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BASIC FUNDAMENTALS FOR
ORGANIZATION OF A TENNESSEE STATE-CHARTERED CREDIT UNION
THE DEPARTMENT OF FINANCIAL
INSTITUTIONS The organization of a state-chartered credit union is governed by selected laws and regulations found in Tennessee Code Annotated, Title 45, Chapter 4. A copy of these selected regulations may be purchased from the Department of Financial Institutions for approximately $50.00 per copy. Also, a copy may be found in your local library for reference. The materials included for review encompass basic information about credit unions and fundamentals for chartering a Tennessee state-chartered credit union. These are some of the most frequently asked questions about credit union organization. WHAT IS A CREDIT UNION? A Credit Union is a cooperative corporation organized for the purpose of promoting thrift among its members and creating a source of credit for them at legal rates of interest for provident purposes. WHO CHARTERS CREDIT UNIONS FOR THE STATE? Certificates of Approval are issued by the Commissioner of Financial Institutions. The Commissioner shall approve the Certificate of Charter if satisfied that the proposed field of operation is favorable to the success of such corporation and the standing of the proposed incorporators is such as to give assurance the affairs will be properly administered. WHO CAN APPLY FOR A CHARTER? Seven (7) persons who are all bona fide residents of Tennessee and have a common bond of occupation and association or reside within a well-defined neighborhood, community or rural district may organize a credit union. HOW MANY PEOPLE ARE NEEDED TO ORGANIZE A CREDIT UNION? At least 500 employees are needed to be members; however, if conditions are favorable, smaller groups will be considered. WHERE DOES THE CAPITAL COME FROM? Capital is raised by the members making deposits into the credit unions. Savings in a credit union are referred to as shares. Par value of a share is five dollars ($5.00). A member must have at least a full share to be eligible for benefits and to vote. WHO SUPERVISES CREDIT UNIONS? Examinations are made annually and may be extended up to eighteen (18) months by the Department of Financial Institutions for the purpose of determining if the credit union is solvent, conducting its business in a safe and authorized manner and is not in violation of the provisions of the Credit Union Laws. A charge is made by the Department of Financial Institutions based on June 30 assets. WHAT ARE THE POWERS OF A CREDIT UNION? The powers of a credit union are only those specifically enumerated in the Credit Union Laws and Bylaws approved by the Commissioner. (Credit Unions are regulated under Title 45, Chapter 4, Tennessee Code Annotated.) WHO OPERATES OR CONTROLS A CREDIT UNION? Each credit union must have a Board of Directors of at least five members elected from their own group. The Board of Directors shall have general management of the affairs of the credit union. WHO APPROVES LOANS? A Credit Committee consisting of at least three people elected by the members of the Board of Directors or the Board shall appoint one or more loan officers. WHAT IS A SUPERVISORY COMMITTEE? They are referred to as the watch dog committee and consists of members elected by the board to see that the affairs of business are carried out as they should be, including reviewing the books, records, and policies. HOW IS OUR MONEY PROTECTED? The credit union is required to have blanket surety bond for all officials and employees. Also, savings are insured up to $100,000 by the National Credit Union Administration. WHAT PART DOES THE SPONSORING COMPANY OR ORGANIZATION PLAY IN THE OPERATION? Occasionally, companies will furnish space and payroll deduction. Some will provide clerical help until the credit union can be self-supporting. WHAT RATE OF INTEREST IS PAID ON SAVINGS? Interest on savings is referred to as dividends in credit unions and is paid from the net earnings of a credit union. Dividends may be paid quarterly, semi-annually, or annually. WHERE CAN SUPPLIES BE PURCHASED? Credit Unions may become members of the Tennessee Credit Union League, which will supply a credit union with the necessary and standard forms. WHO WILL ASSIST US IN STARTING A CREDIT UNION? You may contact the Department of Financial Institutions at the address shown, or the Tennessee Credit Union League at the following address: Tennessee Credit Union League 1317 Hickory Valley Road P. O. Box 21550 Chattanooga, TN 37421 1-800-572-7359 www.yourleague.org
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