Financial Code, 1951

Credit unions that extend consumer credit to covered borrowers must follow the referenced federal consumer credit rules.

A licensee violates this division if it violates certain listed federal acts or regulations.

Loans made over the division’s limits, or in violation of the division, are not invalid or illegal solely for that reason.

State-chartered banks that extend consumer credit to covered borrowers must follow the referenced federal provisions; banks that do not market or extend such credit are not in violation of Section 394 of the Military and Veterans Code.

This section says “shall” means mandatory and “may” means permissive.

A credit union may charge late fees if approved by its board of directors, but only once for each delinquent payment.

Credit unions generally may not make loans or lines of credit with officials unless specified conditions are met, and officials are barred from participating in credit decisions for their own benefit.

The board of directors must declare certain offices vacant if the person does not timely reduce a debt owed to the credit union.

This section defines “certificate of correction” as a certificate executed and filed with the Secretary of State under Corporations Code Section 109, subject to Section 1105.

A bank’s investment in securities issued by one person must not exceed 15% of the stated bank capital base, subject to listed exceptions.

The board of directors must adopt written policies for obligations offered to members, and those policies must cap member obligations at 10% of savings capital, with a similar cap for one family.

Educational loans can be excluded from the loan-aggregation limit if they are made for educational purposes, secured as required, and the exempted amount does not exceed $10,000.

Certain credit unions and related entities may sue a borrower for damages, including exemplary damages capped at 50% of actual damages, when the loan was secured by real property and the borrower’s fraud induced the original lender to make the loan.

A credit union or its agent that received a required notice must not make a later assignment to skip trace, locate, or repossess a vehicle unless it simultaneously tells the assignee the notice information.

A bank may invest in shares of certain registered investment companies if the company’s portfolio consists only of the listed permitted assets.

A bank may buy, acquire, or hold corporate stock if the purchase is part of a commissioner-approved reorganization plan.

A commercial bank does not have to dispose of investments that were authorized when made, even if the Banking Code or later amendments change.

A commercial bank may engage in certain investment-company activities and securities transactions if its selling officers and employees meet standards set by the commissioner or the commissioner’s designee.

A bank or trust company may acquire stock in limited loan-related situations, and later must sell or convert it when sale would fully reimburse its loss.

A public administrator may keep a decedent’s bank deposit in the commercial bank, add estate money not needed for current administration expenses to that account, and need not pay it to the county treasurer.

A credit union may merge with another credit union or a central credit union if the commissioner approves.

A credit union merger must follow an approved plan, with member approval or written consent, unless the commissioner can approve it under the section’s exceptions.

Credit unions must execute a certificate of merger after merger approval requirements are satisfied, include specified merger details, and attach the plan of merger and the commissioner’s written approval.

Merger certificates must be filed with the Secretary of State, and a certified copy must then be filed with the commissioner before the merger becomes effective.

When a credit union merges, the surviving credit union takes the merged credit union’s property, rights, debts, obligations, and liabilities.

A commercial bank that accepts savings deposits must set repayment timing and conditions in its bylaws or contracts, cannot waive notice requirements except for all savings deposits, and must stop making new loans or investments while excess repayment demands exceed available funds.

A commercial bank that accepts savings deposits is treated as a savings bank for laws about depositing funds with savings banks.

A credit union may be dissolved by member vote, and the commissioner may approve dissolution in some cases. Until the members approve or reject the recommendation, the credit union may not make new loans or withdraw shares or certificates for funds.

If a credit union’s dissolution is approved, its board must elect a three-member committee or may appoint a liquidating agent to liquidate the assets. If the commissioner is appointed liquidating agent, the commissioner may act personally or appoint the National Credit Union Administration or another person, and the credit union must surrender its certificate.

Certain officers, a committee majority, or the liquidating agent must promptly sign and verify a certificate of the credit union’s election to wind up and dissolve.

After a vote to dissolve a credit union, it may not do business except as needed for liquidation.

The committee or liquidating agent in charge of liquidation may sue for the credit union and may sell or otherwise dispose of its assets, in whole or in part, by public or private sale.

After debts and liabilities are paid or covered, the committee or liquidating agent must distribute the remaining credit union assets to members or shareholders.

After a credit union is fully wound up and its debts and assets are handled as required, a majority of the committee or the liquidating agent must sign and acknowledge a certificate confirming those facts and the dissolution.

The certificate of dissolution must be filed with the Secretary of State, and certified copies must be filed with the commissioner.

During liquidation, the commissioner may remove the committee or liquidating agent, and then must act as liquidating agent or appoint one to finish dissolving the credit union.

If the commissioner finds the credit union lacks enough assets to fully return shareholders’ investment when dissolution papers are filed, the credit union is not liable for the assessed administration costs.

“Certificate of determination” is defined by reference to Section 156 of the Corporations Code, but that definition is subject to Section 1104.

This section says Chapter 15 restates and reorganizes earlier law on industrial bank licensing, regulation, and deposit insurance.

A credit union may convert itself into a federal credit union if it follows the procedure in this article.

Members of a credit union may vote to convert it into a federal credit union if the board of directors recommends it and the members approve by an affirmative majority vote.

A credit union must file a verified conversion certificate with the commissioner within 10 days after members decide to convert, and file a copy with the Secretary of State.

A certified copy of the Section 15302 certificate filed with the Secretary of State counts as presumptive evidence of the meeting or written vote and the action taken.

A credit union must take the steps needed to become a federal credit union and, within 10 days after receiving the federal charter, file the required charter copy or certificate with the commissioner and the Secretary of State.

When a credit union’s conversion to a federal credit union takes effect, state supervision ends and the credit union’s property automatically vests in the converted federal credit union.

A converted federal credit union keeps the listed property and remains responsible for the state credit union’s obligations.

References in California statutes or regulations to banks or commercial banks include industrial banks, with stated exceptions.

The Industrial Loan Account of the Financial Institutions Fund is renamed the Industrial Bank Account.

The commissioner must annually collect an assessment from qualifying industrial banks, using total assets to calculate it, and may adjust how foreign branch assets are counted in some cases.

A federal credit union may convert into a state-law credit union if its board recommends it and the federal and state certificate requirements are met.

After conversion takes effect, the federal credit union’s officers and directors become the officers and directors of the converted credit union and stay in office until successors are elected and qualified.

The commissioner may conduct a joint audit of a federal credit union, must issue a certificate to the National Credit Union Administration after the audit, and may certify compliance of the asset-and-liability transfer; audit costs are charged to the credit union.

Copies of the member meeting minutes or written vote records must be filed within 10 days after the meeting or vote, and filed in duplicate with the National Credit Union Administration.

Filed verified minutes or written-vote records count as presumptive evidence of the meeting and the action taken.

After an affirmative vote under Section 15350, the federal credit union must take the steps needed to become a credit union of this state. Its directors must file the required documents and carry out the required proceedings.

Directors of a credit union converted from a federal credit union may add a specified incorporation statement to the articles of incorporation.

Within 10 days after filing the articles of incorporation with the Secretary of State, two certified copies must be filed with the National Credit Union Administration.

A federal credit union becomes a state-law credit union after filing articles of incorporation with the Secretary of State and receiving a commissioner’s certificate.

A converted credit union keeps the listed property and remains responsible for the federal credit union’s obligations.

Each industrial bank must be an insured bank whenever it is engaged in industrial banking business.

This section defines “central credit union.”

An industrial bank may accept certain deposit accounts or certificates, but not demand deposits, and this is subject to any commissioner order or regulation.

An industrial bank must treat the listed banking provisions as applying to it as if it were a California state commercial bank.

Central credit unions may be organized and operated under this division, and each such credit union must use the word “central” in its official name.

A central credit union may admit certain employee groups to membership, and may transfer their member accounts, if the commissioner and the board of directors approve and other stated conditions are met.

This section defines “Certificate of revocation” as a certificate executed and filed with the Secretary of State, subject to other specified code provisions.

A corporation may not engage in the trust business unless it meets the listed corporate, authorization, and deposit requirements.

A commercial bank or industrial bank may engage in the trust business only with prior authorization from the commissioner and if its articles meet Section 1100(b).

A California state bank may not conduct trust business at a location unless that location is its head office, an authorized branch office, or an authorized place of business.

Section 1553 exempts several kinds of persons and organizations from Section 1550.

A qualifying national banking association may run a trust business and use “trust” in its name and advertising; the commissioner may access certain federal examination reports.

Most foreign corporations may not act as a trust company or conduct a trust business in this state, except specified banks and certain foreign corporations authorized by their articles.

Certain banks authorized to do trust business are exempt from California constitutional interest-rate limits for specified obligations, loans, and forbearances when acting in a fiduciary capacity.

Tax return preparers should inform clients in writing, before finishing a return, that voluntary contribution check-offs may be available on the state income tax return.

This section says the article should be read to conform to certain OCC fiduciary-activity regulations and related OCC interpretations.

This section defines key terms used for Section 1562, including bank, fiduciary regulations, fiduciary account, fiduciary capacity, and related trust-office terms.

This section incorporates specified Fiduciary Regulations into the article and says references to “national bank” or “national banks” in those regulations mean “bank” or “banks” here.

This section defines “common shares” by referring to Section 159 of the Corporations Code.

Trust companies must deposit specified money or securities with the State Treasurer, with higher amounts for larger-city locations and an extra deposit and written notice if court-trust receipts reach $500,000.

A trust company that receives enough court trust funds must promptly notify the commissioner and, within 30 days, make required deposits with the State Treasurer.

Trust companies depositing security with the Treasurer under Sections 1570 or 1571 must use one of the listed categories of assets.

The commissioner must approve the money or securities and order their deposit with the Treasurer; the Treasurer must give a receipt, hold the deposit for the specified beneficiaries, and deposit the money under the Government Code sections cited.

A trust company may withdraw excess deposited securities by written request, and securities may be exchanged with the commissioner’s approval.

If deposited security drops below the required amount, additional money or securities must be deposited promptly. The commissioner may inspect the value of deposited security and may charge a reasonable fee for that investigation.

If the commissioner revalues securities under Section 1575, U.S. government securities with less than five years to maturity must be valued at no less than par, except when the securities are being presented for deposit.

Money and securities deposited under this article may be sold or disposed of only on a court order, and only for the benefit of the relevant beneficiaries.

The commissioner may levy a civil penalty against a trust company that fails to comply with this article.

A trust company may invest its contributed capital only in the kinds of securities, properties, and real-property loans that commercial banks are permitted to invest in or make under the cited provisions.

If a trust company invests trust funds received in its trust business, it must invest them as provided in Part 4 of Division 9 of the Probate Code.

A trust company may invest trust assets in certain funds, but it must give notice and a prospectus within 30 days after the initial investment and then disclose related fees at least annually.

A trust company or trust-business bank may place trust funds with a state or national bank, but not with itself or a related majority-owner institution unless it first provides qualifying securities as collateral; insured deposit amounts do not need security.

Trust companies may register certain trust securities in nominee names if consent and no contrary trust instrument language exist, but they must keep records, segregate assets, certify holdings on demand, and are liable for losses caused by nominees.

Trust companies may create and administer common trust funds and invest in them, subject to stated conditions. The commissioner may examine those funds, and certain ownership and apportionment rules do not apply.

For participation certificates issued by a trust company and secured by a trust deed or mortgage, the issuing trust company holds the legal title as trustee and may exercise broad powers over the security and related property.

This section defines “confidential information” about a licensee and states that the confidential information is the property of the commissioner.

“Oath” includes affirmation.

A trust company has several powers, including serving in fiduciary roles, acting as transfer agent or registrar, buying and selling securities for customers, and carrying out trust business allowed by law.

This chapter may be cited as the Foreign (Other State) Credit Union Law.

This section defines key terms used in this chapter about foreign (other state) credit unions.

This section says this chapter does not authorize a foreign credit union from another state or nation to do business in California.

A foreign (other state) credit union may not open or keep a California branch office or facility unless it is qualified to do intrastate business, subject to a stated exception.

A foreign credit union may not open a California branch office or facility unless its deposit or share accounts are insured by the National Credit Union Administration or another insurer acceptable to the commissioner.

Applications filed with the commissioner under this chapter must be in the required form, include the required information, be signed properly, and, if required by regulation or order, be verified as the commissioner requires.

Foreign (other state) credit unions must pay specified application, licensing, annual, and examination fees to the commissioner.

A foreign (other state) credit union must file an appointment with the commissioner at least 30 days before opening a California branch office or facility, and service of process rules apply if it does business there.

The commissioner may share information with federal and home state regulators of foreign credit unions when administering this chapter.

A licensed foreign credit union must post a public notice at its office in a conspicuous place.

This section classifies trusts handled by a trust company as either court trusts or private trusts.

A license may not be transferred or assigned.

A foreign credit union licensed to have more than one office must designate one office as its primary office.

A licensed foreign credit union must do all office business in one building or adjoining buildings, unless it gives prior notice to the commissioner and does some business elsewhere in the same vicinity.

If this chapter’s rule conflicts with another chapter’s rule for a foreign credit union with a California branch office or facility, the other chapter’s rule controls.

Trust companies and their officers and employees must not disclose information about a private trust, except in listed situations.

A foreign (other state) credit union may not do business in the state except at a licensed branch office or facility, with specific exceptions for certain activities, advertising, and loan applications.

A foreign (other state) credit union may not establish or keep a California branch office unless the commissioner first approves it and issues a license.

A foreign credit union may establish a California branch office only if the commissioner finds the listed conditions are met; otherwise the commissioner must deny the application.

An approved applicant foreign credit union must establish and maintain the California branch office within one year, unless the commissioner extends the time first; otherwise the approval is revoked by operation of law.

A foreign (other state) credit union must notify the commissioner within 30 days after establishing a California facility, include specified information in the notice, and may not start business at the proposed facility without a license from the commissioner.

The commissioner must examine a trust company’s court trust business at least every 24 months and may examine its private trust business whenever the commissioner considers necessary or advisable.

Every trust company must report separately to the commissioner the amount of real property and personal property it holds in court trusts and private trusts.

A court may allow a fiduciary to place estate money or personal assets with a trust company, and must reduce the fiduciary bond after the deposit is made.

A trust company may deposit securities it holds under a court order into a qualifying securities depository.

A trust company acting as a fiduciary may satisfy an oath or affidavit requirement through certain named officers, and it is liable for failing to perform the duties required of an individual in the same role.

A foreign (other state) credit union must file a report with the commissioner within 10 days after relocating a California branch office or facility, and it may not do business at the new location unless the commissioner issues a license for that location.

A foreign (other state) credit union must file a report with the commissioner at least 30 days before discontinuing a California branch office or California facility.

After relocating or discontinuing a California branch office or facility, a foreign (other state) credit union must promptly surrender the license for that site to the commissioner.

A corporation that wants to stop doing trust business must give the commissioner proof that it has been released from all related obligations and trusts.

A trust company’s acts or proceedings in administering court and private trusts stay valid even if the company, or its officers or employees, failed to comply with this division.

This section defines “constituent corporation” for use with a corporation.

The chapter does not make it unlawful for any person or corporation to receive and hold money in escrow or act as trustee under certain deeds of trust.

A licensed foreign credit union may conduct activities at its office in this state if those activities are allowed by its home state and California law, but it may not do in a California branch or facility anything that its home state law or California credit union law does not allow.

Certain California credit union laws apply to a foreign credit union with a California branch or facility, and those state laws also apply similarly to its activities, operations, and transactions in California.

Certain foreign credit unions with a California branch or facility are exempt from the California constitutional interest-rate restriction, but only within other applicable laws and home-state interest limits.

A licensed foreign credit union in the state must keep office assets separate from its out-of-state business assets if the commissioner’s written order requires it. Creditors tied to an office’s in-state business get priority over other creditors for the in-state business assets.

Banks or trust companies must not mix trust funds with other assets, and may use those funds in business only if they are deposited with the same institution under this division. Officers who knowingly violate or consent to a violation commit a felony.

Banks and trust companies may place eligible securities in a securities depository, but they must keep records showing ownership at all times.

Banks and trust companies in these fiduciary contexts may deposit certain securities with a Federal Reserve Bank, but they must keep ownership records and provide written certifications on demand.

The commissioner may investigate and examine a foreign (other state) credit union, including its subsidiary records, and the commissioner or a designated person has free access to the credit union’s offices and records.

The commissioner may examine a foreign credit union at the commissioner’s office, and may also examine any office of that credit union inside or outside California if the credit union maintains an office in California.

Foreign (other state) credit unions must file certain audit, examination, and response documents with the commissioner within 10 days, unless the commissioner extends the time.

A foreign (other state) credit union must file any other report the commissioner requires, and each report must follow the commissioner’s prescribed form, content, and filing date.

A foreign credit union with a California branch or facility must keep and preserve certain business records there, if the commissioner requires it.

A bank or safe-deposit company must ignore an adverse claim notice and let the renter or depositor access the property, unless a qualifying affidavit or court order changes that result.

The commissioner may sue in superior court to stop violations, enforce compliance, or collect penalties, and the court can grant injunction-type relief.

The commissioner may order a person to stop a violation of Section 16020 until licensed. The ordered person may request a hearing within 30 days, and the commissioner must start the hearing within 15 business days after the request unless a longer period is consented to; otherwise the order is rescinded.

After notice and hearing, the commissioner may order a person who violated this chapter or related regulations or orders to pay a civil penalty.

After notice and hearing, the commissioner may suspend or revoke the license of a foreign (other state) credit union licensed to maintain an office in the state if any listed grounds are found.

The commissioner may suspend or revoke a foreign credit union’s license in specified circumstances. The credit union may ask for a hearing within 30 days, and keeps the right to seek judicial review.

A foreign credit union whose office license is suspended or revoked must immediately surrender the license to the commissioner.

A foreign credit union under an order may ask the commissioner to modify or rescind it, but the commissioner may grant that request only if specified public-interest and compliance findings are made.

The commissioner may take over a foreign credit union’s property and business in California under stated conditions, and the credit union may seek court review within 10 days.

“Contributed capital” means shareholders’ equity other than retained earnings, and a bank may transfer amounts from retained earnings to contributed capital subject to applicable statutes, regulations, and accounting principles.

Banks conducting a safe-deposit business are entitled to the special remedies in this article when enforcing liabilities of safe-deposit box renters and safekeeping or storage depositors.

If a safe-deposit box rent is unpaid for six months, the bank may send notice to the named customer and set a payment deadline of at least 30 days before forcing the box open.

If the rent and notice cost for a safe-deposit box are unpaid after the notice date, the bank may open the box, remove and inventory the contents, and the inventory must be signed by the persons present.

Only listed persons may receive a copy of the inventory from the bank.

The bank must keep contents removed from a safe-deposit box for at least two years, unless they are delivered sooner to or on the order of the person named on the bank’s records. The bank must also deliver the contents to that person after payment of listed charges, and it may deliver them even if the contents suggest someone else owns them.

A bank may notify the person named on its records about unpaid amounts tied to a safe-deposit box, and if payment is not made, may sell the box contents under the section’s notice rules.

Securities listed on an established U.S. stock exchange may not be sold at public sale at the time of sale under Section 1635, but may be sold later through an established stock exchange.

After a securities sale, a bank officer must attach an affidavit stating the sale was made under this article and complied with its requirements.

If a safe-deposit box sale produces proceeds, the bank must deduct the notice amount and any later accrued charges, then record any remaining balance as a liability payable to the renter.

A bank may withhold certain safe-deposit box contents from sale, must keep unsold contents for at least one year, and may later destroy them, with notice required in some cases.

A bank may use special remedies to enforce the former renter’s liability if it previously opened a safe-deposit box for nonpayment and still has the contents in custody.

A bank that receives personal property for safekeeping or storage as a bailee and issues a receipt may enforce its lien as a warehouseman.

A bank may give notice and sell stored personal property if storage charges stay unpaid for six months.

The bank must deduct specified charges and expenses from sale proceeds, then credit any remaining balance to the account named on the receipt.