

Under the Texas Finance Code, the Credit Union Department collects data from credit unions, including an annual balance sheet, income and expense statement, and management information.

The department is required to maintain a system to monitor consumer complaints about credit unions and it may investigate these complaints.

It also may issue “interpretive statements” to guide credit unions on matters of general policy.

Structure

The Texas Credit Union Department has a legal status known as SDSI, meaning “self-directed semi-independent” agency. This means that the agency sets its own fees, budgets, and performance measures outside of the legislative appropriations process.

The department is also partly industry-governed, with an oversight commission called the Credit Union Commission, consisting of four members from the credit union industry, and five members who don’t work for a credit union but are appointed “on the basis of recognized business ability,” according to the Texas Finance Code sec. 15.204.

These members are appointed by the Texas governor with the advice and consent of the Senate. They serve six-year staggered terms. Commission members are not compensated except for a per diem for time served, meals, lodging, or other official expenses. 

Budget

As an SDSI agency, the department is funded through fees on Texas-chartered credit unions. In fiscal year 2019, the department collected about $4.1 million in revenue, almost entirely from operating fees, and spent about $3.9 million.

In 2019, the department employed 29 full-time staff, including 10 administrative staff in Austin and 19 field examiners who work from home and travel across Texas to examine credit unions. 

History

The Texas Legislature first enacted chartering laws for credit unions in 1913. Initially, the Legislature limited state-chartered credit unions to serving rural communities, but soon granted them authority to operate statewide to meet a growing demand for their services. 

The Texas Department of Banking regulated them until 1969, when the Legislature created the Credit Union Department in response to increasing competition and regulatory friction between credit unions and banks. 

In 2009, the Legislature gave the department self-directed semi-independent (SDSI) status.

According to the Sunset Advisory Commission’s 2020 Sunset review of the Credit Union Department, the Texas Legislature has considered moving the department to the Finance Commission nine times in the past four decades, through Sunset reviews, proposed legislation, interim studies, and other evaluations. 

The Finance Commission of Texas oversees three other SDSI agencies that regulate banks and other types of financial institutions and occupations. But the 2020 Sunset review found that transferring the department to the Finance Commission would have “no benefit at this time and the current organizational structure is the best option.”