Powers Generally

  1. Law
  2. Tennessee Code
  3. Banks and Financial Institutions
  4. Credit Unions
  5. Powers and Duties
  6. Powers Generally

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A credit union has the following powers:

  1. It may receive the savings of its members through the purchase of various classes of share accounts, including general or regular shares, share certificates, special accounts, share draft accounts or members' special accounts, savings accounts, certificates and notes;
  2. It may make loans to members, through the credit committee or loan officers;
  3. It may invest, through its board of directors, any of its capital, undivided profits, reserve funds, and other assets not required for loans to members as provided by this chapter, in any of the following ways:
    1. In any legally chartered bank or trust company;
    2. In any state or federal savings and loan association;
    3. In credit unions, with state or federal charters, in an amount not to exceed ten percent (10%) of the shares, members' special accounts and reserve funds of the investing credit union or of the credit union in which the investment is made, whichever amount is the smaller; and in any central credit union, state or federal, approved for the investments by the commissioner of financial institutions, in an amount not to exceed twenty-five percent (25%) of the shares, members' special accounts and reserve funds of the investing credit union or of the credit union in which the investment is made, whichever amount is smaller;
    4. In any agency or association organized either as a stock company, mutual association, or membership corporation; provided, that the membership or stockholders, as the case may be, of the agency or association are restricted to credit unions or organizations of credit unions; and provided further, that the purposes for which the agency or association is organized are designed to service or otherwise assist credit union operations in an aggregate amount not to exceed twenty-five percent (25%) of the allocations to the reserve fund of the investing credit union. Investment in the foregoing stock company, mutual association or membership corporation shall not be legal if the company or association is authorized or empowered to make loans to any person or corporation who is not a member of the credit union organization;
    5. In obligations of or securities fully guaranteed as to principal and interest by the government of the United States or of the state of Tennessee;
    6. In any bonds or other obligations issued by the Tennessee valley authority pursuant to the Tennessee Valley Authority Act of 1933, and any amendment thereto;
    7. In investments authorized under § 35-3-120, and in any investment that is lawful for federal credit unions chartered under title 12 of the United States Code;
    8. In any bonds of the state of Tennessee or any of its political subdivisions;
    9. In addition to the powers otherwise conferred upon credit unions by this chapter, central credit unions, as defined in § 45-4-101(c) and (d), have the power to invest in the obligations as are permitted for state banks under § 45-2-607(a)(4) and (a)(5); and
    10. In the volunteer corporate credit union;
  4. It may undertake other activities, not inconsistent with  this chapter, that the bylaws may provide;
  5. To provide at the sole option of the borrower, as collateral at the expense of the borrower, insurance against the hazards of death or disability, or both, of the borrower. The insurance shall be written by an agent and with a company authorized to do business in Tennessee, or under a group policy issued by a company authorized to do business in Tennessee, at rates approved by the commissioner of commerce and insurance. The credit union may have the insurance written by an agent who is an employee, servant, or agent of the credit union or the insurance may be effected under a group policy issued to the credit union. The amount and type of insurance that may be accepted under this subdivision (5) shall bear a reasonable relation to the existing hazard and risk of loss and shall be subject to the following terms and conditions:
    1. Life insurance shall be in an amount that does not at any time during the term of the loan exceed the original face amount of the note and shall be for a period that does not exceed the term of the loan;
    2. Insurance against the hazard of disability of the borrower shall provide equal benefits, the total of all of which shall not exceed the face amount of the note and shall not be payable beyond the maturity of the loan;
    3. A credit union that obtains a group policy for the purpose of perfecting any insurance that may be required or accepted hereunder, or that obtains any life or disability insurance described in subdivisions (5)(A) and (5)(B), at the request of the borrower, shall contract with the insurance company for a provision therein that the coverage effected as to each individual insured debtor or borrower shall terminate automatically on prepayment in full of the note by refinancing, renewal or otherwise, and the unearned premium refunded to the credit union. The credit union shall pay the unearned premium refund to the borrower;
    4. At the time the loan is made, the lender shall give the borrower a memorandum, showing the name of the insurance company, the types of insurance issued, a description of the coverages, the date of the policy, which shall be the date on which the loan is made, the premium charged for each type of insurance and, if issued under a group policy, the number of the master policy; and
    5. If the premiums for insurance are deducted from the proceeds of the loan, the amount so deducted shall not exceed the premiums charged by the insurer for the insurance;
  6. It may permit its members to withdraw either shares or funds in members' special accounts through a remote withdrawal system utilizing drafts drawn against the members' credit union and payable through a bank, and may engage in any and all other share or fund withdrawal activities heretofore or hereafter authorized by law or regulation for federally chartered credit unions; provided, that no credit union shall allow any person who is not a member of the credit union to maintain an account with the credit union permitting the withdrawal; and provided further, that any credit union utilizing the remote withdrawal of shares and members' special accounts shall be required to establish a reserve against the accounts in an amount not less than the reserve against demand deposits that is required for state chartered banks. The authority conferred by this subdivision (6) shall exist so long as federally chartered credit unions are authorized to engage in the activities;
  7. It may receive United States department of the treasury tax and loan accounts, and pledge collateral to secure treasury tax and loan funds;
  8. It may do all those things permitted to nonprofit corporations generally by title 48, chapter 58, part 5, relative to the indemnification of officers and directors. For the purpose of this subdivision (8), members of the supervisory committee and of the credit committee shall be treated as members of the board of directors; and
  9. It may exercise any power or engage in any activity that it could exercise or engage in if it were a federally chartered credit union, subject to the regulation by the commissioner of financial institutions for the purpose of maintaining the credit union's safety and soundness.


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