State Laws

Title 5, Chapter 17, Code of Alabama.

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§ 5-17-1.    “Credit union” defined.

A credit union is a cooperative society, incorporated for the twofold purpose of promoting thrift among its members and creating a source of credit for them at legitimate rates of interest, particularly among groups of industrial workers and farmers, fraternal and religious organizations, and in those communities where the citizens of the state are distantly removed from convenient centers of business or easy access to financial agencies now provided for by laws of Alabama. 

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§ 5-17-2.    Procedure for organization and incorporation generally.

(a)    Any seven residents of the state of Alabama may apply to the administrator of the Alabama Credit Union Administration for permission to organize a credit union.

(b)    A credit union is organized in the following manner: The applicants shall execute in duplicate a certificate of organization by the terms of which they agree to be bound. The certificate shall state:

(1)    the name and location of the proposed credit union,

(2)    the names and addresses of the subscribers to the certificate and the number of shares subscribed by each, and

(3)    the par value of the shares of the credit union, which shall not exceed $25.00 each.

They shall next prepare and adopt bylaws for the general governance of the credit union consistent with the provisions of this chapter and shall execute the same in duplicate. The certificate and bylaws, both executed in duplicate, shall be forwarded to the administrator of the Alabama Credit Union Administration. The administrator shall, within 30 days of the receipt of said certificate and bylaws, determine whether they conform with the provisions of this chapter and whether or not the organization of the credit union in question would benefit the members of it and be consistent with the purpose of this chapter. Thereupon the administrator shall notify the applicants of his decision. If it is favorable, he shall issue a certificate of approval, attached to the duplicate certificate of organization, and return the same, together with the duplicate bylaws, to the applicants. The applicants shall thereupon file the said duplicate of the certificate of organization, with the certificate of approval attached thereto, with the judge of probate of the county within which the credit union is to do business, who shall make a record of said certificate and return it, along with his certificate of record attached thereto, to the administrator for permanent record. Thereupon, the applicants shall become and be a credit union, incorporated in accordance with the provisions of this chapter. In order to simplify the organization of credit unions, the administrator shall cause to be prepared an approved form of certificate of organization and a form of bylaws, consistent with this chapter, which may be used by credit union incorporators for their guidance, and on written application of any seven residents of the state, shall supply them without charge with a blank certificate of organization and a copy of said form of suggested bylaws.

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§ 5-17-3.    Use of words “credit union” in name or title.

It shall be a misdemeanor for any person, association, copartnership or corporation, except corporations organized in accordance with the provisions of this chapter, credit unions incorporated under the laws of the United States and the Alabama Credit Union League, to use the words “credit union” in their name or title. A corporation organized under the provisions of this chapter shall include in its corporate name or title the words “credit union.” Provided, however, that a credit union organized in another state may conduct business as a credit union in this state with the approval of the administrator of the Alabama Credit Union Administration provided:

(1)     It is organized under laws similar to Alabama credit union laws;

(2)     It is financially solvent;

(3)     Alabama credit unions are allowed to do business in the other state under conditions similar to these provisions;

(4)     It have account insurance comparable to that required for Alabama credit unions;

(5)     It agrees to submit to the administrator an annual examination report from its supervising agency;

(6)     The interest rate on loans made in Alabama does not exceed that allowed by Alabama law;

(7)     It complies with the same consumer protection provisions that Alabama credit unions must obey; and

(8)     It designates and maintains an agent for the service of process in Alabama.

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§ 5-17-4.    Powers generally.

(a)    A credit union shall have all of the following powers:

(1)          To receive the savings of its members either as payment on shares or as deposits, including the right to conduct Christmas clubs, vacation clubs and other thrift organizations within the membership.

(2)          To accept deposits of fiduciary funds if a member is the beneficiary, trustee, or personal representative and if the funds are part of the estate of a deceased member.

(3)          To make loans to members.

(4)          To make loans to other credit unions.

(5)          To make loans to a cooperative society or other organizations having membership in the credit union.

(6)          To deposit in state and national banks, savings and loan associations, the accounts which are insured by the Federal Savings and Loan Insurance Corporation or the Federal Deposit Insurance Corporation, and of other credit unions.

(7)          To invest in any investment legal for savings banks or for trust funds in the state.

(8)          To borrow money from any source and to give its note therefor; provided, that the borrowing shall not at any time exceed 50 percent of its assets.

(9)          To assess each member a recurring or nonrecurring membership fee.

(10)      To exercise incidental powers as necessary to enable it to carry on effectively the purposes for which it is incorporated and other powers as are expressly authorized by the administrator of the Alabama Credit Union Administration.

(11)      In addition to any and all other powers heretofore granted to credit unions, any credit union shall have the power to engage in any activity in which the credit union could engage were the credit union operating as a federally chartered credit union, including but not by way of limitation because of enumeration, the power to do any act and own, possess, and carry as assets property of that character including stocks, bonds, or other debentures which, at the time, are authorized under federal laws or regulations for transactions by federal credit unions, notwithstanding any restrictions elsewhere contained in the statutes of the state of Alabama. No credit union can exercise any power which it claims only by virtue of the power being possessed by a federal credit union if the administrator issues a written order prohibiting a credit union from exercising that power.

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§ 5-17-5.    Membership.

Credit union membership shall consist of the incorporators and such other persons as may be elected to membership and who subscribe to at least one share and pay the initial installment thereon and the entrance fee. Organizations, incorporated or otherwise, composed for the most part of the same general group as the credit union membership may be members. Credit union organization shall be limited to groups, of both large and small membership, having a common bond of occupation or association or to groups within a well-defined neighborhood, community or rural district.

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§ 5-17-6.    Expulsion or withdrawal of members.

A member may be expelled by a two-thirds vote of the members present at a special meeting called to consider the matter, but only after a hearing. Any member may withdraw from the credit union at any time, but notice of withdrawal may be required. All amounts paid on shares or as deposits of an expelled or withdrawing member, with any dividends or interest accredited thereto to the date thereof shall, as funds become available and after deducting all amounts due from the member to the credit union, be paid to him. The credit union may require 60 days' notice of intention to withdraw shares and 30 days' notice of intention to withdraw deposits. Withdrawing or expelled members shall have no further rights in the credit union but are not, by such expulsion or withdrawal, released from any remaining liability to the credit union. A credit union may reserve in its bylaws the right to pay out not more than one half of its monthly receipts to withdrawing members and depositors.

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§ 5-17-7.    Operating fees; fee filed with certificate of organization.

      (a) During 1986 and each year thereafter, all state chartered credit unions shall pay an annual operating fee, the exact amount of which shall be fixed from time to time by the administrator of the Alabama Credit Union Administration. During 1985, credit unions shall continue to be charged and be liable to the Alabama Credit Union Administration for the examination fee presently fixed by the administrator.

      (b) Except as hereinafter provided, the annual operating fee set by the administrator shall not exceed the fee calculated by use of the following scale:

         (1) Credit unions having total assets of less than $500,000.00 shall pay a fee not in excess of $.12 for each $100.00 of assets, subject to a minimum of $200.

         (2) Credit unions with assets of $500,000.00 or more shall pay a fee of $600.00 plus $.05 per $100.00 of assets over $500,000.00 but not in excess of $1,000,000.00 plus three and one-half cents per $100.00 of assets of $1,000,000.00 but not in excess of $5,000,000.00 plus $.02 per $100.00 of assets over $5,000,000 but not in excess of $10,000,000 plus one and eight-tenths per $100.00 on assets over $10,000,000.00 but not in excess of $20,000,000.00 plus one and six-tenths cents per $100.00 on assets over $20,000,000.00 but not in excess of $50,000,000.00 plus one and two-tenths cents per $100.00 on assets over $50,000,000.00 but not in excess of $100,000,000.00 plus $.01 per $100.00 on all assets over $100,000,000.00.

      (c) On one occasion, the administrator may fix an annual operating fee which is not more than 10 percent greater than the above fee scale if the credit union board approves such fee, if said fee is not in effect for more than one year, and if the administrator establishes that such fee is necessary in order that the Alabama Credit Union Administration not be operated at a deficit and that the Alabama Credit Union Administration operated at a deficit during the preceding year.

      (d) The annual operating fee shall be paid on or before the last day of January of each year, based upon the assets of the credit union as of the end of the previous year. Any credit union failing to pay said operating fee may be charged a penalty assessment not to exceed $50.00 for each day that said fee remains unpaid.

      (e) Whenever application is made to the administrator of the Alabama Credit Union Administration for permission to organize a credit union, the applicant shall at the time of filing the certificate of organization with the administrator of the Alabama Credit Union Administration pay a fee not to exceed $100.00 for the purpose of paying the costs incidental to the determination by the administrator of the Alabama Credit Union Administration whether such certificate of organization shall be approved. The administrator of the Alabama Credit Union Administration shall from time to time fix the exact charge to be made, but in no event shall the charge exceed $100.00. The provisions of this subsection shall not apply to any existing credit union seeking charter conversion.

      (f) All fees collected under this section shall be paid into the special fund set up by the state treasurer. This special fund shall be used to pay the salaries of the officials and employees and the expenses of the Alabama Credit Union Administration including the purchase of equipment, vehicles and supplies necessary for the examination and supervision of credit unions and may be spent by the administrator of the Alabama Credit Union Administration for the uses and purposes specified herein. No taxes, fees, assessments, penalties or other revenues collected by the Alabama Credit Union Administration shall be used for any purpose other than the expenses of operating the Alabama Credit Union Administration.

      (g) All the jurisdiction, authority, powers and duties now conferred upon and imposed by law upon the superintendent of banks and the supervisor of the credit union bureau in relation to the management, control, regulation and general supervision of credit unions are hereby transferred to, conferred upon and imposed upon the Alabama Credit Union Administration and administrator.

      (h) All assets primarily used by the bureau of credit unions, including books, records, documents, furniture, equipment and supplies are hereby transferred to the Alabama Credit Union Administration. All funds in the special fund previously maintained by the state treasurer for the bureau of credit unions are hereby transferred to the Alabama Credit Union Administration. All taxes, fees, assessments, penalties or other revenues owed to or collected by the bureau of credit unions are hereby transferred to the Alabama Credit Union Administration. Any employee presently employed by the superintendent of banks who is presently primarily involved with the bureau of credit unions shall be employed by the Alabama Credit Union Administration

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§ 5-17-8.    Reports to administrator of Alabama Credit Union Administration; examination of credit union; revocation of certificate of approval; cease and desist order; suspension from office; appeal and hearing.

      (a) Credit unions shall report to the administrator of the Alabama Credit Union Administration at least annually on or before January 31 on blanks supplied by the administrator for that purpose. Additional reports may be required. Credit unions shall be examined at least annually by employees of the administrator or by other persons designated by the administrator. For failure to file reports when due, unless excused for cause by the administrator, the credit union shall pay to the treasurer of the state five dollars ($5) for each day of its delinquency.

      (b) If the administrator determines that the credit union is violating this chapter, or is insolvent, the administrator may suspend operations of the credit union by issuing an order requiring that the credit union cease operations pending a hearing on the revocation of the certificate of approval, or the administrator may set a date for a hearing on the revocation of the certificate of approval without suspending operations of the credit union. If the administrator suspends operations of the credit union, a hearing on the revocation of the certificate of authority shall be held within 90 days from the date of the order requiring suspension of operations. If demanded by the credit union, the hearing on revocation of the certificate of authority, whether or not the administrator has suspended operations of the credit union pending the hearing, shall be conducted on the record by the administrator who shall also make findings of fact and a written determination concerning revocation of the certificate of authority. The determination may contain an order requiring that credit union to immediately suspend operations or continue in effect a previous order requiring the suspension of operations. If the determination is that the credit union is violating this chapter, or is insolvent, and that the certificate of authority be revoked, and if, for a period of 15 days after the hearing, any violation continues, the administrator may revoke the certificate and take possession of the business and property of the credit union and maintain possession until the administrator shall permit it to continue business or its affairs are finally liquidated.

      (c) The administrator may, with the approval of a majority of the credit union board of the Alabama Credit Union Administration, issue a cease and desist order upon finding that the credit union or any officer, director, committee member, or employee has done any one of the following:

         (1) committed any violation of a law, rule, or regulation.

         (2) engaged or participated in any unsafe or unsound practice in connection with the credit union business.

         (3) engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union.

         (4) committed any fraudulent or questionable practice in the conduct of the credit union's business which endangers the credit union's reputation or threatens insolvency.

         (5) violated any condition imposed in writing by the administrator or any written agreement made with the administrator.

         (6) concealed, destroyed, removed, falsified, or perjured any book, record, paper, report, statement, or account related to the business and affairs of the credit union.

      Any cease and desist order shall be effective not earlier than 10 days after it is delivered to the credit union. The credit union shall have 10 days from the receipt of any cease and desist order to appeal to the credit union board of the Alabama Credit Union Administration by serving the administrator with a written notice of appeal within the 10-day period. Upon receipt of a notice of appeal from the credit union, the effect of the cease and desist order will be suspended pending a decision upon appeal; provided that a majority of the credit union board of the Alabama Credit Union Administration may order that a cease and desist order be in force and effect pending the decision on appeal. A hearing of any appeal shall be held before the credit union board of the Alabama Credit Union Administration within 30 days of the notice of appeal and the decision of the credit union board shall be rendered within 15 days after the hearing.

      (d) The administrator of the