Adopted Amendments to 7 TAC §3.91

Title 7. Banking and Securities
Part 1. Finance Commission of Texas
Chapter 3. State Bank Regulation
Subchapter E. Banking House and Other Facilities
7 TAC §3.91

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts amendments to §3.91, concerning Loan Production Offices without changes to the proposed text as published in the March 6, 2015, issue of the Texas Register (40 TexReg 1004) and will not be republished.

The amended rule clarifies the requirements necessary for a foreign bank to establish a loan production office in this state.

The amendments to §3.91 clarify and provide the requirements foreign banks must fulfill to establish and maintain loan production offices in Texas. Under revised §3.91(g), a foreign bank must comply with Finance Code Chapters 201 and 204 in order to establish a loan production office (LPO) in this state, unless the LPO is being established as an office of a Federal branch regulated by the Office of the Comptroller of the Currency. In that case, then under §3.91(h), the Federal branch must instead comply with the provisions of the Finance Code, Chapter 201, Subchapter B and notify the Banking Commissioner (the commissioner) of the proposed establishment of the office and provide the information as required by §3.91(h)(1).

An LPO of a Federal branch that seeks to relocate or close an established LPO in this state, must notify the commissioner in writing of the planned relocation or closure of the LPO per §3.91(h)(2). Under §3.91(h)(3), no examinations or fees will be required under Finance Code, Chapter 204, for an LPO of a Federal branch.

The Department received no comments regarding the proposed amendments.

The amendment is adopted pursuant to Finance Code, §201.003, which provides that the commission may adopt rules to accomplish the purposes of Title 3, Subtitle G, of the Texas Finance Code, including rules to implement and clarify this subtitle, which includes Chapter 204 governing Foreign Banks.

§3.91. Loan Production Offices.

(a)  Loan production activities. A Texas state bank may, to the extent authorized by its board of directors, engage in loan production activities at a site other than the home office or a branch of the bank, and may use the services of, and compensate, persons not employed by the bank in its loan production activities. Subject to the requirements of subsection (b) of this section, the bank or its operating subsidiary may establish a loan production office (LPO) at which an employee or agent of the bank or of its operating subsidiary accepts loan applications, provided that the loan is made at the home office or a branch of the bank or at an office of the operating subsidiary located on the premises of, or contiguous to, the home office or branch of the bank. A LPO is not a branch within the meaning of Finance Code, §31.002(a)(8), so long as it does not engage the public in the business of banking as defined by Finance Code, §31.002(a)(4), including making loans, receiving deposits, and paying withdrawals, drafts, or checks. All such deposit or withdrawal activity must be performed by the state bank customer in person at the home office or a branch, or by mail, electronic transfer, or similar transfer method.

(b)  Required information. Pursuant to Finance Code, §32.204(b), a Texas state bank shall notify the banking commissioner of its intent to establish a new LPO. The banking commissioner must be notified in writing before the 31st day preceding the date of establishment of the LPO, except that the banking commissioner in the exercise of discretion may waive or shorten the period. The written notification must include the physical address of the planned LPO, a list of the specific activities to be performed at the planned LPO, the anticipated date for the establishment of the LPO, and other information which the banking commissioner may reasonably request.

(c)  Relocation or closure of a LPO. A Texas state bank which seeks to relocate or close an established LPO, shall notify the banking commissioner in writing before the fifth day preceding the date of the planned relocation or closure of the LPO. The written notification must include the physical address of the relocated or closed LPO, the anticipated date for the closure or relocation of the LPO, and other information which the banking commissioner may reasonably request.

(d)  Exemption: temporary LPO. Subsections (b) and (c) of this section do not apply to a LPO which operates for less than a total of 21 days in any one 12-month period. Instead, state banks shall register the location of a temporary LPO with the banking commissioner no later than the tenth day after such office is opened. As a part of such notice, the bank may indicate the anticipated repeated use of such office through the year. For example, a temporary LPO in a convention or exposition hall used in connection with trade shows may be registered once each year with an estimate of usage throughout the year.

(e)  Transactions with management and affiliates. A state bank establishing a LPO involving the purchase or lease of personal or real property from an officer, director, manager, managing participant, or principal shareholder or participant of the bank or an affiliate of the bank, must comply with the provisions of the Finance Code, §33.109, and §3.22 of this title (relating to Sale or Lease Agreements With an Officer, Director, or Principal Shareholder of the Bank or of an Affiliate of the Bank).

(f)  Out-of-state banks. A bank not domiciled or primarily located in this state must comply with the provisions of the Finance Code, Chapter 201, Subchapter B (§§201.101 et seq.), to establish a LPO in this state.

(g)  Foreign bank LPOs. A banking corporation or association incorporated or organized under the laws of a jurisdiction other than the United States or a state, territory, commonwealth, or other political subdivision of the United States, must comply with the provisions of the Finance Code, Chapter 201, Subchapter B (§§201.101 et seq.), and Finance Code, Chapter 204, to establish an LPO, unless the LPO will be an office of a Federal branch regulated by the Office of the Comptroller of the Currency (OCC). In the latter case, the Federal branch must comply with subsection (h) of this section.

(h)  Federal branch LPO. A Federal branch may establish an LPO in this state by complying with the provisions of Finance Code, Chapter 201, Subchapter B (§§201.101 et seq.), and by notifying the banking commissioner of its intent to establish the LPO.

(1)  The Federal branch shall notify the banking commissioner in writing on or before the 31st day preceding the date of establishment of the LPO, except that the banking commissioner may waive or shorten the period if the banking commissioner does not have a significant supervisory or regulatory concern regarding the Federal branch or its planned LPO. The written notification must include the physical address of the planned LPO, a list of the specific activities to be performed at the planned LPO, the anticipated date for the establishment of the LPO, documentation evidencing the approval of the OCC, and such other information as the banking commissioner may reasonably request.

(2)  To relocate or close an existing LPO in this state, a Federal branch shall notify the banking commissioner in writing on or before the tenth day following the date of the relocation or closure of the LPO. The written notification must include the physical address of the LPO, the date for its closure or relocation, documentation evidencing the approval or acquiescence of the OCC, and such other information as the banking commissioner may reasonably request.

(3)  An LPO of a Federal branch established in compliance with this section is not subject to examination by the banking commissioner under, or subject to any fee imposed by, Finance Code, Chapter 204.

Effective Date: May 7, 2015 (40 TexReg 2410)