Article 3. Loans To Directors, Officers And Committee Members of California Financial Code >> Division 5. >> Chapter 7. >> Article 3.
(a) For purposes of this section, the following definitions
(1) "Credit manager" means any individual, regardless of title,
designated pursuant to Section 14600 to fulfill the duties of a
(2) "Obligation" means any loan or approved line of credit,
including both used and unused portions, on which the official is a
borrower, coborrower, cosigner, endorser, or guarantor.
(3) "Official" means a director, officer, or member of the
supervisory committee, or member of the credit committee of a credit
(b) No credit union shall enter into any obligation with any
official, directly or indirectly, unless (1) the obligation complies
with all lawful requirements of this division with respect to
obligations permitted for other members of the credit union, (2) the
obligation is not on terms more favorable than those extended to
other members of the credit union, and (3) the obligation is entered
into in accordance with a written policy adopted by the directors
establishing that all officials shall have an equal opportunity to
enter into obligations with the credit union.
(c) No credit union shall enter into any obligation with any
official, directly or indirectly, unless all of the following
requirements are satisfied:
(1) Upon the making of the obligation, the aggregate amount of
obligations outstanding to all officials, except obligations fully
secured by shares, shall not exceed 20 percent of the aggregate
dollar amount of all savings capital of the credit union.
(2) The obligation, except any portion of an obligation fully
secured by shares, shall not exceed the maximum obligation to the
credit union set forth in subdivisions (b) and (c) of Section 15100.
(3) Any obligation that would cause the aggregate amount of
obligations outstanding to the official to exceed fifty thousand
dollars ($50,000), excluding any portion fully secured by shares,
shall be approved by the credit committee or the credit manager, and
by the board of directors. An official shall not take part in any
credit decision, directly or indirectly, for his or her benefit and
shall not be present during any portion of any committee or board
meeting where his or her credit application is under consideration.
(4) The names of members of the credit committee, the credit
manager, and board of directors who voted to authorize or ratify the
obligation shall be entered in their respective minutes.
(d) No credit union shall permit an official to become surety for
any obligation created by the credit union for anyone other than a
member of his or her immediate family.
(e) No credit union shall enter into any obligation with any
credit manager or any officer employed by the credit union unless the
obligation is in compliance with all requirements of this division
with respect to obligations permitted for other nonemployee members,
and not on terms more favorable than those extended to other
employees, and approved by the board of directors.
The board of directors shall declare the office of any
director, officer, committee member, or the credit manager vacant if
the person fails to reduce any obligation to the credit union for
which he or she is liable in a timely manner according to the terms
of the obligation.