45-1-101. Short title.

This chapter and chapter 2  of this title shall be known and may be cited as the “Tennessee Banking Act.”

Acts 1969, ch. 36, § 1 (1.101); T.C.A., § 45-101.

Cross-References. Funds transfers, title 47, ch. 4A.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Revocation, denial or suspension of professional, driver, and other licenses, to enforce child support obligations, title 36, ch. 5, part 7.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

Information Technology and Non-Legal Sanctions in Financing Transactions, 54 Vand. L. Rev. 1627 (2001).

Regulation by Hypothetical, 67 Vand. L. Rev. 1247 (2014).

45-1-102. Purpose — Standards for exercise of authority by commissioner — Rules of construction.

1. It is the underlying purpose of this chapter and chapter 2 of this title to provide the citizens of Tennessee with a sound system of state chartered banks by providing for and encouraging the development of the banks while restricting their activities to the extent necessary to safeguard the interests of depositors.
2. This underlying purpose includes, but is not limited to, providing for:
   1. The sound conduct of the business of banks subject to this chapter and chapter 2 of this title;
   2. The conservation of their assets;
   3. The maintenance of adequate reserves against deposits;
   4. The opportunity for banks subject to this chapter and chapter 2 of this title to compete with other businesses including, but not limited to, other financial organizations existing under the laws of this and other states, the United States and foreign countries;
   5. The opportunity for banks to serve the citizens of this state by improving and expanding their services and facilities and the opportunity for banks to participate in and promote the economic progress of Tennessee and the United States;
   6. The opportunity for the management of banks to exercise business judgment in conducting the affairs of their institutions; and
   7. Modernization and simplification of the law governing banking by providing that banks subject to this chapter and chapter 2 of this title shall have all the rights and powers granted corporations for profit by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, except for the rights and powers withheld by those chapters or by rule or regulation of the commissioner of financial institutions.
3. It is not a purpose of this chapter and chapter 2 of this title to restrict the activities of banks for the purpose of protecting any person, as hereinafter defined, from competition from banks, and this chapter and chapter 2 of this title do not confer any right or cause of action upon any competitor.
4. The purposes of this chapter and chapter 2 of this title shall constitute standards to be observed by the commissioner of financial institutions in the commissioner's exercise of authority under this chapter and chapter 2 of this title, and shall constitute rules of construction in all matters of construction and application of those chapters.

Acts 1969, ch. 36, § 1 (1.102); 1973, ch. 294, § 6; T.C.A., § 45-102; Acts 1994, ch. 551, § 19.

Attorney General Opinions. The general power to conduct a banking business includes the power to prevent fraud by requiring customers or other individuals who wish to do business with a bank to provide a fingerprint for identification purposes, OAG 01-060, 2001 Tenn. AG LEXIS 52 (4/17/01).

45-1-103. General definitions.

As used in this chapter and chapter 2 of this title, unless the context otherwise requires:

1. “Act as a fiduciary” or “acting as a fiduciary” means to act in the capacity of a fiduciary as defined in § 35-2-102;
2. “Action,” in the sense of a judicial proceeding, includes recoupment, counterclaim, setoff, suit in equity and any other proceedings in which rights are determined;
3. “Bank” means any person, as hereinafter defined, doing a banking business subject to the laws of this or any other jurisdiction and, for the purposes of supervision, examination and liquidation, includes industrial investment companies and industrial banks authorized by chapter 5 of this title;
4. “Branch” with respect to a state bank means any place of business separated from the main office of a bank at which deposits are received, or checks paid or money lent;
5. “Commissioner” means the commissioner of financial institutions;
6. “Community” means a city, town, or incorporated village in this state, or where not within any of the foregoing, a trade area in this state;
7. “Company” includes a bank, trust company, corporation, partnership, association, business or other trust, or similar business entity;
8. “Department” means the department of financial institutions;
9. “Deposit” means a deposit of money, bonds or other things of value, creating a debtor-creditor relationship;
10. “Depository institution” means any company included for any purpose within any of the definitions of insured depository institution, as set forth in 12 U.S.C. § 1813(c)(2) and (3);
11. “Executive officer,” when referring to a bank, means any officer designated as such in the bylaws and includes, whether or not so designated, the president, any vice president, the treasurer, the cashier, the comptroller and the secretary, or any officer who performs the duties appropriate to those officers;
12. “Fiduciary record” means a matter written, transcribed, recorded, received or otherwise in the possession or control of a trust institution, whether in physical or electromagnetic form, that is necessary to preserve information concerning an act or event relevant to an account or a client of a trust institution;
13. “Foreign bank” means a foreign bank, as defined in the International Banking Act of 1978 § 1(b)(7) (12 U.S.C. § 3101(7));
14. “Good faith” means honesty in fact in the conduct or transaction concerned;
15. “Home state” means:
    1. With respect to a federally chartered trust institution and a foreign bank, the state in which the institution maintains its principal office; and
    2. With respect to any other trust institution, the state that chartered the institution;
16. “Home state regulator” means the bank supervisory agency with primary responsibility for chartering and supervising an out-of-state trust institution;
17. “In operation” or “operating” means that:
    1. A charter has been issued to a bank by the United States comptroller of the currency or a certificate of authority has been issued by the commissioner; or
    2. A bank has all appropriate approvals to accept insured deposits from the public;
18. “Item” means any instrument for the payment of money, even though not negotiable, but does not include money;
19. “New trust office” means a trust office located in a host state that:
    1. Is originally established by the trust institution as a trust office; and
    2. Does not become a trust office of the trust institution as a result of:
       1. The acquisition of another trust institution or trust office of another trust institution; or
       2. A merger, consolidation, or conversion involving the trust institution or trust office;
20. “Office,” with respect to a trust institution, means the principal office or a trust office, but not a branch;
21. “Officer,” when referring to a bank, means any person designated as such in the bylaws and includes, whether or not so designated, any executive officer, the chair of the board of directors, the chair of the executive committee and any trust officer, assistant vice president, assistant treasurer, assistant cashier, assistant comptroller, assistant trust officer, or any person who performs the duties appropriate to those offices;
22. “Person” means an individual, corporation, firm, trust, estate, partnership, joint venture, or association;
23. “Principal office” with respect to a:
    1. State trust company means a location registered with the commissioner as the state trust company's home office at which:
       1. The state trust company does business;
       2. The state trust company keeps its corporate books; and
       3. At least one (1) executive officer of the state trust company maintains an office; or
    2. Trust institution, other than a state trust company, means its principal place of business in the United States;
24. “Reason to know” means that, upon the information available, a person of ordinary intelligence in the particular business, or of the superior intelligence or experience that the person in question may have, would infer that the fact in question exists or that there is such a substantial chance of its existence that, if exercising reasonable care with reference to the matter in question, conduct would be predicated upon the assumption of its possible existence;
25. “Savings association” means an association as defined and operating under chapter 3 of this title or under the laws of the United States;
26. “State bank” means any bank chartered by this state;
27. “State trust company” means a corporation or limited liability company organized or reorganized under the Tennessee Banking Act, compiled in this chapter and chapter 2 of this title, whose purposes and powers are limited to fiduciary purposes and power, including a trust company previously organized under the laws of this state;
28. “State trust institution” means a trust institution having its principal office in this state;
29. “Subsidiary corporation” means any corporation, all or part of the stock of which is owned by a bank principally for the purpose of participating in the active management of the business of the corporation as distinguished from the purpose of deriving profit from the appreciation in value of the stock or from dividends paid on the stock;
30. “Terms” when referring to loans means maturities, security for, rates of interest and other charges;
31. “Trust company” means a state trust company or any other company chartered to act as a fiduciary that is neither a depository institution nor a foreign bank;
32. “Trust institution” means a depository institution, foreign bank, state bank or trust company authorized to act as a fiduciary;
33. “Trust office” means an office, other than the principal office, at which a trust institution is authorized by the commissioner to act as a fiduciary; and
34. “Unauthorized trust activity” means:
    1. A company, other than one identified in chapter 2, part 10 of this title, acting as a fiduciary within this state;
    2. A trust institution acting as a fiduciary in this state at any location that is not its principal office, trust office or branch; or
    3. An out-of-state trust institution acting as a fiduciary in this state in violation of an order issued by the commissioner.

Acts 1969, ch. 36, § 1 (1.103); 1973, ch. 294, §§ 6, 8; T.C.A., § 45-103; Acts 1983, ch. 274, § 2; 1993, ch. 22, § 1; 1996, ch. 768, § 3; 1999, ch. 112, § 1; 2014, ch. 642, § 1.

Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

For the Preamble to the act concerning the market for trust and trust services, please refer to Acts 2014, ch. 642.

45-1-104. Department to execute laws.

The department, created by § 4-3-101, is charged with the execution of all laws relative to persons doing or engaged in a banking or other business as provided in this title, except for pawnbrokers covered by chapter 6 of this title.

Acts 1969, ch. 36, § 1 (2.101); impl. am. Acts 1971, ch. 137, § 1; modified; T.C.A., § 45-1-104 Acts 1983, ch. 274, § 3; 1995, ch. 186, § 16; 2005, ch. 440, § 17.

Cross-References. Department of financial institutions, creation, § 4-3-101.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-1-105. Commissioner, deputy and assistant commissioners — Qualifications — Vacancy.

1. 1. The department will have as its chief executive officer a commissioner who will be appointed by the governor as commissioner of financial institutions, and who shall have the same official status as all other commissioners. The commissioner shall hold office for the term of office of the governor except the commissioner may be removed from office by the governor for cause.
   2. The commissioner shall be a person of good character with at least five (5) years of experience in the theory and practice of bank management, three (3) years of which must have been in a full-time management or regulatory capacity. No person under thirty (30) years of age is eligible for appointment as commissioner.
2. 1. With the consent of the governor, the commissioner has the power to appoint a deputy commissioner and one (1) assistant commissioner for each division within the department who shall serve at the will of the commissioner.
   2. The deputy commissioner and assistant commissioners shall be persons of good character and have a minimum of three (3) years experience in the theory and practice of banking, or in the function and operation of credit unions in the case of the assistant commissioner for the credit union division, or in the function and operation of a financial institution in the case of the assistant commissioner for the compliance division, all of which must have been in a full-time management or regulatory capacity. For the purpose of this subsection (b), “financial institution” means any institution subject to the commissioner's jurisdiction and includes similar entities regulated by any other state or federal regulatory agency.
   3. If the office of the commissioner is vacant, or if the commissioner is absent and unable to act, the governor may designate the deputy commissioner to be acting commissioner. If both the office of the commissioner and the office of the deputy commissioner are vacant or both are unable to act, the governor may designate one (1) of the assistant commissioners as acting commissioner.

Acts 1913, ch. 20, § 1; Shan., § 3273a14; Code 1932, § 5940; T.C.A. (orig. ed.), § 45-102; Acts 1973, ch. 294, §§ 10, 13; modified; T.C.A., §§ 45-106, 45-125; Acts 1983, ch. 274, § 4; 1993, ch. 22, §§ 2, 3; 2004, ch. 747, § 17.

Cross-References. Commissioner of financial institutions, appointment and term, §§ 4-3-111, 4-3-112.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-1-106. Salary of commissioner.

The commissioner shall receive an annual salary as provided in § 8-23-101, to be paid monthly in the same manner as the salaries of other state officers are paid.

Acts 1913, ch. 20, § 1; Shan., § 3273a16; Acts 1927, ch. 30, § 7; Code 1932, § 5941; Acts 1949, ch. 38, § 1; C. Supp. 1950, § 5941; impl. am. Acts 1955, ch. 193, § 1; impl. am. Acts 1961, ch. 183, § 1; impl. am. Acts 1963, ch. 261, § 1; impl. am. Acts 1965, ch. 252, § 1; impl. am. Acts 1972, ch. 526, § 6; Acts 1973, ch. 294, § 6; T.C.A., § 45-107.

Code Commission Notes.

For the fiscal year county officials salary schedule, see the County Technical Assistance Service website at http://www.ctas.tennessee.edu.

45-1-107. Powers and duties of commissioner.

1. In addition to other powers conferred by this title, the commissioner has the power to:
   1. Interpret this chapter and chapter 2 of this title, and regulate banking practices thereunder;
   2. Restrict the withdrawal of deposits from all or one (1) or more state banks where the commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of depositors in the affected institutions;
   3. Authorize a state bank to participate in a public agency hereafter created under the laws of this state or of the United States, the purpose of which is to afford advantages or safeguards to banks or to depositors and to comply with all requirements and conditions imposed upon the participants;
   4. Order any person to cease violating a provision of this title or lawful regulation issued under this title;
   5. Order any person to cease and desist from engaging in any unsafe or unsound banking practice when the practice is likely to cause insolvency or dissipation of assets or earnings of a state bank or is likely to otherwise seriously prejudice the interests of the depositors of a state bank; and
   6. Bring an action in the chancery court of Davidson County to enjoin any act or practice in or from this state that constitutes a violation of any provision of law or any rule or order that the department has the duty to execute pursuant to § 45-1-104. The court may not require the commissioner to post a bond in bringing the action. Upon a proper showing by the commissioner, the court shall grant a permanent or temporary injunction, restraining order, writ of mandamus, disgorgement, or other proper equitable relief including the recovery by the commissioner of costs and attorney fees. Further, to the extent that this subdivision (a)(6) does not conflict with other provisions of this title, a receiver or conservator may be appointed for the defendant or the defendant's assets.
2. The commissioner may remove a director, trustee, officer or employee of a state bank who becomes ineligible to hold the position or who, after receipt of an order to cease under subsection (a), violates this title or a lawful regulation or order issued under this title, or who is dishonest. It is a criminal offense against the state for any such persons, after receipt of a removal order, to perform any duty or exercise any power of any state bank for a period of three (3) years. A removal order shall specify the grounds of removal and a copy of the order shall be sent to the bank concerned.
3. Notice and opportunity for a hearing shall be provided in advance of any of the foregoing actions in this section taken by the commissioner, except the formulation of regulations of general application. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take the action but shall promptly afford a subsequent hearing upon application to rescind the action taken.
4. The commissioner may, on petition of any interested person and after hearing, issue a declaratory order with respect to the applicability to any person, property or state of facts under this title or a rule issued by the commissioner. The order shall bind the commissioner and all parties to the proceeding on the state of facts alleged unless it is modified or reversed by a court. A declaratory order may be reviewed and enforced in the same manner as other orders of the commissioner, but the refusal to issue a declaratory order shall not be reviewable.
5. In addition to other powers conferred by this title, the commissioner has power to require a state bank to:
   1. Maintain its accounts in accordance with regulations that the commissioner prescribes, having regard to the size of the organization;
   2. Observe methods and standards that the commissioner prescribes for determining the value of various types of assets;
   3. Charge off the whole or part of an asset that at the time of the commissioner's action could not lawfully be acquired;
   4. Write down an asset to its market value;
   5. Record liens and security in property or at the option of the bank, insure against losses from not recording;
   6. Obtain a financial statement from a prospective borrower to the extent that the bank can do so;
   7. Search, or obtain insurance of, the title to real estate taken as security;
   8. Maintain adequate insurance against other risks that the commissioner determines to be necessary and appropriate for the protection of depositors and the public; and
   9. Call a special meeting of the shareholders.
6. The commissioner has the power to subpoena witnesses, compel their attendance, require the production of evidence, administer an oath and examine any person under oath in connection with any subject relating to duty imposed upon or a power vested in the commissioner. These powers shall be enforced by a court of competent jurisdiction of the county in which the hearing is held.
7. No person shall be subjected to any civil or criminal liability for any act or omission to act in good faith in reliance upon a subsisting order, regulation or definition of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation or definition.
8. The commissioner is granted the power to enact reasonable substantive and procedural rules to carry out the purposes of any and all chapters within the commissioner's regulatory authority as conferred by law. This power shall specifically include, but not be limited to, the authority to establish a schedule of fees to be charged by the department relative to notifications or applications to be reviewed by the department. The promulgation shall be done in conformity with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
9. 1. The commissioner may accept payments to the department by credit card, debit card, electronic funds transfer, electronic check or other electronic means. The commissioner may adopt reasonable policies and rules governing the manner of acceptance of such payments.
   2. The commissioner may enter into appropriate agreements with card issuers or other appropriate parties as needed to facilitate the acceptance of payments authorized under this subsection (i). The commissioner may impose and collect a convenience fee from any person making payment by credit card, debit card, electronic funds transfer, electronic check or other electronic means in order to offset the actual administrative fees and costs incurred by the department for accepting or processing such payments. Notwithstanding any law to the contrary, the convenience fee shall be charged in addition to all other fees, penalties, taxes and costs required by law.
   3. The commissioner also may enter into appropriate agreements with third-party service providers for the acceptance and processing of payments made by credit card, debit card, electronic funds transfer, electronic check or other electronic means. Such agreements may authorize third-party service providers to impose and collect a convenience fee from persons making such payments.
   4. When a person elects to make a payment to the department by credit card, debit card, electronic funds transfer, electronic check or other electronic means and a convenience fee is imposed and collected as authorized by this subsection (i), the payment of the convenience fee shall be deemed voluntary and shall not be refundable.

Acts 1969, ch. 36, § 1 (2.012); impl. am. Acts 1971, ch. 137, § 2; Acts 1973, ch. 294, § 12; 1975, ch. 59, § 1; 1978, ch. 516, § 1; T.C.A., § 45-108; Acts 1992, ch. 658, § 1; 1993, ch. 130, § 1; 1994, ch. 551, § 1; 1996, ch. 562, § 2; 2001, ch. 54, §§ 1, 2; 2013, ch. 102, § 1.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

Compiler's Notes. Acts 1993, ch. 130, § 2 deletes (h), effective July 1, 1996.

Acts 1996, ch. 562, § 2 deleted Acts 1993, ch. 130, § 2, which provided that (h) would expire on July 1, 1996.

45-1-108. Review of commissioner's orders — Enforcement.

1. A person who is aggrieved by an order of the commissioner issued pursuant to § 45-1-107 is entitled to judicial review as provided in the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. A person who is aggrieved and directly affected by an order of the commissioner issued pursuant to other provisions of this title may seek judicial review as provided in title 27, chapter 9, except that judicial review of orders issued pursuant to chapter 5 of this title shall be governed by the Uniform Administrative Procedures Act.
2. In the event a person does not comply with an order issued pursuant to § 45-1-107, the commissioner may petition a chancery court having jurisdiction to seek injunctive relief to compel compliance with the order. The power is conferred and the duty is imposed upon the several chancery courts, in all proper cases, to award injunctive relief; provided, that the order issued by the commissioner shall not be reviewable in a proceeding initiated under this subsection (b).
3. In lieu of the procedure set forth in subsection (b), the commissioner may assess a civil penalty of not more than five hundred dollars ($500) per day against any bank or other person who violates an order issued pursuant to § 45-1-107 for each day during which the violation has occurred and continues. The maximum aggregate civil penalty assessed against a bank and any other person participating in the violation, however, shall not exceed five hundred dollars ($500) per day for each proceeding. In determining the amount of the penalty, the commissioner shall consider the appropriateness of the penalty with respect to the size of the financial resources and good faith of the person charged, the gravity of the violation, and other matters that justice may require. The person shall be afforded an opportunity for hearing upon request made within ten (10) days of the issuance of the notice of assessment. The commissioner's decision after a hearing or otherwise shall constitute a final order and may be reviewed in accordance with subsection (a); provided, that the original order shall not be reviewable in a proceeding initiated under this subsection (c).

Acts 1973, ch. 294, § 18; T.C.A., § 45-126; Acts 1981, ch. 24, § 1; 1983, ch. 274, § 5.

Law Reviews.

Justiciability in Tennessee, Part Two: Standing (Barbara Kritchevsky), 15 Mem. St. U.L. Rev. 179 (1985).

45-1-109. Oaths of office.

1. The commissioner shall, within fifteen (15) days from the time of notice of the appointment, take and subscribe to the constitutional oath of office.
2. In addition, the commissioner, examiners and other employees, before entering upon discharge of their duties, shall take and subscribe to an oath to faithfully and impartially perform the duties of their respective offices and to keep secret all information acquired by them in the discharge of their duties except as may be otherwise required by this chapter and chapter 2 of this title or otherwise by law. Willful violation of this oath is declared to be a criminal offense.
3. The oath of the commissioner shall be filed with the secretary of state. The oaths of other employees of the department shall be filed with the commissioner.

Acts 1969, ch. 36, § 1 (2.104); 1973, ch. 294, § 14; T.C.A., § 45-109; Acts 1993, ch. 22, §§ 4-6.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

45-1-110. [Reserved.]

Neither the commissioner nor any other employee of the department shall be liable in any civil action for damages for any act done or omitted in good faith in performing the duties of the person's office.

Acts 1969, ch. 36, § 1 (2.106); 1973, ch. 294, § 6; T.C.A., § 45-111.

45-1-112. Official seal.

The secretary of state shall provide the commissioner with an official seal. Every paper executed by the commissioner, in pursuance of any authority conferred on the commissioner by law and sealed with the official seal, shall be received in evidence, and may be recorded in any proper recording office in this state, in the same manner and with the same effect as a deed regularly acknowledged or proven.

Acts 1969, ch. 36, § 1 (2.107); 1973, ch. 294, § 6; T.C.A., § 45-112.

45-1-113. Office facilities.

The governor shall assign to the commissioner a suitable room or rooms for conducting the business of the department, and this department shall be furnished with the necessary furniture, stationery, lights, and other proper conveniences and clerical assistants in the same manner as is furnished to other state departments.

Acts 1969, ch. 36, § 1 (2.108); 1973, ch. 294, § 6; T.C.A., § 45-113.

45-1-114. Removal of commissioner from office — Causes — Procedure.

The commissioner may be removed from office for neglect of duty, malfeasance, misfeasance, extortion or corruption in office, incompetency, or intemperance in the use of intoxicating liquors or narcotics to such an extent, in view of the dignity of the office and the importance of its duties, as to render the commissioner unfit for the discharge of the duties, or for any offense involving moral turpitude while in office committed under color of or connected with the office.

Acts 1913, ch. 20, § 1; Shan., § 3273a18; Code 1932, § 5943; T.C.A. (orig. ed.), § 45-108; Acts 1973, ch. 249, §§ 6, 15; T.C.A., § 45-114.

Cross-References. Disclosing condition of bank, its depositors or debtors, § 45-2-1713.

45-1-115. Divisions within department — Classification and salaries of department positions.

1. 1. There are created within the department the following divisions:
      1. The bank examination division;
      2. The bank charter and branch application division;
      3. The credit union division;
      4. The administrative and support services division; and
      5. The industrial loan and thrift companies division.
   2. The commissioner is authorized, with the consent of the governor, to combine, consolidate or abolish any of these divisions, or to create new divisions that are necessary to carry out the duties imposed upon the commissioner and the department.
2. All positions in the department, with the exception of the commissioner, shall be classified by the commissioner according to the nature of the duties to be performed and the minimum qualifications for appointment, subject to § 45-1-105(b) and this section. The commissioner, having regard for the nature of the services to be performed and the salaries paid for similar work elsewhere, shall establish a salary range for each class of positions and within the salary range shall provide for recognition of professionalism and efficiency of service and for length of service.

Acts 1973, ch. 294, § 13; T.C.A., § 45-125; Acts 1983, ch. 274, § 6.

45-1-116. Examiners — Employment and duties.

The commissioner may, from time to time, if necessary, employ examiners to aid the commissioner in the discharge of official duties, and the examiners shall perform the duties the commissioner assigns them.

Acts 1969, ch. 36, § 1 (2.102); 1973, ch. 294, § 6; T.C.A., § 45-115.

Cross-References. Examination of banks and reports, title 45, ch. 2, part 16.

Violations of banking laws, title 45, ch. 2, part 17.

45-1-117. Banking interests of employees of department — Criminal history records check.

1. 1. No officer or employee of the department, except as provided in this title, shall receive, directly or indirectly, any payment or gratuity from any institutions regulated by the department, or be indebted to any state institutions regulated by the department, or engage in the negotiation of loans for others with the institutions regulated by the department. This provision shall not prohibit any employee from being a depositor or a lessor of safe deposit boxes on the same terms as are available to the public generally nor being indebted to any institution regulated by the department:
      1. Upon a mortgage loan upon the residence of the mortgagor;
      2. Upon any evidence of indebtedness transferred to any institution regulated by the department in the regular course of business by a seller of consumer goods or services purchased by the employee; or
      3. Pursuant to any revolving credit arrangement offered to the employee upon the same terms as are available to the public generally.
   2. A violation of subdivision (a)(1) is a criminal offense.
2. 1. The commissioner, or any other employee of the department, shall not hold office or position in, have any indirect pecuniary interest in, or directly or indirectly own shares or securities issued by an institution supervised by the department, except that the commissioner may continue to own shares or securities issued by an institution that are owned on the date of the commissioner's appointment and all shares or security distributed by the institution and received by the commissioner on account of the shares or securities so owned.
   2. A violation of subdivision (b)(1) is a criminal offense.
3. In the event of ownership of shares or securities by the commissioner, the commissioner shall disclose the ownership, amount and date of acquisition of the shares or securities in writing to the state treasurer immediately after the commissioner's appointment and shall not during the commissioner's term of office participate in any decision or take any action concerning an institution in which the commissioner owns the shares or securities other than actions or decisions generally applicable to institutions or classes of institutions.
4. The prohibitions of this section do not apply to employees of the department who hold clerical or support staff positions as determined by the commissioner.
5. Notwithstanding subsections (a)-(d), the commissioner has the authority by rule or by policy to determine what situations are material to the maintenance of regulatory independence and shall establish appropriate exceptions for those situations subject to this section where, by actions beyond the employee's control, there is no intent by the employee to circumvent this section. In so doing, the commissioner shall establish the circumstances under which covered department employees must be recused from official duties and has the authority to define the terms of this section. In establishing these standards, the commissioner shall consider the ethical standards established by other state or federal regulators. Nothing in this subsection (e) shall apply to the requirements otherwise imposed on the commissioner.
6. 1. As a condition of employment with the department, the commissioner is authorized to require an applicant to provide the department or a duly authorized state contractor with a fingerprint sample in a form acceptable to the commissioner, as well as consent to a criminal history records check. Any criminal history records check conducted under this subdivision (f)(1) shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, and the results of the check shall be forwarded to the commissioner. The department shall pay the reasonable costs incurred in conducting the criminal history records check. The commissioner shall by rule or by policy determine what classes of applicants shall submit to a fingerprint criminal history records check and what officers or employees of the department shall have access to the results of the criminal history records check.
   2. Subdivision (f)(1) shall not apply to applicants for clerical or support staff positions as determined by the commissioner.
   3. The department shall maintain the confidentiality of all criminal history records information received pursuant to this subsection (f).

Acts 1969, ch. 36, § 1 (2.109); 1973, ch. 294, § 6; T.C.A., § 45-116; Acts 1983, ch. 274, § 7; 1993, ch. 25, § 1; 2001, ch. 54, § 3; 2009, ch. 499, § 9.

Code Commission Notes.

Pursuant to § 39-11-111, when the performance or nonperformance of any act is made criminal by statute, and no penalty, punishment or forfeiture for the violation of that statute is imposed, the doing of the act is a misdemeanor. The criminal offense in this section has been designated as a Class A misdemeanor by authority of § 40-35-110, which provides that an offense designated a misdemeanor without specification as to category is a Class A misdemeanor. See also § 39-11-114.

Cross-References. Confidentiality of public records, § 10-7-504.

45-1-118. Charter application costs — Annual banking fee — Assessments — Recovering the costs of examination and supervision.

1. Each state bank shall pay to the department the cost, as determined by the commissioner, of investigating an application by the bank for a charter as a new bank or for a branch bank.
2. 1. The commissioner shall determine an annual budget for the department.
   2. The amount of the budget attributable to the regulation and examination of state banks shall thereafter be divided among the state banks by the commissioner.
3. 1. The assessment against each state bank, which shall be known as the banking fee, shall be allocated in proportion to the total assets beneficially owned by each state bank; provided, that:
      1. The commissioner may establish a minimum assessment in lieu of any pro rata assessment, which shall not exceed five thousand dollars ($5,000); and
      2. The maximum assessment shall not exceed the annualized fee that a state bank would pay if it were a national bank of equivalent asset size.
   2. Nondepository trust companies that are regulated by the department shall, in lieu of a banking fee based on asset size, pay to the commissioner, by July 1 of each year, the sum of one thousand dollars ($1,000) for each office operated by the trust company. In addition, nondepository trust companies shall pay the actual expenses of examination at the time of examination. The fees are payable in addition to other fees and taxes now required by law and are expendable receipts for the use of the commissioner in defraying a portion of the cost of administration of this chapter.
4. 1. Assessments shall be paid into the state treasury upon notice from the commissioner, and all moneys collected by the commissioner shall be used for the administration of the department and for the department's sole use.
   2. Any funds collected by the department but unexpended at the end of a fiscal year shall not revert or in any way be transferred to the general fund but shall be rebated to the state banks, within one hundred eighty (180) days, or shall be credited against the banking fee owed by the state banks for the current fiscal year.
5. If any state bank fails to make payment within thirty (30) days after notice from the commissioner of the amount of its assessment, the commissioner may issue an execution against its property for an amount equal to one hundred fifty percent (150%) of the delinquent payment.
6. 1. The department may recover the costs of examination and supervision of a financial institution, subsidiary, or service corporation for supervision or examination that are in addition to the costs associated with the level of supervision ordinarily required for a financial institution in sound financial condition and that are in excess of the normal regulatory fees paid by the institution. The department may also recover the costs of any review of any affiliate of a financial institution determined by the department to have contributed to an unsafe or unsound practice at a financial institution, subsidiary, or service corporation.
   2. The commissioner may issue orders and promulgate rules and regulations pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the purpose of establishing and defining costs associated with complying with this subsection (f) and for the purpose of enforcing the recovery of the costs.
7. 1. The commissioner, in cooperation with the department of human resources, shall on an annual basis conduct a review of the salaries of employees in the department. The review shall include a comparative analysis of salaries of the departmental employees, employees in similar state positions in bank regulatory agencies of other states, employees in federal regulatory agencies, similar employees in other Tennessee state departments, and employees in similar positions in the private sector. Based on the review or other factors including, but not limited to, staff turnover, qualifications, or availability of qualified employees, the commissioner shall make recommendations for changes in classifications, salary improvements, or both.
   2. The commissioner shall establish, maintain, and review on a periodic basis a method for assessing the staffing needs for the department. The method shall include, but not be limited to, assessment of the statutory requirements of the department, the number and type of institutions regulated within each regulatory category, and the size of the assets under the departmental supervision in each category.
8. The commissioner, in the commissioner's discretion, may, by regulation, establish the criteria and circumstances by which a credit toward the annual banking fee may be given to a Tennessee state-chartered bank for the annual banking fee assessment, if any, assessed against an out-of-state branch of the Tennessee state-chartered bank by the host state banking supervisory agency.
9. 1. Persons regulated and supervised by the department's compliance division shall be assessed an annual supervision fee as described in this subsection (i).
   2. Pursuant to subdivision (b)(1), the commissioner shall determine an annual budget for the department. The commissioner shall determine the amount of the budget attributable to the regulation and examination of the persons regulated by the compliance division.
   3. Mortgage loan originators, as defined in §§  45-5-102 and 45-13-105, as applicable, shall not be assessed the annual supervision fee, but mortgage loan originators shall continue to pay the licensing, renewal and any other fees required in chapters 5 and 13 of this title. The total number of mortgage loan originators licensed with the department at the end of the previous fiscal year shall be multiplied by the annual renewal fee for mortgage loan originators, and the product shall be deducted from the compliance division's budget. The remaining amount of the compliance division's budget shall be allocated as described in subdivision (i)(4).
   4. 1. The commissioner shall periodically determine the per diem costs of conducting a routine examination of persons regulated and supervised by the compliance division.
      2. After deducting the amounts referenced in subdivision (i)(3), the remaining budget shall be assessed as a supervision fee among all licensed and registered locations based on the relative complexities of examining and regulating each industry.
      3. Payment of the supervision fee calculated in this subsection (i) shall be a condition of licensure or registration renewal. The supervision fee shall be nonrefundable and no abatement of the supervision fee shall be made if the license or registration is surrendered, cancelled, revoked or suspended prior to the expiration of the period for which it was issued.
      4. The supervision fee includes annual licensing and registration fees and the costs for a routine examination or investigation of a licensee or registrant regulated by the compliance division.
   5. In addition to the supervision fee, a licensee or registrant shall pay the actual expenses incurred for out-of-state examinations and inspections of books, records, and papers maintained out-of-state.
   6. In addition to the supervision fee, the commissioner may impose a special assessment upon a licensee or registrant for the purpose of recovering costs in excess of those costs normally incurred for conducting a routine examination.
   7. A person who applies for a new license or registration shall pay, as a condition of licensure or registration, the same supervision fee for each licensed or registered location as a person holding the same license or registration type has paid as a supervision fee during that fiscal year. If the supervision fee for a fiscal year has not yet been determined, the person applying for a new license or registration shall pay, as a condition of licensure or registration, the supervision fee required to obtain the license or registration type in the previous fiscal year, except as designated in subdivision (i)(8).
   8. A person submitting an application to the compliance division for a new license or registration from July 1, 2015 through September 30, 2015, shall pay a supervision fee of five hundred dollars ($500). Thereafter, the supervision fee shall be an amount determined by the commissioner pursuant to subdivision (i)(4).
   9. All funds collected by the department's compliance division shall be used for the administration of that division.

Acts 1969, ch. 36, § 1 (2.110); 1973, ch. 294, § 16; T.C.A., § 45-117; Acts 1988, ch. 655, § 1; 1992, ch. 628, § 1; 1993, ch. 233, § 1; 1995, ch. 451, §§ 1, 2; 1996, ch. 562, § 4; 1999, ch. 112, § 2; 2014, ch. 736, § 1.

Compiler's Notes. Pursuant to Acts 2007, ch. 60, references to the department of personnel were changed to the department of human resources, effective April 24, 2007.

45-1-119. Annual report.

1. The commissioner shall report to the governor annually within sixty (60) days after the end of each calendar year. The report shall include:
   1. The text of all rules of the department of general application adopted or altered since the commissioner's last previous report;
   2. Recommendations for legislation;
   3. A statement of the status and remaining assets and liabilities of all banking organizations in the possession of the commissioner;
   4. A summary of all changes occurring since the commissioner's last previous report by reason of opening new state banks, mergers and conversions, increases and decreases in capital and the like; and
   5. A combined statement of condition of all state banks as of the date of the most recent reports of condition rendered to the commissioner, and reference to the availability in the commissioner's office of the statements of condition of each state bank, as of the date of the most recent reports to the commissioner.
2. Copies of the last annual report not previously so submitted shall be available to the general assembly at the opening of each regular session.
3. The annual report of the commissioner may be published on the order of the governor, if the governor deems the report to be of sufficient importance to the public.

Acts 1969, ch. 36, § 1 (2.111); 1973, ch. 294, § 6; T.C.A., § 45-118; Acts 2003, ch. 253, § 1.

45-1-120. Records of department.

1. No information from the records of the department shall be revealed without the consent of the commissioner.
2. Reports of examinations made by the department shall be retained for five (5) years.
3. A copy of any document on file with the department that is certified by the commissioner as being a true copy may be introduced in evidence as if it were the original. The commissioner shall establish a schedule of fees for copies of documents.

Acts 1969, ch. 36, § 1 (2.112); 1973, ch. 294, §§ 6, 17; T.C.A., § 45-119; Acts 1993, ch. 22, § 7.

45-1-121. Traveling expenses.

The necessary traveling expenses in the discharge of the duties of the commissioner and examiners employed by the commissioner shall be audited by the commissioner of finance and administration and shall be paid monthly by warrants drawn by the commissioner of finance and administration on the state treasurer in favor of the commissioner of financial institutions.

Acts 1969, ch. 36, § 1 (2.113); 1973, ch. 294, § 6; T.C.A., § 45-120.

45-1-122. Suits to vacate and annul bank charters.

In addition to other remedies provided in this chapter and chapter 2 of this title, the commissioner of financial institutions, in the name of the state, is authorized to institute a quo warranto, or other appropriate proceedings, to vacate and annul the charter of any bank where the bank has done or permitted such act or acts as under the law authorized a vacation of its charter, and no suit shall be instituted by any person to vacate the charter of any bank except by the commissioner.

Acts 1969, ch. 36, § 1 (2.114); 1973, ch. 294, § 6; T.C.A., § 45-121.

Cross-References. Applicability to industrial banks, § 45-5-607.

45-1-123. Legal counsel for commissioner.

1. The district attorneys general in each county, when requested by the commissioner, shall, as a part of their official duty and without compensation, represent the commissioner in any suit that the commissioner may desire to bring, or that may be brought against the commissioner, in the commissioner's official capacity, in their respective counties.
2. The attorney general and reporter shall advise the commissioner on any question of law submitted to the attorney general and reporter by the commissioner, respecting the commissioner's authority and duties under the law.

Acts 1969, ch. 36, § 1 (2.115); 1973, ch. 294, § 6; modified; T.C.A., § 45-122.

Cross-References. Submission of criminal violation of banking law to district attorneys general by commissioner, § 45-2-1717.

45-1-124. Application of this chapter and chapter 2 of this title.

1. The existence of state banks formed or existing on April 2, 1969, shall not be impaired by the enactment of  this chapter and chapter 2 of this title, or by any change in the requirements for the formation of state banks, or by any amendment or repeal of the laws under which they were formed or created, and except as otherwise expressly provided in those chapters, the repeal of a prior act or acts by those chapters shall not affect any right accrued or established, or any liability or penalty incurred, under  the act, prior to the repeal of the act.
2. To the full extent consistent with such rights, liabilities, and penalties, all state banks and, to the extent applicable, all banks, shall hereafter be operated in accordance with this chapter and chapter 2 of this title. Unless the commissioner determines otherwise, this chapter and chapter 2 of this title, and the rules of this chapter and chapter 2 of this title, shall also apply to the operation and regulation of state trust companies and banks whose purposes and powers are limited to fiduciary purposes and powers.
3. All powers granted in this chapter and chapter 2 of this title may be freely exercised by any corporation, which is empowered by its charter under any prior act of the general assembly and any amendments thereto, to exercise the rights and powers that appertain and belong to a banking institution or to conduct a general banking business, without the necessity of amending its charter, unless the charter expressly prohibits the exercise of such powers.
4. Except to the extent inconsistent with or contrary to specific provisions of chapters 1, 2 and 3 of this title, Tennessee state banks, trust companies, savings and loan associations, and savings banks, and their directors, officers and shareholders shall be governed by and subject to the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as the same may be amended from time to time, and successor statutes thereto. The commissioner has the authority to interpret the Tennessee Business Corporation Act as it applies to financial institutions subject to regulation by the commissioner.
5. The charter of a trust company granted by the commissioner shall not be void due to the enactment of any amendment or repeal of the laws under which it was formed if the trust company is in operation, as determined by the commissioner, on July 1, 1999.
6. A company engaged in activities subject to this chapter and chapter 2 of this title, on July 1, 1999, but formed, as determined by the commissioner, prior to the enactment of chapter 620 of the Public Acts of 1980, and not previously subject to regulation by the commissioner, may continue to act as a fiduciary without submitting an application. However, the entity shall be otherwise fully subject to this chapter and chapter 2 of this title.
7. A company authorized by its charter, prior to the enactment of chapter 620 of the Public Acts of 1980, to engage in fiduciary activities, but not engaging in fiduciary activities on July 1, 1999, must file the appropriate application to establish a trust company and then fully comply with this chapter and chapter 2 of this title.
8. All state trust companies operating on July 1, 1999, shall have a period of time that the commissioner determines to be reasonable and prudent to conform to the requirements of this chapter and chapter 2 of this title and the regulations  under this chapter and chapter 2 of this title, but the period shall not exceed three (3) years from July 1, 1999. During this period of time, to conform to the requirements of this chapter and chapter 2 of this title, the commissioner may conduct examinations at the company's expense, and apply the requirements of this chapter and chapter 2 of this title as deemed appropriate.

Acts 1969, ch. 36, § 1 (1.104); T.C.A., § 45-123; Acts 1980, ch. 620, § 3; 1994, ch. 551, § 2; 1999, ch. 112, §§ 3, 4.

Compiler's Notes. Section 5 of Acts 1980, ch. 620 reads:

“The existence and operation of any trust company formed prior to the effective date of this act shall not be impaired by the enactment of this act.”

45-1-125. Liability of director or officer of financial institution in receivership or reorganization.

A director or officer, including a former director or officer of a financial institution, shall not be liable to the financial institution in receivership or reorganization or to the receiver, shareholders, depositors or creditors of the closed financial institution for money damages for breach of fiduciary duty, unless the claim or action arises out of the breach of the director's duty of loyalty to the financial institution or for acts or omissions not in good faith or that involved intentional misconduct or knowing violation of the law by the director or officer during the director's or officer's term of office with the financial institution. For purposes of this section, “financial institution” means a bank organized under the laws of this state, a national bank with its principal office in this state, a savings and loan association or savings bank organized under the laws of this state, or a federal savings and loan association or federal savings bank with its principal office in this state. This section shall apply both retrospectively and prospectively.

Acts 1994, ch. 551, § 3.

45-1-126. Compliance review documents — Confidentiality.

1. As used in this section, unless the context otherwise requires:
   1. “Compliance review committee” means:
      1. 1. An audit, loan review or compliance committee appointed by the board of directors of a depository institution; or
         2. Any other person to the extent the person acts in an investigatory capacity at the direction of a compliance review committee; and
      2. Whose functions are to evaluate and seek to improve:
         1. Loan underwriting standards;
         2. Asset quality;
         3. Financial reporting to federal or state regulatory agencies; or
         4. Compliance with federal or state statutory or regulatory requirements;
   2. “Compliance review documents” means documents prepared for or created by a compliance review committee;
   3. “Depository institution” means a state bank, national bank, state or federal savings and loan association, or a state or federal savings bank located in this state that is authorized to maintain deposit or share accounts;
   4. “Loan review committee” means a person or group of persons who, on behalf of a depository institution, reviews loans held by the institution for the purpose of assessing the credit quality of the loans, compliance with the institution's loan policies, and compliance with applicable laws and regulations; and
   5. “Person” means an individual, group of individuals, board, committee, partnership, firm, association, corporation or other entity.
2. Except as provided in subsection (c):
   1. Compliance review documents are confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee; and
   2. Compliance review documents delivered to a federal or state governmental agency remain confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee.
3. Subsection (b) does not apply to any information required by statute or regulation to be maintained by or provided to a governmental agency while the information is in the possession of the governmental agency to the extent applicable law expressly authorizes its disclosure.

Acts 1994, ch. 551, § 18.

Cross-References. Confidentiality of public records, § 10-7-504.

45-1-127. Fiduciary responsibilities or liabilities of financial institutions, officers or employees.

1. No financial institution or officer or employee thereof shall be deemed or implied to be acting as fiduciary or have a fiduciary obligation or responsibility to its customers or to other parties, other than shareholders of the institution, unless there is a written agency or trust agreement under which the financial institution specifically agrees to act and perform in the capacity of a fiduciary. The fiduciary responsibility and liability of a financial institution or any officer or employee of a financial institution shall be limited solely to performance under the contract and shall not extend beyond the scope of the contract. Any claim for a breach of a fiduciary responsibility of a financial institution or any officer or employee thereof may only be asserted within the time provided in § 48-18-601.
2. For purposes of this section, “financial institution” means a state or national bank, a savings and loan association, savings bank, industrial loan and thrift company, or mortgage lender.
3. 1. It is the legislative intent that this section is not intended to restrict, alter, or modify a court's application of the equitable doctrines of resulting or constructive trusts.
   2. It is the further legislative intent that this section shall be applied only to transactions or relationships that are entered into after May 10, 1994; provided, that any transaction or relationship that may have existed prior to May 10, 1994, may be ratified, altered, or amended by meeting the requirements of this section.

Acts 1994, ch. 955, § 1.

45-1-128. [Reserved.]

All applications required to be submitted to the commissioner under  chapters 2, 3 and 14 of this title or any regulations promulgated under these chapters, may be submitted by electronic communications, including, but not limited to, facsimile transmissions and electronic mail. Applications submitted in this manner shall be deemed complete for purposes of processing as of the date the electronic submission is received by the commissioner, as long as any filing fees or original documents required to be submitted with the application are received by the commissioner within three (3) business days of the electronic communication. If the application is incomplete, the commissioner may request additional information and the time for processing shall date from the receipt of the information.

Acts 1996, ch. 768, § 4.

Compiler's Notes. Acts 1996, ch. 768, which enacted this section, is known as and may be cited as the Bank Reform Act of 1996.

45-1-130. License, certification or registration — Notifications — Prerequisites — Website.

1. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each applicant for a professional or occupational license, certification or registration from the department, board, commission, agency or other governmental entity where to obtain a copy of any statutes, rules, guidelines, and policies setting forth the prerequisites for the license, certification or registration and shall, upon request, make available to the applicant a copy of the statutes, rules, guidelines, and policies.
2. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each holder of a professional or occupational license, certification or registration from the board, commission, agency or other governmental entity of changes in state law that impact the holder and are implemented or enforced by the entity including newly promulgated or amended statutes, rules, policies, and guidelines, upon the issuance and upon each renewal of a holder's license, certification or registration.
3. The department and each board, commission, agency or other governmental entity created pursuant to this title shall establish and maintain a link or links on the entity's website to the statutes, rules, policies, and guidelines that are implemented or enforced by the entity and that impact an applicant for, or a holder of, a professional or occupational license, certification, or registration from the entity.
4. 1. The department and each board, commission, agency, or other governmental entity created pursuant to this title shall allow each holder of a professional or occupational license, certification or registration from the department, board, commission, agency or other governmental entity to have the option of being notified by electronic mail of:
      1. Renewals of the holder's license, certification or registration;
      2. Any fee increases;
      3. Any changes in state law that impact the holder and are implemented or enforced by the entity, including newly promulgated or amended statutes, rules, policies and guidelines; and
      4. Any meeting where changes in rules or fees are on the agenda. For purposes of this subdivision (d)(1)(D), the electronic notice shall be at least forty-five (45) days in advance of the meeting, unless it is an emergency meeting then the notice shall be sent as soon as is practicable.
   2. The department and each board, commission, agency or other governmental entity created pursuant to this title shall notify each holder of a license, certification or registration of the availability of receiving electronic notices pursuant to subdivision (d)(1) upon issuance or renewal of the holder's license, certification or registration.

Acts 2008, ch. 1070, § 11; 2012, ch. 952, § 8.

Compiler's Notes. Acts 2008, ch. 1070, § 13 provided that each entity subject to the act shall promulgate rules to effectuate the purposes of the act. The rules shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Part 2
Bank Customer Dispute Resolution Act of 1981

45-2-101, 45-2-102. [Reserved.]

1. 1. As used in this section, unless the context otherwise requires:
      1. “Bank” means a bank or trust company organized under the laws of this state;
      2. “Control” means possession, direct or indirect, of the power to direct or cause the direction of management and policies of a person, whether through the ownership of voting securities by contract or otherwise; provided, that no individual shall be deemed to control a person solely on account of being a director, officer, or employee of the person. For purposes of this section, a person who, directly or indirectly, owns, controls, holds the power to vote, or holds proxies representing twenty-five percent (25%) or more of the then outstanding voting securities issued by another person is presumed to control the other person. For purposes of this section, the commissioner may determine whether a person, in fact, controls another person;
      3. “Controlling person” means a person who, directly or indirectly, controls a bank;
      4. “Person” means an individual, a corporation, an association, a syndicate, a partnership, a business trust, an estate, a trust, or an organization of any kind, or any combination of any of the foregoing acting in concert; and
      5. “Shareholder” means:
         1. In the case of a corporation, a holder of a share of any class or series;
         2. In the case of a nonprofit or charitable corporation, an unincorporated association, or a syndicate, a member;
         3. In the case of a partnership, a partner;
         4. In the case of a business trust, an estate, or a trust, a holder of a beneficial interest; and
         5. In the case of an organization of any other kind, a holder of an ownership interest.
   2. No person shall, directly or indirectly, unless the commissioner has approved the acquisition of control, acquire control of a bank or a controlling person; provided, that nothing in this subdivision (a)(2) shall be considered to prohibit any person from negotiating to acquire (but not acquiring) control of a bank or a controlling person.
   3. 1. The application shall be on a form prescribed by the commissioner and shall be made under oath. The application shall, except to the extent expressly waived by the commissioner, contain the following information:
         1. The identity, personal history, business background and experience, and financial condition of each person by whom or on whose behalf the acquisition is to be made, including a description of the managerial resources and future prospects of each acquiring party and a description of any material pending legal or administrative proceedings in which the person is a party;
         2. The terms and conditions of any proposed acquisition and the manner in which the acquisition is to be made;
         3. The identity, source, and amount of the funds or other consideration that has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and arrangements, agreements, or understanding with those persons;
         4. Any plans or proposals that any acquiring party making the acquisition may have to liquidate the bank, to sell its assets or merge it with any company, or to make any other major changes in its business or corporate structure or management;
         5. The terms and conditions of any offer, tender, invitation, agreement, or arrangement under which any voting security will be acquired and any contract affecting the security or its financing after it is acquired; and
         6. Other information that the commissioner by rule shall require to be furnished in an application, as well as any information that the commissioner orders to be included in the particular application filed.
      2. The applicant shall pay a filing fee as established by the commissioner when the application is filed.
      3. Information obtained by the commissioner under this section is confidential and is subject to the confidentiality requirements contained in § 45-2-1603.
   4. The commissioner shall deny an application for the proposed acquisition of control of a bank or a controlling person if the commissioner finds that:
      1. The effect of the proposed acquisition of control may be to substantially lessen competition or to tend to create a monopoly or that the proposed acquisition of control would in any manner be in restraint of trade, and that the anticompetitive effects of the proposed acquisition of control are not clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served;
      2. The financial condition of any acquiring person might jeopardize the financial stability of the bank or controlling person being acquired, or prejudice the interests of the depositors, creditors, or shareholders of the bank or controlling person;
      3. Plans or proposals to liquidate the bank or controlling person, to sell the assets of the bank or the controlling person, or to make any other major change in the business, corporate structure or management of the bank or the controlling person;
      4. The competence, experience, or integrity of any acquiring person indicates that it would not be in the interests of the depositors, creditors, or shareholders of the bank or the controlling person or in the interest of the public to permit the person to control the bank or controlling person;
      5. The bank will not have adequate capital structure, or be in compliance with the laws of this state after the acquisition;
      6. The proposed acquisition is unfair, unjust, or inequitable to the bank or the controlling person or to the depositors, creditors, or shareholders of the bank or controlling person;
      7. The applicant neglects, fails or refuses to furnish to the commissioner all the information required by the commissioner; or
      8. The applicant is not acting in good faith.
   5. The commissioner may, in approving a proposal to acquire control of a bank or a controlling person pursuant to subdivision (a)(4), impose conditions that the commissioner deems reasonable or necessary or advisable in the interest of the public.
   6. The commissioner may, for good cause, amend, alter, suspend, or revoke any approval of a proposal to acquire control of a bank or a controlling person issued pursuant to subdivision (a)(4).
   7. 1. Notwithstanding any other provision of this section, any application for approval to acquire control of a bank or a controlling person that is not denied or approved by the commissioner within a period of sixty (60) days after the application is filed with the commissioner, or if the applicant consents to an extension of the period within which the commissioner may act, within the extended period, shall be considered to be approved by the commissioner as of the first day after the period of sixty (60) days or the extended period as the case may be.
      2. For purposes of this section, an application for approval to acquire control of a bank or a controlling person is considered to be filed with the commissioner at the time when the complete application, including any amendments or supplements, containing all the information in the form required by the commissioner, is received by the commissioner.
   8. After denying an application for approval to acquire control of a bank or a controlling person, the commissioner, upon the filing of a written request for a hearing by any person prejudiced by the commissioner's decision, may conduct a hearing and upon the hearing shall affirm, modify, or reverse the decision. The hearing shall commence within a period of sixty (60) days after the written request for the hearing is filed with the commissioner or, if the person filing the written request for the hearing consents to an extension of the period within which the hearing is to commence, within the extended period.
   9. This section does not apply to:
      1. The acquisition of securities in connection with the exercise of a security interest or otherwise by way of foreclosure on default in the payment of a debt previously contracted for in good faith; provided, that the person acquiring the securities does not vote the securities so acquired without having given written notice of the foreclosure to the commissioner;
      2. Transactions requiring the prior approval of the board of governors of the federal reserve system under the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq. and 26 U.S.C. § 1101 et seq. [repealed]);
      3. Acquisitions or transfers by operation of law or by will or intestate succession; provided, that the person acquiring the securities does not vote the securities so acquired without having given written notice of acquisition to the commissioner;
      4. Transactions governed by §§ 45-2-1304, 45-2-1313 and 45-2-1505; or
      5. Any transaction that the commissioner by rule or order may exempt as not being contemplated by the purposes of this section or the regulation of which is not necessary or appropriate to achieve the objectives of this section.
   10. No provision of this section shall be construed to prevent the commissioner from investigating, commenting upon, or seeking to enjoin or set aside any transfer of voting securities, whether the transfer is included within this section or not, if the commissioner considers the transfer against the interest of the depositors, creditors, or shareholders of the bank or the controlling person or against the interest of the public.
2. Whenever a loan or loans are made by a bank, which loan or loans are or are to be secured by twenty-five percent (25%) or more of the voting stock of another state bank, the president or other chief executive officer of the bank that makes the loan or loans shall report the facts to the commissioner within twenty-four (24) hours after obtaining knowledge of the loan or loans, except when the borrower has been the owner of record of the stock for a period of one (1) year or more, or the stock is of a newly organized bank prior to its opening.
3. The reports required in subsections (a) and (b) shall contain whatever information is available to inform the commissioner of the effect of the transaction upon control of the bank whose stock is involved, and shall contain, when known by the person making the report, the number of shares involved, the identity of the sellers or transferors, and purchasers or transferees of record, the identity of the beneficial owners of the shares involved, the purchase price, the total number of shares owned by the sellers or transferors and purchasers or transferees of record, both immediately prior to and after the transaction being reported, and the total number of shares owned by the beneficial owners of the shares involved, both immediately prior to and after the transaction being reported, and the identity of the borrowers, the name of the bank issuing the stock securing the loan, the number of shares securing the loan and the amount of the loan or loans. The report shall be in addition to any report that may be required pursuant to other provisions of law.
4. All state banks shall report to the commissioner within twenty-four (24) hours any changes in chief executive officers, including in their reports a statement of the past and current business and professional affiliations of any new chief executive officers.

Acts 1969, ch. 36, § 1 (3.321); 1973, ch. 294, § 6; T.C.A., § 45-232; Acts 1983, ch. 441, § 1.

Compiler's Notes. 26 U.S.C. § 1101 et seq., which is referred to in this section, was  repealed by Act Nov. 5, 1990, P. L. 101-508, Title XI, § 11801(a)(34), 104 Stat. 1388-521, effective November 5, 1990, except as provided by § 11821(b) of the Act, which is classified to 26 U.S.C. § 29 note. It related to distributions of property pursuant to the Bank Holding Company Act.

Cross-References. Applicability to industrial banks, § 45-5-607.

“Bank” includes state-chartered savings and loan associations, § 45-3-108.

Confidentiality of public records, § 10-7-504.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 2.

Law Reviews.

Selected Tennessee Legislation of 1983 (N. L. Resener, J. A. Whitson, K. J. Miller), 50 Tenn. L. Rev. 785 (1983).

45-2-104. Equality of taxation.

Except for taxes on property and the banking fees provided by law, no tax levied by this state, whether privilege, excise, franchise, sales or otherwise, shall be levied upon or be applicable to any bank chartered under the laws of this state, unless and until the same tax may be legally levied upon and be applicable to national banks in this state, in which case the tax shall be levied upon and be applicable to all the state and national banks.

Acts 1969, ch. 36, § 1 (3.701); T.C.A., § 45-233.

45-2-105. Exemption of nonprofit general welfare corporations.

The commissioner may exempt a trust company from any requirement of this chapter or chapter 1 of this title or the rules of the department that would threaten the viability of the corporation, including, but not limited to, capitalization requirements, fees, and procedures that are not essential to the protection of the interests of the trust beneficiaries, if the trust company is:

1. Chartered as a nonprofit general welfare corporation under the laws of Tennessee for the purpose of providing fiduciary services to mentally or physically disabled persons;
2. Exempt from federal taxation under 26 U.S.C. § 501(c)(3); and
3. Approved by the commissioner of mental health and substance abuse services or the commissioner of intellectual and developmental disabilities as providing a necessary service that is not otherwise generally available for those persons.

Acts 1982, ch. 895, § 1; 2010, ch. 1100, § 71; 2012, ch. 575, § 2.

Compiler's Notes. Acts 2010, ch. 1100, § 153 provided that the commissioner of mental health and developmental disabilities, the commissioner of mental health, the commissioner of intellectual and developmental disabilities, and the commissioner of finance and administration are authorized to promulgate rules and regulations to effectuate the purposes of the act. All such rules and regulations shall be promulgated in accordance with the provisions of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Cross-References. Nonprofit corporations generally, title 48, chs. 51-68.

45-2-106. Provisions applicable to savings and loan associations and savings banks — Conflicting laws.

1. The following provisions of this chapter are applicable to state and federal savings and loan associations and savings banks; provided, that in the event of a conflict between the provisions and the provisions of a law on the same subject relating specifically to state or federal savings and loan associations or savings banks, the provisions of the specific law shall be controlling:
   1. Section 45-2-703 relating to deposits in two (2) or more names;
   2. Section 45-2-704 relating to deposits in trust;
   3. Section 45-2-706 relating to adverse claims to deposits;
   4. Section 45-2-707 relating to powers of attorney;
   5. Section 45-2-806 relating to the deposit of public funds and security requirements;
   6. Part 9 of this chapter relating to safe deposit and safekeeping; and
   7. Part 10 of this chapter relating to fiduciary powers.
2. The following provisions of this chapter are applicable to state and federal savings and loan associations, savings banks, and credit unions; provided, that in the event of a conflict between the provisions and the provisions of a law on the same subject relating specifically to state or federal savings and loan associations, savings banks or credit unions, the provisions of the specific law shall be controlling:
   1. Section 45-2-708, relating to payment from accounts or contents of safe deposit boxes when no executor or administrator has qualified and given notice of the executor or administrator's qualifications; and
   2. Section 45-2-710, relating to the accrual of a civil action to enforce a claim on accounts.

Acts 1985, ch. 168, § 2; 1992, ch. 834, § 1; 2005, ch. 30, § 3.

45-2-107. Acquisition, formation or control of banks and savings institutions.

1. 1. As used in this subsection (a), unless the context otherwise requires:
      1. “Bank” means any company that accepts deposits in Tennessee that are eligible for insurance under  the Federal Deposit Insurance Act (12 U.S.C. § 1811 et seq.);
      2. “Bank holding company” means any company that is a bank holding company (12 U.S.C. § 1841 et seq.);
      3. “Banking institution” means any institution organized under this title, or under title 12, chapter 2 of the United States Code;
      4. “Company” has the meaning set forth in subsection 2(b) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(b)); and
      5. “Control” has the meaning as set forth in subdivisions 2(a)(2) and (3) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(a)(2) and (3)).
   2. No bank holding company or other banking institution shall acquire, form or control a bank, as defined herein, unless the bank:
      1. Accepts deposits in Tennessee that the depositor has a legal right to withdraw on demand; and
      2. Engages in the business of making commercial loans in Tennessee.
   3. No company that is not a bank holding company shall acquire, form or control a bank.
   4. If any person has engaged or proposes to engage in a transaction that is not permitted under this section, the commissioner shall apply, and any other interested person, which shall include, but not be limited to, any Tennessee bank or Tennessee bank holding company, may apply, for equitable relief, including, but not limited to, a permanent or temporary injunction or restraining order, to the chancery court of Davidson County, or any other chancery court having jurisdiction or any court of the United States having jurisdiction.
   5. Nothing in this section shall prohibit the ownership or control of a bank by an entity that is not a bank holding company, if:
      1. The bank received a charter under this chapter, or its predecessor, prior to January 1, 1920; and
      2. The ownership or control of the bank by the entity that is not a bank holding company existed prior to July 1, 1983.
2. 1. As used in this subsection (b), as distinguished from subsection (a) relating to banks, unless the context otherwise requires:
      1. “Company” has the meaning set forth in subdivision (a)(1)(C) of the Savings and Loan Holding Company Amendments of 1967 (12 U.S.C. § 1730a et seq. [repealed]);
      2. “Control” has the meaning set forth in subdivision (a)(2) of the Savings and Loan Holding Company Amendments of 1967;
      3. “Savings and loan holding company” means any company that is a savings and loan holding company under  the Savings and Loan Holding Company Amendments of 1967; and
      4. 1. “Savings institutions” means any institution organized under chapter 3 of this title, or under title 12, chapter 12 of the United States Code; and
         2. “Savings institutions” means a savings and loan association or a savings bank, state or federal, eligible for insurance under  the Federal Savings and Loan Insurance Act (12 U.S.C. § 1724 et seq. [repealed]).
   2. No savings and loan holding company or other savings institution shall acquire, form, or control a savings institution, as defined herein, unless the savings institution:
      1. Accepts deposits in Tennessee that the depositor has a legal right to withdraw on demand; and
      2. Engages in the business of making commercial loans in Tennessee.
   3. No company that is not a savings and loan holding company shall acquire, form, or control a savings institution.
   4. If any person has or proposes to engage in a transaction that is not permitted under this section, the commissioner shall apply, and any other interested person, which shall include, but not be limited to, Tennessee savings institutions or Tennessee savings and loan holding companies, may apply, for equitable relief, including, but not limited to, a permanent or temporary injunction or restraining order, to the chancery court of Davidson County or any other chancery court having jurisdiction, or any court of the United States having jurisdiction.

Acts 1985, ch. 262, §§ 1, 2.

Compiler's Notes. Chapters 2 and 12 of Title 12 of the United States Code, referred to in this section, are codified as 12 U.S.C. §§ 21-220 and 1461-1470.

Part 2
Organization of Banks

45-3-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Savings and Loan Act.”

Acts 1978, ch. 708, § 1.01; T.C.A., § 45-1301.

Compiler's Notes. Former chapter 3 (Acts 1875, ch. 142, § 14; 1919, ch. 136, §§ 2, 3, 8, 9, 11; 1929, ch. 117, §§ 3, 5-8; Shan. Supp., §§ 2135, 2179a2, 2179a3, 2179a8, 2179a9, 2179a11; Code 1932, §§ 3899, 3902, 3903, 3907, 3909, 3910-3911, 3914, 3915, 3917; Acts 1933, ch. 19, §§ 1-4, 6, 7, 9-11, 15, 16; 1935 (E.S.), ch. 27, §§ 1-3, 5; 1935 (E.S.), ch. 28, § 4; 1935 (E.S.), ch. 34, § 1; Code Supp. 1950, §§ 3898.1-3898.11, 3898.23-3898.29, 3898.31-3898.33, 3898.46-3898.50, 3898.57; (Williams, §§ 3898.1-3898.4, 3898.6, 3898.7, 3898.9-3898.11, 3898.15, 3898.16, 3902, 3903, 3904.1-3904.5, 3914, 3918.8); Acts 1957, ch. 281, §§ 1, 2; 1957, ch. 282, §§ 1, 2; 1968, ch. 501, § 1; 1969, ch. 124, § 1; 1973, ch. 274, § 1; 1973, ch. 360, §§ 1, 2; 1973, ch. 361, §§ 1, 2; 1974, ch. 698, §§ 1, 3, 4; 1976, ch. 582, §§ 1, 2, 3(a), (b), (f)-(i), 4), concerning operation and management of building and loan associations was repealed by Acts 1978, ch. 708, § 6.01 and the present provisions substituted therefor in 1980.

This chapter was reenacted by Acts 1980, ch. 617.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

Cross-References. Bank deposits and collections, title 47, ch. 4.

Conversion of financial institutions, title 45, ch. 11.

Cooperative scholarship corporations, building and loan associations participating in plans, § 49-4-106.

Funds transfers, title 47, ch. 4A.

Investment of public funds in federal savings and loan associations accounts, § 9-1-107.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

State and Local Taxation of Financial Institutions: An Opportunity for Reform (C. James Judson & Susan G. Duffy), 39 Vand. L. Rev. 1057 (1986).

45-3-102. Scope and application.

1. Effect on Existing Associations.  The charter of every savings and loan association, by whatever name called, heretofore organized under the laws of this state existing and in good standing on July 1, 1978, shall continue in full force and effect, subject to compliance with  this chapter, and the same shall be deemed as modified to conform with this chapter without the adoption or approval of a new charter, as to corporate powers and functions, and all associations shall bring themselves into compliance as to corporate powers and functions within twelve (12) months from July 1, 1978. An association existing on July 1, 1978, and that is not then in compliance with minimum capital requirements may continue to operate with its existing capital so long as its accounts are insured as provided in this chapter. Unless otherwise invalid or unenforceable, the contracts, obligations, rights, powers, and liabilities of every such association, and the contracts, notes, mortgages, investments, and other assets of every kind and nature whatsoever held by it, as well as its bylaws and resolutions, shall continue in full force and effect. Every existing association and every association hereafter organized under this chapter shall, except as otherwise provided, be subject to this chapter.
2. Effect on Federal Associations.  Unless federal laws or regulations provide otherwise, federal savings and loan associations and their members shall possess all of the rights, powers, privileges, immunities, and exemptions granted by this chapter to associations operating hereunder.

Acts 1978, ch. 708, § 1.02; T.C.A., § 45-1302.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-103. Application of general corporation law and the Uniform Administration Procedures Act.

Unless otherwise specifically provided by this chapter or unless the application would otherwise conflict with the purposes of this chapter, the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, and of the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, as each of those acts may be amended from time to time, shall apply to all associations governed by this chapter.

Acts 1978, ch. 708, § 1.03; T.C.A., § 45-1303; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch.1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 4, 6, 8, 9.

45-3-104. Chapter definitions.

1. As used in this chapter, unless the context otherwise requires:
   1. “Association” means a capital stock or mutual savings and loan association;
      1. “Capital stock association” means an association, the ownership of which rests in the holders of shares of capital stock, who may receive dividends on their shares, and who have the sole right to vote on matters affecting the association; and
      2. “Mutual association” means an association, the ownership of which rests in members, who receive interest on their deposit accounts, and who have the sole right to vote on all matters affecting the association;
   2. “Branch office” means an office or facility, other than the home office, at which payments on accounts and loans may be accepted and applications for loans may be received, at which accounts may be opened, and loans may be closed, and at which any other authorized business of the association may be transacted;
   3. “Commissioner” means the commissioner of financial institutions;
   4. “Deposit” or “deposit account” means that part of the deposit liability of an association that is credited to the account of the holder;
   5. “Deposit liability” means the aggregate amount of deposit accounts of depositors or members, including interest credited to the accounts, less redemptions and withdrawals;
   6. “Depositor” means the holder of a deposit account in an association;
   7. “Dividend” means that part of the net income or capital surplus of a capital stock association that is declared payable to the stockholders of the association from time to time by the board of directors, and is to be distinguished from “interest”;
   8. “Electronic funds transfer system (EFTS)” means a computer payment system for transferring funds from one (1) party to another;
   9. “Federal association” means a savings and loan association operating under the laws and regulations of the United States;
   10. “Financial institution” means a thrift institution, commercial bank, or trust company;
   11. “Home” means a structure designed for residential use by not more than four (4) families or a single condominium unit, including common elements pertinent thereto, designed for residential use by one (1) family in a multiple dwelling unit structure or complex, and includes fixtures;
   12. “Home office” means the principal place of business maintained by the association and so designated in its charter, at which all authorized business of the association may be transacted;
   13. “Home property” means real estate on which there is located, or will be located, a home;
   14. “Homeowner” means any person or persons in whose name or names legal title to a home, or real property on which a home is located, or is to be located, is registered pursuant to the laws of this state;
   15. “Impaired condition” means a condition in which the assets of an association in the aggregate do not equal the aggregate amount of its liabilities;
   16. “Interest” means that part of the net income, retained earnings, or surplus of an association that is payable to or credited to holders of deposit accounts;
   17. “Interest date” means the effective date on which interest is payable to depositors on deposit accounts;
   18. “Liquid assets” means:
       1. Cash on hand;
       2. Time certificates of deposit or cash on deposit in federal home loan banks, state banks performing similar functions, or in commercial banks, that is withdrawable upon not more than thirty (30) days' notice and that is not pledged as security for indebtedness, except that any deposits in a bank that is being liquidated or rehabilitated by any supervisory authority shall not be considered as liquid assets;
       3. Obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or this state; and
       4. Other assets that the commissioner may, by rule or regulation, designate as liquid assets;
   19. “Member” means a person holding a deposit account of a mutual association;
   20. “Mobile home” means a dwelling designed for occupancy by a single family unit, which may be permanently affixed to real property, and is designed to be movable from one (1) location to another. “Mobile home” does not include recreation vehicles or campers;
   21. “Net income” means gross revenues for an accounting period, less all interest and expenses paid or incurred, taxes, and losses sustained that have not been charged to any reserve accounts;
   22. “Net worth” means the aggregate of all loan contracts of an association, plus the aggregate value of all other assets of the association, less the aggregate amount of deposit accounts of depositors, including interest credited to the accounts, and less any other liabilities of the association;
   23. “Person” means an individual, firm, partnership, joint venture, trust, estate, unincorporated association, company, or corporation organized under the laws of this or any other state, the United States or foreign country;
   24. “Primarily residential property” means real estate on which there is located, or will be located pursuant to a real estate loan, any of the following:
       1. A structure or structures designed or used primarily for residential rather than nonresidential purposes and consisting of more than one (1) dwelling unit;
       2. A structure or structures designed or used primarily for residential rather than nonresidential purposes for students, residents, and persons under care, employees, or members of the staff of an educational, health, or welfare institution or facility; or
       3. A structure or structures that are used in part for residential purposes for not more than one (1) family and in part for business purposes; provided, that the residential use of the structure or structures must be substantial and permanent, not merely transitory;
   25. “Primary lending area” means any area within the territorial limits of this state or within a radius of one hundred (100) miles from the home office or branch of an association;
   26. “Real estate loan” means any loan or other obligation secured by a lien on real estate in any state held in fee or in a leasehold extending or renewable automatically for a period of at least ten (10) years beyond the date scheduled for the final principal payment of the loan or obligation, or any transactions out of which a lien or claim is created against the real estate, including, inter alia, the purchase of the real estate in fee by an association and the concurrent or immediate sale thereof on installment contract;
   27. “Remote service unit” means a facility where deposits to, withdrawals from, and transfers between existing accounts may be made and where payments on loans made or serviced by the association may be made;
   28. “Satellite office” means a facility that is operated ancillary to a home or branch office and that does not have more than one thousand (1,000) square feet of floor space nor more than four (4) teller stations;
   29. “Service organization” means either a corporation, the majority of the capital stock of which is owned by one (1) or more associations, and that has the powers to engage in those activities of general service corporations in which federal associations may invest; or a corporation, business trust, or other similar organization that is an affiliate of an association that owns a majority of the voting shares of the organization and that has the powers of an affiliate of a federal association;
   30. “Stockholder” means the holder of one (1) or more shares of any class of capital stock of a capital stock association organized and operating pursuant to this chapter;
   31. “Surplus” means the aggregate amount of the undistributed net income of an association held as undivided profits or unallocated reserves for general corporate purposes, and any paid-in surplus or initial undivided profits held by an association;
   32. “Thrift institution” means an association, a mutual savings bank, a cooperative bank, a homestead association, a credit union, a federal association, a small loan company, and any supervised thrift or residential financing institution of a substantially similar nature as determined by the commissioner; and
   33. “Withdrawal value” means the amount paid to an association on a deposit account, plus interest credited thereto, less lawful deductions therefrom, as shown by the books of the association.
2. Any reference in this chapter or elsewhere in this code to a savings and loan association, or to a federal savings and loan association, or to any association as may be defined in this chapter, includes a federal savings bank or other financial institution, the accounts of which are insured by the federal savings and loan insurance corporation (FSLIC) or any successor of the corporation.

Acts 1978, ch. 708, § 1.04; T.C.A., § 45-1304; Acts 1984, ch. 705, § 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

For transfer of functions under this chapter from the department of commerce and insurance to the department of financial institutions, see Executive Order No. 38 (February 11, 1983).

The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

Textbooks. Tennessee Jurisprudence, 9 Tenn. Juris., Deposit, § 2; 22 Tenn. Juris., Savings and Loan Associations, § 7.

45-3-105. Powers of associations generally.

Every association has all the powers enumerated, authorized and permitted in this section and other rights, privileges, and powers as may be incidental to or reasonably necessary or appropriate for the accomplishment of the objects and purposes of the association, including those rights and powers not in conflict with this chapter conferred generally upon corporations by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27. Without limiting the foregoing, and except as otherwise provided by this chapter, every association has the power to:

1. Deposits and Investments.  Acquire deposits and pay interest on deposits, and lend and invest its funds;
2. Property Transfers.  Acquire, hold, sell, dispose of, convey, mortgage, pledge, or lease any real or personal property;
3. Borrowing.  Subject to any rules or regulations promulgated by the commissioner, borrow from sources, individual and corporate, for the uses and purposes of the association, which borrowings may be evidenced by the notes, bonds, debentures, or other obligations or securities as the commissioner may prescribe; and pledge, mortgage, or otherwise encumber any of its assets in connection therewith; provided, that in no event shall any borrowing by an association exceed seventy percent (70%) of the deposit liability of the association unless the commissioner shall grant written approval of a greater percentage;
4. Sale of Loans.  Sell any loan, without recourse, including any participating interests therein;
5. Insurance of Accounts.  Obtain and maintain insurance of its deposit accounts by the federal savings and loan insurance corporation, any agency of this state or other federal agency established for the purpose of insuring deposit accounts in associations, or with any other insurer approved by the commissioner and having a net worth not less than one hundred million dollars ($100,000,000);
6. Membership in Organizations.  Qualify as and become a member of a Federal Home Loan Bank, or any other agency of the United States or the state of Tennessee or of any organization to the extent that the agency or organization assists in furthering or facilitating the association's purposes or powers, and comply with any reasonable conditions of eligibility;
7. Safe Deposit Boxes.  Maintain and let safes, boxes, or other receptacles for the safekeeping of personal property in the same manner as banks are authorized to do under the laws of this state; provided, that in the event of any conflict with the law relating to safe deposit boxes in banks, this law shall be controlling. Any association has the right to construct a vault on its real estate, or on premises leased by it, or to rent any vault that in the judgment of the directors will provide reasonable means of safety against loss by theft, fire, or other cause, in which vault may be placed safes, boxes, or receptacles, for the keeping of jewelry, diamonds, gold, bank notes, bonds, notes, and other valuables, and that may be rented by the association to other persons on terms that may be agreed by the parties, but it is understood that in no event shall the association be liable for any loss of the jewelry, diamonds, gold, bank notes, bonds, notes, or other valuables by theft, robbery, fire, or other cause, the association not being the insurer of the safety of the property, nor in any manner liable therefor. The association is not required to take any note of property thus deposited, as the person who rents a safe, box, or receptacle is, for the term of the lease, the owner thereof;
8. Money Orders, etc.  Sell money orders, travel checks, and similar instruments drawn by it on its bank accounts or as agents for any organization empowered to sell the instruments within this state;
9. Fiscal Agent.  Act as fiscal agent of the United States, of this state, or of any subdivision of this state when duly designated for that purpose, and as fiscal agent perform the reasonable functions that may be required by it;
10. Servicing.  Service loans and investments for others;
11. Limited Trusteeship.  Act as trustee or custodian within the contemplation of the Federal Self-Employed Individual Tax Retirement Act of 1962, the Federal Employee Retirement Income Security Act of 1974, or similar federal acts, all as may be amended from time to time; and act as trustee or custodian with regard to other activities that may be authorized to federal associations by federal law or regulation. An association exercising the powers authorized by this subdivision (11) shall segregate all funds held in those fiduciary capacities from the general assets of the association and shall keep a separate set of books and records, showing in detail all transactions made under authority of this subdivision (11). If the individual records are kept as aforementioned, all funds held in the fiduciary capacities by an association may be commingled for appropriate purposes of investment. The funds may be invested in deposit accounts of the association in the event that the trust, custodial, or other plan does not prohibit the investment;
12. Employee Stock Option Plans.  Establish, as part of its compensation benefits to its full-time employees, a plan or plans whereby the employing association may issue shares of its capital stock to the employees as compensation to them at a value to be established periodically, but at least annually, by the board of directors of the employing association, which value may be less than the market value of the stock or less than the price at which the stock may be offered to nonemployees; provided, that the plan is approved by a majority of the stockholders of the employing association. The plan may include provisions for the creation of a retirement trust whereby the stock issued to the employees and accumulated earnings on the stock are held in trust for the employees' retirement; and
13. Electronic Funds Transfer Systems.  Subject to rules and regulations of the commissioner, transfer funds between holders of deposit accounts, and third parties, or their designees, by means of electronic funds transfer systems. No such system or any part of the system, including terminals or processing centers, shall of itself be considered a branch or satellite office.

Acts 1978, ch. 708, § 1.05; T.C.A., § 45-1305; Acts 1981, ch. 36, § 1; 1984, ch. 626, § 1; 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Federal Employee Retirement Income Security Act of 1974 referred to in this section is compiled in 5 U.S.C. §§ 5108, 5109; 18 U.S.C. §§ 664, 1027, 1954; 26 U.S.C. generally; 29 U.S.C. §§ 1221, 1222, 1302, 1381; 42 U.S.C. § 1320b-1.

The federal savings and loan insurance corporation, referred to in this section, was abolished, effective February 1, 1992. See the Historical and Statutory Notes under 12 U.S.C. § 1437.

The Federal Self-Employed Individual Tax Retirement Act of 1962 referred to in this section is compiled in 26 U.S.C. §§ 37, 62, 72, 101, 104, 105, 172, 401-405, 503, 805, 1361, 2039, 2517, 3306, 3401, 6047, 7207.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 8, 13.

45-3-106. Tie-in provision.

Notwithstanding anything to the contrary in the laws of this state, every association organized and incorporated pursuant to or operating under this chapter has all the powers granted to savings and loan associations whose home offices are located in this state and that are incorporated or operating under the laws of the United States.

Acts 1978, ch. 708, § 1.06; T.C.A., § 45-1306.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-107. Corporate form required — Capital stock and mutual associations authorized.

1. No person, except a corporation chartered by the state of Tennessee or a federally chartered association, shall engage in the business of a savings and loan association in this state.
2. The charter of an association may provide for the issuance of capital stock or for the organization of the association as a mutual association.

Acts 1978, ch. 708, § 1.07; T.C.A., § 45-1307.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 4, 6, 9.

45-3-108. Ownership of associations — Changes affecting control.

1. The rights and incidents of ownership in a capital stock association shall be vested in the holders of capital stock as shown on the books of the association and in no other persons. Depositors in capital stock associations shall not be vested with any rights or incidents of ownership in the association. The rights and incidents of ownership in a mutual association shall be vested in the depositors of the association.
2. Section 45-2-103 is applicable to state-chartered savings and loan associations. Unless the context requires other meaning, references to bank in § 45-2-103 include state-chartered savings and loan associations for the purposes of this subsection (b) only, and shall not be construed to give the associations any rights or powers not set forth in this chapter.

Acts 1978, ch. 708, § 1.08; T.C.A., § 45-1308; Acts 1984, ch. 697, §§ 1, 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Acts 1984, ch. 697, § 3 provided that the provisions of the 1984 amendment by that act were remedial in nature and to be liberally construed to effectuate its purposes.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 7.

45-3-109. Capital stock — Nature.

1. Capital stock shall constitute a reserve out of which losses shall be paid after all other available reserves have been exhausted, and shall have a par value, or if the capital stock has no par value, then a stated value, of one dollar ($1.00) per share or another amount that the charter may prescribe.
2. 1. Nonwithdrawability.  Capital stock shall be nonwithdrawable, except as otherwise specifically provided by this chapter, or by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
   2. Dividends.  Capital stock shall be entitled to dividends, unless limited by this chapter, or by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.

Acts 1978, ch. 708, § 1.09; T.C.A., § 45-1309; Acts 1994, ch. 551, § 19.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

The Tennessee General Corporation Act, compiled in title 48, ch. 1, has been repealed effective January 1, 1988. New provisions concerning business corporations may be found in title 48, chs. 11-27. New provisions concerning nonprofit corporations may be found in title 48, chs. 51-68.

45-3-110. Capital stock associations — Issuance of capital stock.

An association may issue the shares of capital stock authorized by its charter and none other. The capital stock of an association, when issued, shall not be retired or withdrawn except as hereinafter provided until all liabilities of the association have been satisfied in full, including the withdrawal value of all deposit accounts. An association may issue shares of common stock and preferred stock, with or without par value, and the common and preferred stock may be divided into classes and the classes into series. Capital stock of an association shall be issued pursuant to the following requirements:

1. Consideration for Issuance of Stock.  Except for stock issued pursuant to an employee stock option plan, or pursuant to a plan of merger, consolidation, conversion from a mutual to a stock association, or other type of reorganization that has been approved by the commissioner, the consideration for the issuance of capital stock shall be paid in cash and the par value or stated value thereof shall be maintained as the permanent capital of the association, and any excess shall be credited to paid-in surplus;
2. Permanent Capital — Reduction and Retirement.  The aggregate par value or stated value of all outstanding shares of capital stock shall be the permanent capital of the association, and, except as otherwise specifically provided by this chapter, the capital stock shall not be retired until final liquidation of the association. No association shall reduce the par or stated value of its outstanding capital stock without first obtaining the written approval of the commissioner, and approval shall be withheld if the reduction will cause the par or stated value of outstanding capital stock to be less than the minimum required by this chapter, or will result in less than adequate net worth as the commissioner may, in the commissioner's discretion, determine. No association shall retire any part of its capital stock unless the retirement is approved by the commissioner. With the written approval of the commissioner, an association may purchase its capital stock from the personal representative of a deceased stockholder; and with the written approval, an association may contract with a living stockholder for the purchase upon the stockholder's death. The purchase shall be for a price, and upon terms and conditions, that are agreed upon by the association and the stockholder or personal representative; provided, that the purchase shall not reduce the net worth accounts of the association, or any of them, to an amount less than required by applicable law or by the approved insurer of the association's deposit accounts. An association agreeing with a stockholder to purchase that stockholder's capital stock upon the stockholder's death may purchase insurance upon the life of the stockholder to fund or partially fund the purchase. Any stock purchased from a decedent's personal representative may be resold by the association at the price, and upon terms and conditions, that the board of directors of the association approves or may be retired; provided, that prior to resale, notice shall be filed with the commissioner disclosing the price, terms, and conditions of the proposed resale.

Acts 1978, ch. 708, § 1.10; T.C.A., § 45-1310.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 6.

45-3-111. Capital stock and mutual associations — Minimum capital requirements.

1. 1. The minimum capital with which an association shall commence business shall be determined by reference to, in the case of a capital stock association, the sum of the par or stated value of all issued and outstanding shares of voting common capital stock, and, in the case of a mutual association, the total of all subscribed and paid-in deposit accounts. The minimum capital of an association shall be prescribed by the commissioner; provided, that the minimum capital shall not be less than:
      1. One hundred thousand dollars ($100,000) if the home office of the association is to be located in a county having less than ten thousand (10,000) inhabitants;
      2. Two hundred fifty thousand dollars ($250,000) if the home office is to be located in a county having between ten thousand (10,000) and one hundred thousand (100,000) inhabitants; and
      3. Five hundred thousand dollars ($500,000) if the home office is to be located in a county having one hundred thousand (100,000) inhabitants or more.(2)  The population of each county shall be based upon the latest federal census.
2. Notwithstanding the above requirements, if the home office of an association is to be located in a county that is contiguous to a county the population of which would require higher minimum capital requirements, and if the commissioner determines that the association will draw a substantial amount of its depositors from the contiguous county, the commissioner shall require that the association meet the higher capital requirements of the contiguous county.

Acts 1978, ch. 708, § 1.11; T.C.A., § 45-1311.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

For table of U.S. decennial populations of Tennessee counties, see Volume 13 and its supplement.

45-3-112. Capital stock associations — Paid-in surplus.

1. In addition to the minimum capital required by this chapter for a capital stock association to commence business, the subscribers to the capital stock of the association shall pay an additional amount for their stock equal to not less than fifty percent (50%) of the par or stated value of the stock subscribed, which additional amount shall be credited to the paid-in surplus account and may be used for organization and operating expenses, including interest to the holders of deposit accounts. The minimum capital and surplus may be used for the reserves required by this chapter and as permitted by the commissioner.
2. The capital, paid-in surplus, retained earnings, and other net worth accounts of an association, or any combination of the net worth accounts, may, by action of the association and subject to approval of the commissioner, be specifically earmarked as an insurance reserve account to be used solely for absorbing losses.

Acts 1978, ch. 708, § 1.12; T.C.A., § 45-1312.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-113. Mutual associations — Expense fund requirements.

1. The incorporators of a mutual association, in addition to their subscriptions to deposit accounts, shall create an expense fund in an amount not less than fifty percent (50%) of the minimum capital required by this chapter for the association to commence business.
2. Any organization and operating expenses may be paid from the fund until such time as the net income of the association is sufficient to pay the interest that is declared and paid or credited to deposit account holders from sources available for the payment of interest.

Acts 1978, ch. 708, § 1.13; T.C.A., § 45-1313.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-114. Mutual associations — Repayment of contributions to expense fund.

1. Contributions made by the incorporators and others to the expense fund and to the undivided profits account, if so required by the commissioner, may be repaid pro rata to the contributors from the net income of the association after provision for required loss reserves and declaration of interest of not less than two percent (2%) on deposit accounts.
2. In case of the liquidation of an association before contributions to the expense fund and to the undivided profits account have been repaid, any contributions to the expense fund and to the undivided profits account remaining unexpended, after payment of expenses of liquidation, all creditors and the withdrawal value of all deposit accounts, shall be paid to the contributors pro rata.
3. The books of the association shall reflect the expense fund and undivided profits account.
4. Contributors to the expense fund and to the undivided profits account shall be paid interest on the amounts paid in by them and for that purpose the contributions shall in all respects be considered as deposit accounts of the association.
5. Except as otherwise provided by this chapter or by rules and regulations prescribed by the commissioner, the amounts contributed to the expense fund and to the undivided profits account shall not constitute a liability to the association.

Acts 1978, ch. 708, § 1.14; T.C.A., § 45-1314.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-115. Change of office or name.

No association shall, without the prior approval of the commissioner:

1. Establish any branch or satellite office other than the home office stated in its charter;
2. Move any home, branch, or satellite office of the association from its immediate vicinity; or
3. Change the name of any association.

Acts 1978, ch. 708, § 1.24; T.C.A., § 45-1324.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-101.

45-3-116. Exemption from securities laws.

All associations subject to this chapter and all federal associations, the directors, officers, agents, or employees of the associations, deposit accounts and capital stock of the associations and the sale, issuance, or offering for sale of deposit accounts and capital stock of the associations are exempted from all provisions of law of this state, other than this chapter, that provide for supervision, registration, or regulation in connection with the sale, issuance, or offering for sale of securities, and the sale, issuance, or offering for sale of the accounts or stock shall not require any action or approval whatsoever by any official authorized to license, regulate, or supervise the sale, issuance, or offering for sale of securities.

Acts 1978, ch. 708, § 5.23; T.C.A., § 45-1723.

45-3-117. Acknowledgments by stockholders, members, and employees.

No public officer qualified to take acknowledgments or proofs of any instrument in writing in which an association is interested shall be disqualified by reason of the officer's status as a stockholder, member, or employee of the association so interested, and the acknowledgments or proofs previously taken are validated.

Acts 1978, ch. 708, § 5.24; T.C.A., § 45-1724.

45-3-118. References to “building and loan association.”

Any and all references in any provision of the laws of this state to the term “building and loan association” are deemed to refer to the term “savings and loan association.”

Acts 1978, ch. 708, § 5.25; T.C.A., § 45-1725.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 1, 2.

45-3-119. References to federal savings and loan associations.

Any and all references in any provision of the laws of this state to “federal savings and loan associations” are deemed to refer to “savings and loan associations operating under the laws of this state and federal savings and loan associations.”

Acts 1978, ch. 708, § 5.26; T.C.A., § 45-1726.

45-3-120. Liberal construction.

This chapter shall be liberally construed to promote and foster a sound and efficient system of savings and loan associations.

Acts 1978, ch. 708, § 5.27; T.C.A., § 45-1727.

Part 2
Organization

45-4-101. Corporation for carrying on credit union — Formation — Par value of shares.

1. Seven (7) persons, residents of this state, who are all bona fide residents of this state and who have a common bond of occupation and association or reside within a well defined neighborhood, community or rural district, by complying with this chapter, may become together with others who may hereafter be associated with them or their successors, a body corporate for the purpose of carrying on a credit union as herein provided.
2. The par value of the shares of capital stock shall be five dollars ($5.00).
3. The commissioner of financial institutions may designate or approve, upon application, charters for credit unions to be designated as central credit unions and each of which must contain in its name the word “central.” A proposed central credit union must also meet the following criteria:
   1. Fulfillment of such requirements as would apply to any other credit union chartered pursuant to this title and chapter;
   2. Demonstrated need for central credit union services of the one (1) or more areas of the state, or if appropriate, the entire state, that would be served by the proposed central credit union, giving particular consideration to the adequacy of existing central credit unions serving the state; and
   3. The ability of the field of membership and the area to be served to support the proposed central credit union, giving consideration to:
      1. The competition offered by existing central credit unions;
      2. The history of the potential field of membership and area to be served as it is related to the potential support for an additional central credit union;
      3. Opportunities for profitable employment for central credit union funds as indicated by the commissioner's review of credit union transactions and the number of potential credit union members of the proposed central credit union; and
      4. Other facts and circumstances bearing on the proposed central credit union and its relationship to the proposed field of membership, that, in the opinion of the commissioner, may be relevant.
4. Membership in a central credit union initially shall include not less than fifteen (15) credit unions organized and operating under this chapter or under any other credit union act, and may also include, but not be limited to:
   1. Officers, directors, committee members and employees of the credit unions; officials and employees of any association of credit unions; and employees of federal or state government agencies responsible for the supervision of credit unions in this state;
   2. Organizations and associations of credit unions or of those persons or organizations enumerated in subdivision (d)(1);
   3. Employees of an employer with insufficient numbers to form or conduct the affairs of a separate credit union, as determined by the commissioner;
   4. Persons in the field of membership of liquidated credit unions or of credit unions that have entered into or are about to enter into voluntary or involuntary liquidation proceedings; and
   5. Members of the immediate families of all members qualified in subdivisions (d)(1)-(4).

Acts 1923, ch. 68, §§ 1, 2; Shan. Supp., §§ 2198a3, 2198a4; Code 1932, § 3833; Acts 1937, ch. 264, §§ 1, 2; C. Supp. 1950, § 3833 (Williams, §§ 3832.1, 3833); Acts 1978, ch. 552, § 1; T.C.A. (orig. ed.), § 45-1802; Acts 1986, ch. 558, § 5.

Cross-References. Bank deposits and collections, title 47, ch. 4.

Central credit unions, dividends, § 45-4-503.

Central credit unions, power to borrow, § 45-4-502.

Funds transfers, title 47, ch. 4A.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

Common Sense of the Common Bond: Banks, Federal Credit Unions, and Field of Membership Rules, 66 Tenn. L. Rev. 1201 (1999).

Selected Tennessee Legislation of 1986, Tenn. L. Rev. 457 (1987).

45-4-102. Submission of bylaws and amendments to bylaws — Provisions.

1. At the time of applying for a charter of incorporation, the incorporators of the credit union shall submit, in duplicate, sets of bylaws with the acknowledgment of their adoption to the commissioner, which shall provide:
   1. The date of the annual meeting, which shall be at any time in January, February or March of each year, the manner of notification of meetings, conducting the same, the number of members constituting a quorum, and regulations as to voting;
   2. The number of directors, which shall be not less than five (5), all of whom must be members, their powers and duties, together with the duties of officers elected by the board of directors;
   3. The qualifications for membership;
   4. The conditions under which shares may be issued, transferred, and withdrawn, members' special accounts may be received and withdrawn, loans may be made and repaid and funds of the corporation may be otherwise invested; and
   5. The charges, if any, that will be made for failure to meet obligations punctually, whether or not the corporation will have the power to borrow, the method of receipting for money, the manner of accumulating a reserve fund and determining a dividend and other matters, consistent with this chapter, that may be required to perfect the organization and make possible the operation of the credit union in question.
2. Upon adoption of any amendments to its bylaws, the credit union shall submit duplicate copies to the commissioner. No amendment of the bylaws of the credit union shall become effective until approved in writing by the commissioner.
3. The credit union may adopt, subject to the approval of the commissioner, bylaws that substantially follow the National Credit Union Administration (NCUA) Federal Credit Union Bylaws or the NCUA Standard Bylaw Amendments. Any credit union adopting bylaw provisions in accordance with either the NCUA Federal Credit Union Bylaws or the NCUA Standard Bylaw Amendments may operate the credit union in accordance with the bylaws, notwithstanding other sections of this chapter to the contrary.

Acts 1923, ch. 68, § 4; Shan. Supp., § 2198a6; Code 1932, § 3834; Acts 1963, ch. 30, § 1; 1967, ch. 227, § 2; Acts 1973, ch. 294, § 6; T.C.A. (orig. ed.), § 45-1803; Acts 1986, ch. 558, § 5; 1987, ch. 100, § 1; 1989, ch. 223, § 1; 1992, ch. 591, §§ 1, 2.

45-4-103. Certificate of approval issued by commissioner of financial institutions on approval.

The commissioner shall approve the certificate of organization, and the bylaws, and if satisfied that the proposed field of operation is favorable to the success of the corporation and that the standing of the proposed incorporators is such as to give assurance that its affairs will be properly administered, the commissioner shall issue to the proposed incorporators a certificate of approval, annexed to the duplicate of the certificate of organization and of the bylaws.

Acts 1923, ch 68, § 4; Shan. Supp., § 2198a7; Code 1932, § 3835; Acts 1937, ch. 264, § 3; C. Supp. 1950, § 3835; Acts 1973, ch. 294, § 6; T.C.A. (orig. ed.), § 45-1804; Acts 1986, ch. 558, § 5.

45-4-104. Use of words “credit union” in name or title regulated.

The use by any person, corporation, association or copartnership, except corporations formed under this chapter, of any name or title that contains the words “credit union” is a Class C misdemeanor.

Acts 1923, ch. 68, § 5; Shan. Supp., § 2198a8; Code 1932, § 3836; T.C.A. (orig. ed.), § 45-1805; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

Part 2
Organization and Operation

45-5-101. Purpose and construction.

1. This chapter is adopted for the purpose of revising and restating the Industrial Loan and Thrift Companies Act, to the end that the people of this state may have available the facilities and resources of regulated lending institutions to meet their needs for loans at rates and charges reasonably commensurate with economic realities.
2. This chapter shall be liberally construed to effectuate its declared purpose, and to that end, no charge authorized under this chapter shall be construed as interest or a loan charge that is not defined and denominated as such.
3. The procedural provisions of this chapter shall be construed in pari materia with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, to the end that all proceedings under this chapter to which the Uniform Administrative Procedures Act applies shall be governed by the Uniform Administrative Procedures Act, with this chapter construed as supplemental thereto. Only where there is an express conflict shall this chapter be deemed to control.

Acts 1979, ch. 204, § 25; T.C.A., § 45-2025.

Compiler's Notes. The former chapter §§ 45-2001 — 45-2021 (Acts 1951, ch. 226, §§ 1-15 (Williams, §§ 6720.1 — 6720.15); Acts 1955, ch. 139, § 1; 1957, ch. 389, § 1; 1959, ch. 205, §§ 1, 2; 1963, ch. 351, §§ 1, 2; 1968, ch. 466, §§ 1-10; 1969, ch. 260, § 4; ch. 275, § 1; 1974, ch. 425, § 1; 1975, ch. 261, §§ 1, 2, 5, 6, 7, 8, 11; 1977, ch. 104, § 1) was repealed by Acts 1979, ch. 204, § 26 and the present provisions substituted therefor.

Section 28 of Acts 1979, ch. 204 provided:

“Transactions validly entered into before July 1, 1979, and the rights, duties and interests flowing from them, remain valid thereafter, and may be terminated, completed, consummated or enforced as required or permitted by any statute or other law repealed or amended by this Act, as though such repeal or amendment had not occurred.”

Section 30 of Acts 1979, ch. 204 provided that the Act “applies to transactions entered into and events occurring after midnight on June 30, 1979, including any refinancing, consolidations and deferrals made after that date as to loans whenever made.”

Cross-References. Bank deposits and collections, title 47, ch. 4.

Funds transfers, title 47, ch. 4A.

Letters of credit, title 47, ch. 5.

Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Savings Institution Act, title 45, ch. 3, part 14.

Law Reviews.

State and Local Taxation of Financial Institutions: An Opportunity for Reform (C. James Judson & Susan G. Duffy), 39 Vand. L. Rev. 1057 (1986).

Attorney General Opinions. Effect of regulations issued by the comptroller of the currency, OAG 04-057, 2004 Tenn. AG LEXIS 55 (4/06/04).

45-5-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:

1. “Actuarial method” means the method of allocating payments made on a debt between the principal and interest pursuant to which payment is applied first to accumulated interest and any remainder is subtracted from, or any deficiency is added to, the unpaid principal balance of the debt;
2. “Affiliated lender” means any industrial loan and thrift company or industrial investment company or industrial bank under common control with another registrant, or working together with another registrant, so as to effect for each other a greater volume of business;
3. “Amount financed” means the amount financed as disclosed under the federal Truth in Lending Act, which is contained in Title I of the Consumer Credit Protection Act (15 U.S.C. § 1601 et seq.) and Regulation Z (12 CFR Part 226);
4. “Commissioner” means the commissioner of financial institutions;
5. “Control” means possession, direct or indirect, of the power to direct or cause the direction of management and policies of a person, whether through the ownership of voting securities by contract or otherwise; provided, that no individual shall be deemed to control a person solely on account of being a director, officer, or employee of the person. For purposes of this section, a person who, directly or indirectly, owns, controls, holds the power to vote, or holds proxies representing twenty-five percent (25%) or more of the then outstanding voting securities issued by another person is presumed to control the person. For purposes of this section, the commissioner may determine whether a person, in fact, controls another person;
6. “Controlling person” means any person in control of a registrant;
7. “Effective rate of interest” means the simple rate of interest, including the result of converting discount or other nominal rates of interest into simple rates of interest;
8. “Endorsement company” is any person engaged in the business of arranging for the making of loans, other than a residential mortgage loan, for a fee, consideration or charge, by endorsement or by providing security for loans or otherwise, even though the person does not actually make the loan; provided, however, that for loans, other than a residential mortgage loan, a natural person may refer a potential borrower to a registrant and receive a fee or consideration from the registrant without being deemed an “endorsement company,” so long as the natural person does not claim to be a loan broker or “endorsement company”;
9. “Industrial bank” means a person organized and registered as an industrial bank pursuant to this chapter, engaged in the business of making loans and imposing the interest and loan charges authorized under this chapter, that issues thrift certificates and that is also examined, supervised and liquidated as a state bank under this title;
10. “Industrial investment company” means a person organized and registered as an industrial investment company pursuant to this chapter, engaged in the business of making loans and imposing the interest and loan charges authorized under this chapter, that issues investment certificates subject to the Tennessee Securities Act, compiled in title 48, chapter 1, part 1, and that is also examined, supervised and liquidated as a state bank under this title;
11. “Industrial loan and thrift company” means a person engaged in the business of making loans and imposing the interest and loan charges authorized under this chapter, and includes persons engaged in business as endorsement companies;
12. “Interest” means compensation for the use, detention or forbearance to collect money over a period of time, and does not include compensation for other purposes, including, but not limited to:
    1. Time-price differentials;
    2. Loan charges as provided in § 45-5-403; and
    3. Insurance charges as provided in § 45-5-305;
13. 1. “Investment certificate” means a writing by which an industrial investment company evidences its receipt of money from a natural person and its obligation to repay the money, with interest, in accordance with the writing, which certificates are not insured by an agency of the United States government;
    2. “Investment certificate” does not include:
       1. Promissory notes, bonds, debentures, commercial paper and the like issued by an industrial loan and thrift company or industrial investment company or industrial bank to a bank, insurance company, or other commercial lender; or
       2. A promissory note — provided, that the note is nonnegotiable to a natural person and includes a provision to the effect that any attempt at its assignment to any person other than the maker, a bank, insurance company, or other commercial lender shall be null, void and of no effect — issued by an industrial loan and thrift company to the following:

1. A bona fide executive officer who works at least thirty (30) hours per week at the company, or to members of the executive officer's immediate family;
2. A voting member of the board of directors of the company, or to members of the voting member's immediate family; or
3. To a shareholder, including a beneficial owner, of the company where the shareholder and members of the shareholder's immediate family own at least twenty-five percent (25%) of the outstanding voting shares of the company;

For purposes of subdivision (13)(B)(ii), “immediate family” includes a note payee, and the payee's parents, grandparents, siblings, children and grandchildren; and

The burden of demonstrating to the commissioner that an obligation is not an “investment certificate” shall be on the registrant, and the registrant shall file its reports under this chapter in a manner that clearly reflects that exempt status is being claimed;

“Loan charges” means compensation to a registrant for services, expenses, detriments or commitments directly incident to a loan, and does not include compensation for other purposes, including, but not limited to, time-price differentials, interest or insurance charges;

(A)  In general, “loan processor or underwriter” means an individual who performs clerical or support duties as an employee, not an independent contractor, at the direction of and subject to the supervision and instruction of a registrant authorized to make residential mortgage loans;

For purposes of subdivision (15)(A), “clerical or support duties” may include, subsequent to the receipt of an application for a residential mortgage loan:

The receipt, collection, distribution and analysis of information common for the processing or underwriting of the loan; and/or

Communicating with a consumer to obtain the information necessary for the processing or underwriting of the loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms;

“Mortgage loan originator” means:

An individual who, for compensation or gain or in the expectation of compensation or gain:

Takes a residential mortgage loan application; or

Offers or negotiates terms of a residential mortgage loan;

“Mortgage loan originator” does not include an individual engaged solely as a loan processor or underwriter for a registrant, unless that individual is an independent contractor and not an employee;

“Nationwide Mortgage Licensing System and Registry” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of licensed mortgage loan originators;

“Nominal rate of interest” means a stated rate of interest, other than simple interest, including, but not limited to, discount interest;

“Person” means an individual, corporation, firm, trust, estate, partnership, joint venture or association, as the context may require;

“Principal” means the total of money paid to, received by, or paid or credited to the account of the borrower, including loan charges as provided in § 45-5-403(a)(1)-(3), as applicable, and including insurance charges for which the borrower contracts to pay pursuant to § 45-5-305;

“Registrant” means any person registered as an industrial loan and thrift company, industrial investment company or industrial bank under this chapter;

“Residential mortgage loan” means any loan, including an extension of credit, primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling, as defined in § 103(v) of the federal Truth in Lending Act (15 U.S.C. § 1602(v)), or residential real estate upon which is constructed or intended to be constructed a dwelling, as so defined;

“Residential real estate” means any real property located in this state upon which is constructed or intended to be constructed a dwelling;

“Simple rate of interest” means the ratio between the interest payable on an obligation and the principal for a period of time, expressed as a percentage for a period such as a year or a month;

“Thrift certificate” means a writing by which an industrial bank evidences its receipt of money from a natural person and its obligation to repay the money, with interest in accordance with the writing, that is insured by an agency of the United States government. “Thrift certificate” does not include investment certificate, and does not include commercial paper or other evidence of indebtedness issued by an industrial bank to a bank, insurance company or other commercial lender;

“Total amount of the loan” means the aggregate amount of money scheduled to be paid by a borrower to a registrant to repay a loan, including principal and any interest precomputed and deducted in advance; and

“Unique identifier” means a number or other identifier assigned by protocols established by the Nationwide Mortgage Licensing System and Registry.

Acts 1979, ch. 204, § 1; T.C.A., § 45-2001; Acts 1983, ch. 274, § 8; 1988, ch. 737, § 1; 1990, ch. 857, §§ 1, 3; 1991, ch. 57, § 1; 1997, ch. 19, § 1; 2001, ch. 165, §§ 1, 2; 2009, ch. 499, §§ 1, 2; 2018, ch. 600, §§ 1, 2.

Compiler's Notes. Acts 2018, ch. 600, § 6 provided that the act, which amended this section, shall apply to loans made on or after March 23, 2018.

Law Reviews.

State Regulation of Bank Holding Companies and the Future of Interstate Banking: A Tennessee Perspective (Colman B. Hoffman and Kathryn R. Edge), 51 Tenn. L. Rev. 383 (1984).

45-5-103. Requirement of registration.

1. Except as otherwise provided by this chapter, no person shall engage in business as an industrial loan and thrift company or industrial bank or industrial investment company without obtaining from the commissioner a certificate of registration as herein provided.
2. A separate certificate of registration shall be required for each office or other place from which the business is conducted. However, loans secured by real property are not required to be closed at an office where the registrant making the loan is registered; but the loans may be closed at the office of any attorney at law licensed to practice in Tennessee or at the office of a title insurance company or title insurance agency licensed to do business in Tennessee; provided, that the closing location is within this state and within one hundred (100) miles of any registered office of the registrant making the loan.

Acts 1979, ch. 204, § 2; T.C.A., § 45-2002; Acts 1983, ch. 274, § 9; 1993, ch. 133, § 1.

Compiler's Notes. For repeal of former section, see Compiler's Notes to § 45-5-101.

45-5-104. Scope of chapter.

This chapter applies only to persons engaged in business as industrial loan and thrift companies or industrial banks or industrial investment companies. Neither the requirement of registration nor any other provision of this chapter shall apply to any state or national bank, other than industrial banks, any state or federal savings and loan association, any state or federal credit union, any insurance company, or any other person engaged in the business of making loans whose activities in so doing are subject to supervision and regulation by a state or federal administrative agency; nor shall the requirement of registration or any other provision of this chapter apply to licensed pawnbrokers, or to any person engaged in the sale of goods or services as a licensed pawnbroker.

Acts 1979, ch. 204, § 3; T.C.A., § 45-2003; Acts 1983, ch. 274, § 10.

Compiler's Notes. For repeal of former section, see Compiler's Notes to § 45-5-101.

45-5-105. Persons registered under former law.

Any person holding a certificate of registration under this chapter as of May 16, 1983, shall be deemed, as of that date, to be registered as an industrial loan and thrift company hereunder, without the necessity of reapplying or paying any additional fees.

Acts 1979, ch. 204, § 24; T.C.A., § 45-2024; Acts 1983, ch. 274, § 11.

45-5-106. Violation of provisions a misdemeanor — Penalty.

Any person who willfully violates this chapter commits a Class C misdemeanor.

Acts 1979, ch. 204, § 23; T.C.A., § 45-2023; Acts 1989, ch. 591, § 113.

Cross-References. Penalty for Class C misdemeanor, § 40-35-111.

45-5-107. Delegation to industrial loan and thrift companies division.

The commissioner may by order delegate the powers and duties under this chapter to the assistant commissioner for the industrial loan and thrift companies division that are appropriate for the effective administration of this chapter.

Acts 1983, ch. 274, § 12.

Part 2
Registration of Companies