Chapter 1
Department of Financial Institutions

Part 1
Department of Financial Institutions

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).

NOTES TO DECISIONS

1. Construction.

The powers bestowed upon the commissioner of the Tennessee department of financial institutions are limited to those judicial powers reasonably necessary to the accomplishment of the purposes for that the department of financial institutions was created; therefore, T.C.A. § 45-2-1504 does not violate the separation of powers provision of Tenn. Const. art. II, § 2. Sentinel Trust Co. v. Lavender (In re Sentinel Trust Co.), 206 S.W.3d 501, 2005 Tenn. App. LEXIS 841 (Tenn. Ct. App. 2005), appeal denied, In re Sentinel Trust Co., — S.W.3d —, 2006 Tenn. LEXIS 612 (Tenn. 2006), appeal denied, In re Sentinel Trust Co., — S.W.3d —,2006 Tenn. LEXIS 613 (Tenn. 2006), appeal denied, Sentinel Trust Co. v. Lavender, — S.W.3d —, 2006 Tenn. LEXIS 614 (Tenn. 2006), cert. denied, Sentinel Trust Co. v. Lavender, 549 U.S. 1021, 127 S. Ct. 566, 166 L. Ed. 2d 412, 2006 U.S. LEXIS 8410 (2006).

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. 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.
    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.
    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).

NOTES TO DECISIONS

1. Evidence.

A party should allege facts demonstrating that he, she or it is adversely affected by the decision of the administrative agency in order to be classified as an aggrieved person and therefore to be entitled to judicial review; the aggrieved and directly affected person should be able to show a special interest in the final decision and that he, she or it is subject to a special injury not common to the public generally. League Cent. Credit Union v. Mottern, 660 S.W.2d 787, 1983 Tenn. App. LEXIS 623 (Tenn. Ct. App. 1983).

2. Liability of Commissioner.

Absent a clear legislative intent to the contrary, it would be a dangerous precedent to hold that a public official is subject to suit by a private individual or entity in competition, direct or indirect, with another individual or entity, chartered, licensed and/or regulated by that official under law. League Cent. Credit Union v. Mottern, 660 S.W.2d 787, 1983 Tenn. App. LEXIS 623 (Tenn. Ct. App. 1983).

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. 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.
  1. 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. 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.
    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.
  1. 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.
  2. 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.
  3. 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.
    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.
    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.
    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.
    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.
  2. 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.
    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.
    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.
  3. 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.
    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).
      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.
    4. 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.
    5. 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.
    6. 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).
    7. 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).
    8. 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.”

NOTES TO DECISIONS

1. Applicability

The taking emergency possession of a trust company by the commissioner of the Tennessee department of financial institutions was proper where there was a $7 million deficit, and there was ample evidence that the company was being run in unsound manner, because the legislature's intent to bring state trust companies under the umbrella of the Tennessee Banking Act is clear from the plain and ordinary meaning of the statutory language of T.C.A. § 45-1-124(b) and (d); therefore, T.C.A. § 45-2-1502, that authorizes the commissioner to take possession of a state bank under certain circumstances, also vests in the commissioner the full authority to take possession of a Tennessee trust company under the same set of circumstances. Sentinel Trust Co. v. Lavender (In re Sentinel Trust Co.), 206 S.W.3d 501, 2005 Tenn. App. LEXIS 841 (Tenn. Ct. App. 2005), appeal denied, In re Sentinel Trust Co., — S.W.3d —, 2006 Tenn. LEXIS 612 (Tenn. 2006), appeal denied, In re Sentinel Trust Co., — S.W.3d —,2006 Tenn. LEXIS 613 (Tenn. 2006), appeal denied, Sentinel Trust Co. v. Lavender, — S.W.3d —, 2006 Tenn. LEXIS 614 (Tenn. 2006), cert. denied, Sentinel Trust Co. v. Lavender, 549 U.S. 1021, 127 S. Ct. 566, 166 L. Ed. 2d 412, 2006 U.S. LEXIS 8410 (2006).

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. 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
      1. 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.
    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.
    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

45-1-201. Short title.

This part shall be known and may be cited as the “Bank Customer Dispute Resolution Act of 1981.”

Acts 1981, ch. 25, § 1; T.C.A., § 45-1-301.

Code Commission Notes.

This section was renumbered from § 45-1-301 to § 45-1-201 by the authority of the Code Commission in 2020.

Cross-References. Negotiable instruments, title 47, ch. 3.

Law Reviews.

Alternative Dispute Resolution in the Personal Injury Forum (William P. Zdancewica), 26 U. Mem. L. Rev. 1169 (1996).

45-1-202. Commissioner authorized to mediate or arbitrate.

The commissioner has the discretion to mediate or arbitrate a complaint against a state bank made by a customer of the bank.

Acts 1981, ch. 25, § 2; T.C.A., § 45-1-302.

Code Commission Notes.

This section was renumbered from § 45-1-302 to § 45-1-202 by the authority of the Code Commission in 2020.

45-1-203. Decision to intervene discretionary with commissioner.

Upon receipt of a complaint, the commissioner shall determine whether mediation or arbitration is appropriate; however, the commissioner's decision not to resolve a complaint shall not be reviewable, and the commissioner shall not resolve a complaint unless the customer and the bank both agree to the resolution. The commissioner shall consider the amount of money in dispute, the complexity of facts and law, the ability of the customer to obtain judicial relief, and other matters that may be relevant to determine whether a dispute appropriately may be resolved by the commissioner's mediation or arbitration. The commissioner, however, shall not resolve through arbitration a complaint involving more than seven hundred fifty dollars ($750).

Acts 1981, ch. 25, § 3; T.C.A., § 45-1-303.

Code Commission Notes.

This section was renumbered from § 45-1-303 to § 45-1-203 by the authority of the Code Commission in 2020.

45-1-204. Informal conference or hearing — Mediation or arbitration — Award.

  1. In resolving a complaint, the commissioner may conduct an informal conference or informal hearing or may require that the parties submit written statements or sworn affidavits.
  2. In addition, the commissioner may designate a qualified person, whether or not an employee of the department, to mediate or arbitrate the complaint.
  3. When the commissioner conducts an informal hearing or conference, the parties are not bound by the rules of procedure and evidence pertaining to contested cases.
  4. Upon reaching a decision, the commissioner shall notify the parties with a written award.

Acts 1981, ch. 25, § 4; T.C.A., § 45-1-304.

Code Commission Notes.

This section was renumbered from § 45-1-304 to § 45-1-204 by the authority of the Code Commission in 2020.

45-1-205. Award is binding — Review on appeal — Compliance orders.

  1. An award of the commissioner issued pursuant to this part shall be binding upon the parties, but either party may seek to vacate the award in any court with jurisdiction over the original subject matter, by commencing the appropriate original action against the other party within thirty (30) days of receiving a copy of the award.
  2. Review by the court shall be de novo.
  3. If the party against whom an award is rendered does not initiate an appeal as  provided in subsection (a) and does not comply with the award, the commissioner shall consider the lack of compliance as a violation of this section and may order the party to comply as provided by § 45-1-107.

Acts 1981, ch. 25, § 5; T.C.A., § 45-1-305.

Code Commission Notes.

This section was renumbered from § 45-1-305 to § 45-1-205 by the authority of the Code Commission in 2020.

45-1-206. Commissioner to notify parties of effect of award, right to appeal.

The commissioner shall advise both parties in writing, at the time the award is made, that the commissioner's decision will be binding on both parties unless appealed to a court of law within thirty (30) days, as provided in § 45-1-205.

Acts 1981, ch. 25, § 6; T.C.A., § 45-1-306.

Code Commission Notes.

This section was renumbered from § 45-1-306 to § 45-1-206 by the authority of the Code Commission in 2020.

45-1-207. Commissioner's rulemaking authority.

The commissioner is granted the power to enact reasonable substantive and procedural rules to carry out the purposes of this part.

Acts 1981, ch. 25, § 7; T.C.A., § 45-1-307.

Code Commission Notes.

This section was renumbered from § 45-1-307 to § 45-1-207 by the authority of the Code Commission in 2020.

45-1-208. Legislative intent — Liberal construction.

  1. This part is enacted for the purpose of providing the citizens of this state with an informal and expeditious method of resolving customer disputes with state chartered banks.
  2. This part is not intended to create a new agency or division within the department. It is intended that the purpose of this part be carried out primarily by existing personnel of the department, or qualified persons designated to resolve disputes by the commissioner, who will act without compensation.
  3. This part shall be liberally construed to effect its declared purpose.

Acts 1981, ch. 25, § 8; T.C.A., § 45-1-308.

Code Commission Notes.

This section was renumbered from § 45-1-308 to § 45-1-208 by the authority of the Code Commission in 2020.

45-1-209. General arbitration law inapplicable.

Title 29, chapter 5, part 1 does not apply to an arbitration covered by this part.

Acts 1981, ch. 25, § 9; T.C.A., § 45-1-309.

Code Commission Notes.

This section was renumbered from § 45-1-309 to § 45-1-209 by the authority of the Code Commission in 2020.

45-1-111. Limitation of personal liability.

45-1-129. Electronic applications.

Chapter 2
Banking Institutions

Part 1
General Provisions

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

    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.
      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.
    3. 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.
    4. 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.
    5. 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).
      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.
    6. 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.
    7. 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.
    8. 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.
  1. 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.
  2. 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.
  3. 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. 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.
    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
        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

45-2-201. Incorporators — Applicant requirements.

  1. A corporation seeking to conduct a banking business in Tennessee may be organized by five (5) or more incorporators, a majority of whom shall be residents of this state. The incorporators shall complete the process provided in this part and as outlined in subsection (c).
  2. Each incorporator shall subscribe and pay in full, in cash, for common stock in a minimum amount as determined by the commissioner.
  3. In order to provide for the organization of the business authorized to conduct banking business in Tennessee, applicants shall complete the following:
    1. Submit a notice of intention and request for issuance of a charter for a corporation seeking to conduct banking business in Tennessee to be filed with the secretary of state as provided in § 45-2-202;
    2. Submit and complete an application for charter, as provided in § 45-2-204; and
    3. Submit and complete an application for certificate of authority, as provided in § 45-2-212.
  4. For purposes of this part, a bank may be organized as a corporation as provided in title 48, chapters 11-27 or as a limited liability company as provided in title 48, chapters 201-249 and as outlined in § 45-2-220.

Acts 1969, ch. 36, § 1 (3.304); T.C.A., § 45-201; Acts 1996, ch. 768, § 5; 2006, ch. 660, § 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.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Cross-References. Conversion of financial institutions, title 45, ch. 11.

45-2-202. Notice of intention — Request for issuance of charter — Approval or nonapproval of notice of intention or request for issuance of charter and accompanying documents — Notice — Filing — Restriction on acceptance of shares of capital stock until notice of approval received.

  1. The incorporators shall file with the commissioner a notice of their intention to organize a corporation seeking authority to become a state bank, signed by each of the incorporators. The notice shall state the following and other information that the commissioner may require:
    1. The name, residence and occupation of each incorporator, and the amount of stock subscribed and paid for by each;
    2. The name and address of an individual within the state to whom notice to all incorporators may be sent;
    3. The total capital, the number of shares of each class and series, the par value of the shares of each class and series of the corporation and a copy of the stockholder offering circular and subscription agreement. For purposes of Tennessee law, any securities with different voting, distribution, or liquidation rights or preferences shall be deemed to be securities of different classes;
    4. Whether it is intended that the proposed state bank shall have trust powers;
    5. The community in which the proposed state bank is to be headquartered;
    6. The proposed name of the institution, which, in the commissioner's judgment, is not likely to cause confusion to the affected public. The incorporators shall use the phrase “in organization” after the proposed bank's name, until such time as the certificate of authority has been issued;
    7. A statement of the method of financing and amount of organizational expense fund as required in § 45-2-203;
    8. A copy of the escrow agreement; and
    9. The filing fee required by the secretary of state.
  2. The incorporators may also file with the commissioner a request for issuance of charter for a corporation seeking to conduct banking business in Tennessee, accompanied by an executed charter. The executed charter filed with the commissioner shall be in the form the commissioner prescribes, containing the following information:
    1. The name of the state bank;
    2. If the state bank is to exercise trust powers, a statement to that effect;
    3. The community in which the main office is to be located;
    4. The amount of capital, the number of shares of each class and series, the relative preferences, powers and rights of each class and series, the par value of the shares of each class and series, if any, and the amount of the paid-in surplus; and
    5. Any other proper provisions to govern the business and affairs of the state bank that may be desired by the incorporators, including, but not limited to, the initial directors of the proposed state bank.
    1. If the notice of intention, request for issuance of charter or any accompanying documents do not comply with the requirements of this section, the commissioner shall, within ten (10) business days after receipt, either:
      1. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents are approved as to form pending the receipt of any additional information requested of the applicant in the notice; or
      2. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents, have not been accepted, calling attention to the defect or defects in the documents. The incorporators may resubmit the notice of intention, proposed charter or accompanying documents, revised as necessary, to address the defect or defects noted by the commissioner.
    2. The commissioner shall have five (5) business days after receipt of the revised notice of intention, request for issuance of charter and accompanying documents to review the notice, request and documents and either:
      1. Notify the incorporators that the revised notice of intention, request for issuance of charter and accompanying documents are approved as to form; or
      2. Notify the incorporators that the notice of intention, request for issuance of charter and accompanying documents have not been accepted, calling attention to the defect or defects still in the documents.
    3. If the revised notice of intention, request for issuance of charter and accompanying documents are not accepted, any subsequent filing by the incorporators for the proposed bank shall be as if it were an initial filing.
    4. If the commissioner does not refuse to accept the notice of intention and request for issuance of charter or revised notice of intention and revised request for issuance of charter within the time provided, they shall be deemed to be approved as to form.
  3. After the notice of intention and request for issuance of charter for a corporation seeking to conduct banking business in Tennessee is accepted for filing or deemed to have been filed with the commissioner, the commissioner shall authorize the filing of the executed charter by endorsing approval on all copies thereof and filing the originally executed charter with the secretary of state, retaining one (1) copy for the department's files and returning one (1) copy to the incorporators within ten (10) business days thereafter, so that the incorporators may take any further steps necessary to duly incorporate the proposed new state bank as a corporate entity. However, the commissioner shall retain the right to require any amendment to the charter or disallow any proposed officer or director of the proposed new bank prior to granting a certificate of authority. Nothing in this subsection (d) shall prevent the commissioner from otherwise rejecting the application or refusing to grant a certificate of authority.
  4. It is a Class C misdemeanor, under this chapter and chapter 1 of this title, to accept any stock subscription for shares of capital stock of the proposed bank from any persons other than the incorporators until the incorporators have received the notification from the commissioner that the notice of intention and accompanying documents are approved as to form, or in violation of any order of the commissioner. Any subscription for capital stock of the proposed bank accepted in violation of this subsection (e) shall be enforceable by the commissioner and only to the extent the commissioner determines it to be necessary to protect investors.

Acts 1969, ch. 36, § 1 (3.305); 1973, ch. 294, § 6; T.C.A., § 45-202; Acts 1989, ch. 591, § 113; 1996, ch. 768, §§ 6, 7; 2001, ch. 54, § 5; 2006, ch. 660, § 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.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

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

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

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

45-2-203. Organizational expenses.

  1. Organizational expenses shall not be paid from capital or surplus funds of the bank without the prior written consent of the commissioner.
    1. Prior to filing the notice of intent, the incorporators shall subscribe for shares of the corporation seeking to conduct banking business in Tennessee in an amount the commissioner deems adequate to pay the organizational expenses of the proposed bank.
    2. The expense fund shall be used for expenses incurred by the incorporators in connection with the organization of the proposed bank. Subscriptions paid by the incorporators for their shares in the proposed bank may be used to pay organizational expenses, but, in that case, shall not be commingled with funds in any account in which any non-incorporator funds have been or are to be deposited.
  2. Payment from the expense fund for payment of broker commissions to secure subscriptions to stock shall not be permitted without prior written consent of the commissioner.

Acts 1969, ch. 36, § 1 (3.306); 1973, ch. 294, § 6; 1977, ch. 35, § 1; T.C.A., § 45-203; Acts 2006, ch. 660, § 1.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

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

45-2-204. Application for charter — Acceptance, nonacceptance and filing of application — Notice to other banks — Formation of interim bank.

  1. After the incorporators have received notification from the commissioner that the notice of intention and other accompanying documents are approved as to form, the incorporators or, after the charter has been filed, the corporation seeking authority to conduct banking business in Tennessee, may file an application and request for charter, if not previously requested, with the commissioner. The incorporators shall submit the following, if not previously filed with the commissioner:
    1. The information required by the commissioner in § 45-2-202(b);
    2. The application fee required by the commissioner;
    3. Proposed bylaws in the form the commissioner prescribes; and
    4. An application in the form and containing the information the commissioner requires, including the following:
      1. The name, residence and occupation of each subscriber from whom subscriptions have been accepted as of the date the application is filed, and the number of shares for which each subscriber has subscribed, which list shall be updated not less than every thirty (30) business days to add all additional subscribers and any amendments to any information previously filed;
      2. The past and present connection with any bank, other than as a customer on terms generally available to the public, of each director and each subscriber to more than ten percent (10%) of the capital stock, updated as necessary to identify subscribers not previously identified in the application; and
      3. The address at which it is proposed that the state bank do business, or, if the address is not known, the area within the community in which it is proposed that the business be located.
    1. If the application, the proposed charter or any other accompanying documents do not comply with the requirements of this chapter and chapter 1 of this title, the commissioner shall, within twenty (20) business days after the receipt thereof, either:
      1. Return them to the incorporators, calling attention to the defect or defects therein; or
      2. Notify the incorporators of the rejection of the application, calling attention to the defect or defects therein.
    2. If the application, proposed charter and accompanying documents, if any, are not so returned or rejected by the commissioner within twenty (20) business days of the receipt thereof, they shall be deemed to have been filed with the commissioner.
  2. Should the application be rejected or should a certificate of authority not be granted, the commissioner shall give appropriate notice to the secretary of state. The incorporators shall either:
    1. Return the original charter to the commissioner and take the steps that are necessary to dissolve the proposed state bank as a corporate entity as provided in the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27; provided, that all subscription proceeds, except those proceeds made by incorporators to establish an organizational expense fund as provided in § 45-2-203, shall be returned to all subscribers in accordance with the subscription agreement; or
    2. Amend the original charter to rename the corporate entity and revise any other provisions as determined by the commissioner as provided in the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
  3. The commissioner may also require publication of the notice.
  4. Notwithstanding this chapter and chapter 1 of this title to the contrary, the commissioner may prescribe by rule or regulation the application procedure for the formation of an interim bank to facilitate an interim bank merger, as defined in § 45-2-1402.

Acts 1969, ch. 36, § 1 (3.307); 1973, ch. 294, § 6; 1977, ch. 36, § 1; T.C.A., § 45-204; Acts 1983, ch. 74, § 4; 1996, ch. 768, § 8; 2006, ch. 660, § 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.

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 4, 5.

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).

45-2-205. Examination of application for charter — Factors considered.

  1. When an application for a charter has been filed with the commissioner, the commissioner shall make or cause to be made a careful investigation and examination relative to the following:
    1. The character, reputation and financial standing of the organizers or incorporators and their motives in seeking to organize the proposed state bank;
    2. The character, financial responsibility, banking or trust experience, and business qualifications of those proposed as officers of the bank;
    3. The character, financial responsibility, business experiences and standing in the community of the proposed directors of the bank;
    4. The need in the community where the bank would be located for banking, banking and trust, or trust facilities, or additional facilities of like character, giving particular consideration to the adequacy of existing banking and trust facilities;
    5. The ability of the community to support the proposed bank, giving consideration to:
      1. The competition offered by existing banks and other financial institutions;
      2. The banking history of the community;
      3. The opportunities for profitable employment of bank funds as indicated by the average demand for credit, the number of potential depositors, the volume of bank transactions, and the business and industries of the community, with particular regard to their stability, diversification and size; and
      4. If the bank is to exercise trust powers, the opportunities for profitable employment of fiduciary services; and
    6. Other facts and circumstances bearing on the proposed bank and its relation to the community that, in the opinion of the commissioner, may be relevant.
  2. Within the longer of six (6) months after the filing of the application or three (3) months after the filing of a listing of subscribers showing that at least seventy-five percent (75%) of the stock has been subscribed, the commissioner shall consider the commissioner's findings and recommendations and all other relevant information available to the commissioner and shall have the discretion to approve the application, but the commissioner shall not approve the application before ascertaining to the commissioner's satisfaction that:
    1. The public need and advantage will be promoted by the establishment of the proposed bank;
    2. Conditions in the community in which the bank would transact business afford reasonable promise of successful operation;
    3. The bank is being formed for no other purpose than the legitimate objects contemplated by this chapter and chapter 1 of this title;
    4. The proposed capital and surplus are not less than the required minimum and are adequate in the light of current and prospective banking conditions;
    5. Those proposed as officers and directors have sufficient experience, ability and standing to afford reasonable promise of successful operation; and
    6. The applicants have complied with all applicable provisions of this chapter and chapter 1 of this title.
  3. If the charter has not been previously granted in accordance with § 45-2-204(c), upon approval of the application, the commissioner shall grant a charter by endorsing the approval on all copies of the charter and filing one (1) copy with the secretary of state, one (1) copy with the register in the county in which the bank is located, retaining one (1) copy for the department's files and returning one (1) copy to the incorporators within twenty (20) days of the action approving the application.

Acts 1969, ch. 36, § 1 (3.308); 1973, ch. 294, § 6; T.C.A., § 45-205; Acts 1980, ch. 620, § 2; 1996, ch. 768, § 9; 2001, ch. 54, § 6.

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.”

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

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

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).

Decisions Under Prior Law

1. Basis of Decision.

Method by that superintendent of banks acquires facts upon that to base decision rests in his discretion so long as it is based upon some material fact or facts and is not arbitrary or illegal. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

45-2-206. Subscription calls.

After the charter for a corporation seeking to conduct banking business in Tennessee has been filed with the secretary of state, the incorporators or, if directors have been initially appointed, the directors of the proposed state bank, may call for the payment of the subscriptions. The subscriptions shall be placed into an escrow account. The incorporators or directors, as appropriate, may not remove any funds from the escrow account prior to the issuance of the certificate of authority or upon written approval from the commissioner.

Acts 1969, ch. 36, § 1 (3.309); T.C.A., § 45-206; Acts 1996, ch. 768, § 10; 2001, ch. 54, § 7; 2006, ch. 660, § 2.

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

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

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

45-2-207. Capital structure.

  1. A state bank shall have the capital structure that the commissioner deems adequate. The capital structure of an interim bank chartered pursuant to § 45-2-204(d) shall consist of amounts as determined by the commissioner and prescribed by rule or regulation.
  2. The commissioner may require the bank to increase its capital structure to the point deemed adequate by the commissioner before granting approval of an application for a branch office, amendment to charter, change of location or trust powers.
  3. The issuance of preferred or convertible preferred stock shall be authorized by the commissioner. The stock shall have the preferences, powers and rights the commissioner may approve. It shall not be retired without the approval of the commissioner, and the requirement of the approval shall be stated in the stock certificates, but the commissioner may give advance approval to sinking funds payable exclusively out of earnings available for dividends.
  4. The commissioner may direct a state bank to sell additional stock in a designated amount to remedy an impairment of capital.
  5. The commissioner may consider the value of outstanding debentures as capital for the purpose of determining the legal lending limits of the bank.

Acts 1969, ch. 36, § 1 (3.301); 1973, ch. 294, § 6; T.C.A., § 45-207; Acts 1983, ch. 74, § 5; 1993, ch. 447, § 2; 2001, ch. 54, §§ 8, 9.

Compiler's Notes. The section as set out above reflects the version prior to the amendment of this section by Acts 1996, ch. 447, § 2. Section (13) of that act provided that that amendment expired July 1, 1996, and that the prior version was reinstated.

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

Law Reviews.

Section I: Symposium - Rethinking The U.S. Regulatory Structure Governing Financial Institutions: 21st Century Solutions For a 21st Century Marketplace: When the Government Becomes a Stockholder: Impact of the Capital Purchase Program on Bank Regulation (Jackie Prester), 39 U. Mem. L. Rev. 931 (2009).

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

45-2-208. Capital notes and debentures.

  1. Any bank, after obtaining the prior approval of the shareholders owning two-thirds (2/3) of the stock of the bank entitled to vote and after obtaining the prior approval of the commissioner, may issue and sell its convertible or nonconvertible capital notes or debentures. Capital notes or debentures that are by their terms convertible into stock may be converted into shares of common or preferred stock in accordance with the provisions therefor as may be made in the capital notes or debentures with the approval of the commissioner.
  2. Capital notes and debentures issued by banks shall be unsecured indebtedness of the bank and shall be subordinate to the claims of all depositors and of all other creditors of the bank, regardless of whether the claims of the depositors arose before or after the issuance of the capital notes or debentures. In order to secure the payment of the capital notes or debentures, however, provisions for sinking funds may be made. In the event of liquidation, all depositors and all other creditors of the bank shall be entitled to be paid in full before payment shall be made on account of principal or interest on the capital notes or debentures. No payment shall be made at any time on account of the principal thereof unless following the payment the aggregate of the capital, surplus and undivided profits and capital notes or debentures thereafter outstanding shall be at least equal to the aggregate immediately before the original issuance of the capital notes or debentures, or as may otherwise be expressly authorized by the commissioner. The claims of holders of capital notes or debentures shall, however, be superior to the claims of stockholders for dividends or other claims on account of shares of capital stock held by them.
  3. The amount of outstanding capital notes and debentures issued and outstanding by any bank shall be, subject to the approval of the commissioner, treated as capital for the purpose of computing the loan limits prescribed by § 45-2-1102(a) and for the purpose of computing investment limits prescribed by § 45-2-607(a)(9).

Acts 1969, ch. 36, § 1 (3.302); 1973, ch. 294, § 6; T.C.A., § 45-208.

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

NOTES TO DECISIONS

1. Debentures.

Debentures are both unsecured and subordinated in payment to the claims of depositors and other creditors, and thus debenture holders are not entitled to pro rata distribution of the remaining assets in a sinking fund. First American Nat'l Bank-Eastern v. Federal Deposit Ins. Corp., 782 F.2d 633, 1986 U.S. App. LEXIS 21910 (6th Cir. Tenn. 1986).

45-2-209, 45-2-210. [Reserved.]

A state bank may provide for indemnification of its officers, directors or employees as provided in the Tennessee Business Corporation Act, compiled in title 48, chs. 11-27.

Acts 1969, ch. 36, § 1 (3.311); T.C.A., § 45-211; Acts 1980, ch. 549, § 1; 1994, ch. 551, § 7.

Law Reviews.

National Banks — National Banks Need Not Comply With State Banking Laws When Seeking To Relocate Principal Office And Retain The Former As A Branch, 24 Vand. L. Rev. 175.

45-2-212. Application for certificate of authority — Contents.

After the applicant has received notification from the commissioner that the application for charter has been approved and subscription proceeds have been accepted and collected for at least the minimum capital of the proposed state bank as required by the commissioner, the proposed state bank shall file a request with the commissioner for the issuance of a certificate of authority, which request shall contain:

  1. A statement that the capital and surplus have been paid in;
  2. The name and address of each stockholder and the number of shares held by the stockholders; and
  3. Any other information that the commissioner may require to enable the commissioner to determine whether authority to commence business should be issued.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-212; Acts 1996, ch. 768, § 11; 2006, ch. 660, § 3.

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

Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

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

45-2-213. Return of noncomplying applications — Effect of failure to return.

  1. If the application for a certificate of authority or any accompanying documents do not comply with the requirements of this chapter and chapter 1 of this title, the commissioner shall, within ten (10) business days after the receipt thereof, return them to the incorporators, calling attention to the defect or defects in the application.
  2. If the application and accompanying documents are not so returned within the ten-day period, they shall be deemed to have been filed with the commissioner.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-213; Acts 1996, ch. 768, § 12; 2007, ch. 29, § 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.

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

45-2-214. Time for approval or denial of application — Conditions for approval.

The commissioner shall approve or deny the application for a certificate of authority within thirty (30) days after the application has been filed. The commissioner shall approve the application if:

  1. The capital and surplus have been fully paid in cash;
  2. Appropriate bylaws have been adopted;
  3. Any conditions imposed by the commissioner in granting the charter have been fulfilled;
  4. The requirements of this chapter and chapter 1 of this title have been satisfied; and
  5. An amount of fidelity bond coverages satisfactory to the commissioner is in force.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-214; Acts 1996, ch. 768, § 13.

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

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

45-2-215. Approval or denial of application — Action by commissioner — Limitation of bank or trust company to fiduciary purposes and powers.

  1. If the commissioner approves the application, the commissioner shall promptly issue a certificate of authority and mail the same to the incorporators. If the commissioner denies the application, the commissioner shall promptly mail a notice of the denial to the incorporators, stating therein the reason or reasons for denying the application.
  2. A state bank or trust company, for which the commissioner has approved the filing of a charter and has issued a certificate of authority, is not illegally organized because its purposes and powers are, or have been required by the commissioner to be, limited to fiduciary purposes and powers.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-215; Acts 1980, ch. 620, § 1; 1996, ch. 768, § 14.

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

“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.”

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

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

Decisions Under Prior Law

1. Purpose.

The provision of the former statute for approval of the bond required to be executed for protection of the deposit of state funds, and the provision for issuance of a permit to the trust company to do a general banking business, were designed for the protection of the depositors, and could not be converted into a shield to protect the trust company from liability. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

2. Operation Without Certificate.

The abuse of corporate power by a trust company by failing to obtain a permit from the (former) state superintendent of banking to do a general banking business, prior to receiving a deposit from the state, did not render the transaction ultra vires, in view of § 45-2-1707 where its charter conferred upon it the power. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

Even if a transaction whereby the state deposited a sum of money with a trust company was ultra vires, because the trust company had not received a permit from the state superintendent of banking to do a general banking business, the defense was not available to the trust company so long as it retained the benefits received by the transaction. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

Where state officials were dealing with a trust company in a transaction relating to deposit of state funds, and it appeared from the trust company's charter that it had full power to do a general banking business, including reception of deposits, the state was not chargeable with notice that the trust company had failed to obtain from the (former) superintendent of banking a permit to do a general banking business, as affecting the right of recovery. State v. Holston Trust Co., 168 Tenn. 546, 79 S.W.2d 1012, 1934 Tenn. LEXIS 85 (1934).

45-2-216. Forfeiture of charter for failure to obtain certificate of authority or to commence business — Restitution of improper expenditures.

If no application for a certificate of authority is filed within six (6) months following the grant of a charter or any additional period allowed by the commissioner, or if a certificate of authority has been finally denied, or if the bank fails to commence business within six (6) months after the issuance of a certificate of authority or any additional period allowed by the commissioner, the charter shall be forfeited, and the bank shall be liquidated in accordance with the orders of the commissioner. If an improper expenditure has been made, the commissioner may order the persons who were incorporators or directors at the time to restore the sum by equal contributions.

Acts 1969, ch. 36, § 1 (3.312); 1973, ch. 294, § 6; T.C.A., § 45-216.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 7.

45-2-217. Operation before receiving certificate of authority prohibited.

It is a criminal offense against this chapter and chapter 1 of this title for a state bank to perform any act other than to perfect its organization, obtain and equip a place of business and otherwise prepare to do business before receiving a certificate of authority to operate.

Acts 1969, ch. 36, § 1 (3.312); T.C.A., § 45-217.

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

45-2-218. Charter amendment.

  1. A state bank shall apply to the commissioner to amend its charter or to change its location or the location of any of its branches. The change of location shall be consistent with § 45-2-614.
  2. An application for an amendment of the charter shall be authorized by the vote of at least a majority of the outstanding voting stock at a meeting of stockholders except as provided by § 48-20-102(1)-(7).
  3. Notice of the application shall be sent to the persons and organizations that the commissioner may require.
  4. In making a determination, the commissioner shall consider whether the public convenience and advantage would be served by granting the application and shall be guided by the standards prescribed for the approval of an application for a charter, insofar as they are reasonably applicable.
  5. Any amendment to the charter of an incorporated bank increasing or decreasing its capital stock or otherwise must be recorded in accordance with § 45-2-205(c).
  6. Any other provision of the law to the contrary notwithstanding, any bank that was exercising fiduciary powers on April 2, 1969, may continue to exercise the powers without changing any provisions of its charter.
  7. Notwithstanding any law to the contrary, the name, address, and zip code of each incorporator does not need to be set forth in a restated charter.

Acts 1969, ch. 36, § 1 (3.313); 1971, ch. 343, § 1; 1971, ch. 433, § 1; 1973, ch. 294, § 6; T.C.A., § 45-218; Acts 1994, ch. 551, § 8; 2001, ch. 54, § 10; 2020, ch. 605, § 4.

Amendments. The 2020 amendment added (g).

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 6.

45-2-219. Charter null and void on ceasing business — Definition.

Any charter issued under  this chapter shall be null and void if an institution that is chartered and commences business ceases to conduct business and no business is conducted for a period of two (2) years. For the purposes of this section, “business” means:

  1. Receiving deposits, paying out money on checks and making loans; or
  2. Acting as a fiduciary for the purposes of a trust company.

Acts 1999, ch. 112, § 5.

45-2-220. Organization as a limited liability company — Rules and regulations — Applicability of limited liability company laws.

  1. Subject to the requirements and restrictions of this chapter, including, but not limited to, deposit insurance requirements where applicable, a bank or trust company may organize as a limited liability company pursuant to title 48, chapters 201-249.
  2. The department shall have the authority to promulgate rules and regulations specifying the conditions under which a bank or trust company may organize as a limited liability company.
  3. To the extent title 48, chapters 201-249 is consistent with and not in conflict with this chapter and the rules and regulations of the department, title 48, chapters 201-249 shall apply to a bank or trust company that has organized as a limited liability company.

Acts 2006, ch. 660, § 4.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

Part 3
Stockholders

45-2-301. [Reserved.]

The bank may not vote shares that it holds in any capacity other than as fiduciary.

Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-220; Acts 1994, ch. 551, § 9.

45-2-303. Items allowed in the charter of a bank — Required language if bank amends its charter — Shareholder consent to release of information — No fee for approving charter amendment — Right of shareholder to be informed in writing of number of shares counted — Shareholder right to declaratory judgment regarding dispute about votes.

  1. In addition to any provisions permitted or required by this chapter and the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, the charter of a bank may include all, but not less than all, of the following:
    1. The bank shall not disclose the name, address or number of shares of a bank shareholder, except as required or permitted by the Financial Records Privacy Act, compiled in chapter 10 of this title, and such information shall be deemed to be a financial record within the meaning of that act;
    2. No person shall solicit a proxy or written consent from any shareholder to vote shares of the bank, unless the information specified by the bank's bylaws is delivered to the bank and to the shareholders as a group no later than the date specified in the bank's bylaws. In adopting an informational requirement, a bank shall provide the information to all shareholders or specify a reasonable and timely method for a shareholder to communicate with other shareholders about bank business;
    3. If the bylaws state that the bank will communicate the information to the other shareholders on the shareholder's behalf, the bank may charge a reasonable fee to cover the cost of distribution, which shall be provided for in the bylaws; and
    4. The bank shall notify the requesting shareholder that it has provided the requested information to the other shareholders. The bank shall notify the requesting shareholder within seven (7) days after receiving the request and the information to be provided to the shareholders. The bylaws shall describe the means by which the bank will notify the requesting shareholders.
  2. If a bank amends its charter in accordance with subsection (a), the charter shall include the following language, in all capital letters and in at least twelve (12) point bold type:

    THE RECORD OF SHAREHOLDERS OF THIS BANK IS NOT SUBJECT TO INSPECTION AND COPYING IN ACCORDANCE WITH TENN. CODE ANN. § 48-26-102. IT IS A FINANCIAL RECORD AND MAY BE OBTAINED ONLY IN ACCORDANCE WITH THE FINANCIAL RECORDS PRIVACY ACT, COMPILED IN TENN. CODE ANN. §§ 45-10-101 ET SEQ.

  3. If a shareholder of a bank, which amends its charter in accordance with subsection (a), notifies the bank in writing that the shareholder consents to the release of information in the shareholder record relating to such shareholder, the bank shall timely provide such information to any shareholder requesting the information.
  4. If a bank adopts a charter amendment pursuant to subsection (a), the commissioner shall not charge a fee for approving the amendment.
  5. Any shareholder, if the bank's charter or bylaws expressly authorize shareholder actions by written consent, shall have the right to be informed in writing by the bank of the number of shares counted:
    1. Toward a quorum for a shareholders meeting;
    2. Regarding any nomination or proposal voted upon at a shareholders meeting; or
    3. Regarding an action taken by written consent.
  6. Any bank shareholder of record shall have the right to seek a declaratory judgment with respect to a bona fide dispute regarding votes described in subsection (e) in a court of record in the county in which the bank's main office or chief executive's office is located.
  7. For purposes of this section:
    1. “Bank” has the same meaning as provided in § 45-1-103, except that “bank” shall be deemed to include any controlling person;
    2. “Controlling person” has the same meaning as provided in § 45-2-103(a)(1); and
    3. “Person” has the same meaning as provided in § 45-2-103(a)(1).
  8. Nothing in this section shall in any way limit the authority held by the commissioner.

Acts 2013, ch. 119, § 1.

Compiler's Notes. Former § 45-2-303 (Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-221), concerning proxies, was repealed by Acts 1994, ch. 551, § 9.

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

45-2-304. Voting trusts — Approval of commissioner.

  1. No shares deposited under a voting trust agreement shall be voted by the trustees unless the agreement has been approved by the commissioner.
  2. Approval shall be withheld, or if previously granted, revoked whenever it appears that the existence of the trust would tend to reduce competition among lending institutions or to affect adversely the character or competence of the management or the bank's policies or operation procedures.

Acts 1969, ch. 36, § 1 (3.314); 1973, ch. 294, § 6; T.C.A., § 45-222.

45-2-305. Stockholders relieved of double liability.

Stockholders in banking institutions doing a general banking business in this state pursuant to charters granted under authority of Acts 1909, ch. 54, §§ 1-4 (compiled as §§ 3892-3895, inclusive, of the Code of 1932, and repealed by Acts 1939, ch. 106), are relieved of the double or additional individual liability to the depositors of the institutions; notwithstanding that such double liability feature may be written in the body of the charters of the banking institutions, and shown on the face of the stock certificates.

Acts 1969, ch. 36, § 1 (3.314); T.C.A., § 45-225; T.C.A., § 45-2-307.

Code Commission Notes.

This section was renumbered from § 45-2-307 to § 45-2-305 by the authority of the Code Commission in 2020.

Compiler's Notes. For cases involving double liability under §§ 3892-3895 of the 1932 Code, see Rose v. Morrow, 153 Tenn. 97, 282 S.W. 379 (1926); Rose v. Morrow, 10 Tenn. App. 698 (1929).

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 12.

Part 4
Directors and Officers

45-2-401. Directors and officers — Qualifications of directors — Election — Terms.

    1. The affairs of a state bank must be managed by a board of directors, which shall exercise its powers and be responsible for the discharge of its duties.
    2. The charter or bylaws may establish a variable range for the size of the board of directors by fixing a minimum of not less than five (5) members and a maximum of not more than twenty-five (25) members. If a variable range is established, then the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or the board of directors; however, unless the charter or bylaws provide otherwise, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa.
    3. Each bank director must, during each director's whole term of service, be a citizen of the United States.
    4. A majority of the directors must reside in a state in which the bank has a branch location or within one hundred (100) miles of the location of any branch, for at least one (1) year immediately preceding their election and during their term of service as a director. However, the commissioner may waive the residency requirement of this subdivision (a)(4) if the commissioner finds that:
      1. The business experience and ability of each proposed director is relevant to the bank, its market, and the type of services the bank provides or intends to provide; and
      2. The waiver of the residency requirement will support the safety and soundness of the bank.
    5. The bylaws of the bank may specify other qualifications for directors.
    6. Any director who becomes disqualified shall resign the office, but, upon removal of the disqualification, is eligible for election. The board of directors or the commissioner may remove a director who is disqualified. An action taken by a director prior to resignation or removal is not subject to attack on the ground of the director's disqualification.
  1. Except in cases of disqualification, directors shall serve until their successors are elected and qualified.
  2. Directors shall be elected by the stockholders at the first meeting and thereafter at the annual meeting or at a special meeting called for the purpose. If the charter provides for cumulative voting, the votes of each share may be cast for one (1) person or divided among two (2) or more, as the stockholders may choose. The person or persons (to the number of directors to be elected) having the largest number of votes shall be elected.
  3. The term of office of directors shall be one (1) year or, if the bylaws so provide, three (3) years, in which case one-third (1/3) of the directors, or as nearly one-third (1/3) as possible, shall be elected for each year following the first election of directors. Vacancies at any one time to the number of one-third (1/3) of the board may be filled by vote of the board of directors until the next meeting of the stockholders.
  4. The officers designated by the bylaws shall be elected by the board of directors. The bank shall have only one (1) officer designated as president and the president shall be a member of the board of directors. No officer shall be elected or a contract executed for employment for a period longer than three (3) years. An officer may be removed by the board of directors at any time but removal shall not prejudice any rights that the officer may have to damages for breach of contract of employment.

Acts 1969, ch. 36, § 1 (3.315); 1971, ch. 77, § 1; 1973, ch. 294, § 6; T.C.A., § 45-226; Acts 1989, ch. 57, § 1; 1994, ch. 551, § 10; 1996, ch. 768, §§ 15, 16; 2001, ch. 54, § 11; 2020, ch. 605, § 3.

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

Amendments. The 2020 amendment reorganized (a) as (a)(1)–(a)(6); substituted “must” for “shall” in present (a)(1); inserted “then” in the second sentence of present (a)(2); in present (a)(4), deleted “both” preceding “for at least”, added the second sentence, and added (a)(4)(A) and (a)(4)(B); and rewrote the former last three sentences of (a) as present (a)(6), which read: “Any director who becomes disqualified shall forthwith resign the office, but, upon removal of the disqualification, shall be eligible for election. A director who is disqualified may be removed by the board of directors or by the commissioner. No action taken by a director prior to resignation or removal shall be subject to attack on the ground of the director's disqualification.”

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

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.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 15, 19.

Law Reviews.

A Realistic Duty of Care for Outside Bank Directors, 51 Tenn. L. Rev. 569 (1984).

NOTES TO DECISIONS

1. Construction.

There is nothing in the Tennessee Banking Act that purports to require the FDIC to warn banks of irregularities of their officers. FDIC v. Blackburn, 109 F.R.D. 66, 1985 U.S. Dist. LEXIS 14440 (E.D. Tenn. 1985).

45-2-402. Directors — Meetings and duties — Examinations and reviews — Fiduciary powers.

  1. The board of directors shall meet at least quarterly. The commissioner, one-third (1/3) of the directors, or any two (2) executive officers may call a special meeting. A majority of the board shall constitute a quorum. The board shall keep minutes of each meeting, including a record of attendance and of all votes cast by each director.
  2. The board, or an executive committee appointed by the board, shall review periodically, in a manner satisfactory to the commissioner, the lending and investment transactions occurring since the last review.
  3. The board shall cause a review, at least once in each calendar year at intervals of not more than fifteen (15) months, of all the affairs of the state bank, including the character and value of investments, loans, the efficiency of operating procedures, and any other matters as the commissioner may prescribe, with the review discussed and recorded in the minutes. Compliance with the external auditing requirements of the federal regulatory agencies shall be deemed as compliance with this subsection (c). However, the commissioner may require, at the commissioner's discretion, any state bank to obtain a financial statement audit or balance sheet audit should conditions warrant that action.
  4. A state bank authorized to exercise trust powers shall not accept or voluntarily relinquish a fiduciary account without the approval or ratification of the board or of a committee of officers or directors designated by the board to perform this function, but the board or the committee may prescribe general rules governing acceptance or relinquishment of fiduciary accounts, and action taken by an officer in accordance with these rules is sufficient approval. Any committee so designated shall keep minutes of its meetings and report at each meeting of the board all action taken since the previous meeting of the board. The board shall designate one (1) or more committees to supervise the investment of fiduciary funds. The investment shall not be made, retained or disposed of without the approval of a committee. At least once in every calendar year, at intervals of not more than fifteen (15) months, the committee shall review all the assets of each fiduciary account and shall determine their current value, safety and suitability and whether the investments should be modified or retained. The committee shall keep minutes of its meetings and shall report at each meeting of the board its conclusions on all questions considered and all action taken since the previous meeting of the board.
  5. The board of a state trust company is responsible for the proper exercise of fiduciary powers by the state trust company and each matter pertinent to the exercise of fiduciary powers, including, but not limited to:
    1. The determination of policies;
    2. The investment and disposition of property held in a fiduciary capacity; and
    3. The direction and review of the actions of each officer, employee, and committee used by the state trust company in the exercise of its fiduciary powers.

Acts 1969, ch. 36, § 1 (3.316); 1973, ch. 294, § 6; T.C.A., § 45-227; Acts 1999, ch. 112, § 6; 2001, ch. 54, § 12.

Law Reviews.

Residential Mortgage Lending: Charting a Course Through the Regulatory Maze, 29 Vand. L. Rev. 957.

45-2-403. Fidelity bonds and other insurance — Special reserve fund.

  1. The directors of a state bank shall direct and require good and sufficient fidelity bonds on all active officers and employees, whether or not they draw salary or compensation, which bonds shall provide for indemnity to the bank on account of any losses sustained by it as the result of any dishonest, fraudulent or criminal act or omission committed or omitted by them acting independently or in collusion or combination with any person or persons. The bonds may be in individual, schedule or blanket form, and the premiums for the bonds may be paid by the bank.
  2. The directors shall also direct and require suitable insurance protection to the bank against burglary, robbery, theft, liability and other similar insurable hazards to which the bank may be exposed in the operations of its business on the premises or elsewhere.
  3. The directors shall be responsible for prescribing at least once in each year the amount of penal sum of the bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazard. The action shall be recorded in the minutes of the board of directors and be subject to the approval of the commissioner.
    1. In lieu of providing a good and sufficient fidelity bond on all active officers and employees as required by subsection (a), a state bank with sufficient capital to assets ratio as established by the commissioner may establish a special reserve fund in such form, amount, and including such assets, as approved by the commissioner.
    2. The commissioner shall promulgate necessary rules and regulations to implement  subdivision (d)(1).

Acts 1969, ch. 36, § 1 (3.317); 1973, ch. 294, § 6; T.C.A., § 45-228; Acts 1986, ch. 865, § 1.

Law Reviews.

The Nuts and Bolts of a Fidelity Bond Claim, 27 No. 3 Tenn. B.J. 22 (1991).

45-2-404. Authority to declare dividends.

The board of directors of a state bank may not declare dividends in any calendar year that exceeds the total of its net income of that year combined with its retained net income of the preceding two (2) years without the prior approval of the commissioner.

Acts 1969, ch. 36, § 1 (3.318); T.C.A., § 45-229; Acts 2001, ch. 54, § 13.

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

Law Reviews.

Section I: Symposium - Rethinking The U.S. Regulatory Structure Governing Financial Institutions: 21st Century Solutions For a 21st Century Marketplace: When the Government Becomes a Stockholder: Impact of the Capital Purchase Program on Bank Regulation (Jackie Prester), 39 U. Mem. L. Rev. 931 (2009).

45-2-405. Government service.

  1. Notwithstanding  any law to the contrary, any officer, director, or employee of any bank may serve in any capacity in state or local government, except in any capacity with the department, or on any board, commission, or other agency of the governmental unit; provided, that the officer, director or employee has:
    1. Disclosed to the chief executive officer of the bank and the board of directors of the bank the capacity in which the officer, director or employee is serving with the governmental unit; and
    2. Disclosed to the chief executive officer of the governmental unit and to the appropriate board, commission or other agency the relationship to the bank.
  2. Where there has been compliance with this section, the existence of the dual relationship shall not invalidate, or adversely affect, any sale, contract or other business transaction between the bank and the governmental unit.
  3. As used in this section, “bank” means any state or national bank, or state or federal savings and loan association, or credit union established pursuant to chapter 4 of this title.

Acts 1983, ch. 287, § 1.

Law Reviews.

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

Attorney General Opinions. T.C.A. § 45-2-405 authorizes any officer, director, or employee of any bank to serve in any local office, including on the county commission, the county budget committee, or the county purchasing commission, so long as he or she discloses the position to the bank and the local government, OAG 07-141, 2007 Tenn. AG LEXIS 141 (10/10/07).

Part 5
Membership in Federal Reserve Banks

45-2-501. Part definitions.

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

  1. “Federal Reserve Act” includes the act of congress of the United States approved December 23, 1913, as amended;
  2. “Federal reserve bank” means the federal reserve banks created and organized under the authority of the Federal Reserve Act;
  3. “Federal reserve board” means the federal reserve board, created and described in the Federal Reserve Act; and
  4. “Member bank” means any national bank, state bank, or banking and trust company that has become or that becomes a member of one (1) of the federal reserve banks created by the Federal Reserve Act.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-301.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-502. Power to subscribe to stock.

Any state bank has the power to subscribe to the capital stock and become a member of a federal reserve bank.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-302.

45-2-503. Powers of federal reserve bank membership.

A state bank that is or that becomes a member of a federal reserve bank is by this part vested with all powers conferred upon member banks of the federal reserve banks by the terms of the Federal Reserve Act as fully and completely as if the powers were here specifically enumerated and described, and all the powers shall be exercised, subject to all restrictions and limitations imposed by the Federal Reserve Act, or by regulations of the federal reserve board made pursuant to the act. The right, however, is expressly reserved to revoke or to amend the powers herein conferred.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-303.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

45-2-504. Reserves of Federal Reserve Act sufficient.

A compliance on the part of a bank with the reserve requirements of the Federal Reserve Act shall be held to be a full compliance with those  laws of this state that require banks to maintain reserves, and the bank shall not be required to carry or maintain reserves other than those required under the terms of the Federal Reserve Act.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-304.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is compiled in 12 U.S.C.

45-2-505. Supervision and examinations — Disclosures to federal reserve board.

The bank shall continue to be subject to the supervision and examinations required by the laws of this state, except that the federal reserve board shall have the right, if it deems necessary, to make examinations, and the authorities of this state having supervision over the bank or trust company may disclose to the federal reserve board, or to examiners duly appointed by it, all information in reference to the affairs of any bank that has become, or desires to become, a member of a federal reserve bank.

Acts 1969, ch. 36, § 1 (3.323); T.C.A., § 45-305.

Part 6
General Powers of Banks

45-2-601. General powers.

Subject to regulation by the commissioner and any restrictions expressly imposed by this chapter and chapter 1 of this title, any bank may enjoy any and all rights and may exercise any and all powers, as defined herein, conferred upon banking corporations for profit by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as same may be amended from time to time. In addition, any state bank may exercise any power or engage in any activity that it could exercise or engage in if it were a national bank located in Tennessee, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness.

Acts 1969, ch. 36, § 1 (3.101); 1973, ch. 294 § 6; 1977, ch. 274, § 1; T.C.A., § 45-401; Acts 1986, ch. 666, § 1; 1994, ch. 551, § 19.

Cross-References. Common trust funds, establishing for purpose of furnishing investments to itself as fiduciary, § 35-4-102.

Cooperative scholarship corporations, banks participating in plan, § 49-4-106.

Development credit corporations, § 48-101-101 et seq.

Loans and investments utilizing federal housing administration, Federal National Mortgage Association and veterans' administration authorized, § 35-3-120.

Negotiable instruments, title 47, ch. 3.

Tennessee Valley Authority, investment in bonds and obligations of, § 35-3-119.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 29, 51.

Law Reviews.

The Competitive Equality Doctrine and the Demise of Intrastate Bank Branching Restrictions (Henry N. Butler), 55 Tenn. L. Rev. 703 (1989).

Attorney General Opinions. Both former T.C.A. § 56-6-201 (repealed), prohibiting a bank holding company from owning or controlling an insurance agent, and T.C.A. § 56-35-131(a)(1), limiting the amount of business income a title insurance agent may receive through owners and affiliates, are preempted by federal law, including the Gramm-Leach-Bliley Financial Modernization Act (GLB), P.L. 106-102, to the extent these statutes prohibit or significantly interfere with a national bank's exercise of its authority to control or own an interest in a title insurance agency; under the state “wild-card” statute, T.C.A. § 45-2-601, then, state banks may also control or own a financial subsidiary that acts as a title insurance agent under the same conditions national banks would be permitted to engage in the same activity, OAG 02-013, 2002 Tenn. AG LEXIS 12 (2/1/02).

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

Effect of regulations issued by the comptroller of the currency, OAG 04-059, 2004 Tenn. AG LEXIS 57 (4/07/04).

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

2. Usury Not Shown.

Dismissal of a debtor's suit against the bank that issued the promissory note and the holder of the note for charging usurious interest was proper because the bank was authorized to charge interest at the default rate under T.C.A. § 45-5-301(2) when the note was executed, and the holder was entitled to collect interest at the default rate. Foster Bus. Park, LLC v. J & B Invs., LLC, 269 S.W.3d 50, 2008 Tenn. App. LEXIS 52 (Tenn. Ct. App. Jan. 30, 2008), appeal denied, — S.W.3d —, 2008 Tenn. LEXIS 634 (Tenn. Aug. 25, 2008).

Decisions Under Prior Law

1. Capital Stock — Payment in Notes.

The capital stock of a banking corporation cannot be paid in the notes of the stockholders or directors, mutually indorsed. Moses v. Ocoee Bank, 69 Tenn. 398, 1878 Tenn. LEXIS 110 (1878).

2. Purchase of Stock in Another Bank.

Power to deal in stocks does not authorize the purchase of the controlling interest in another bank, for the reason that the control of one corporation by another would tend to monopoly. Wood v. Green, 131 Tenn. 583, 175 S.W. 1139, 1914 Tenn. LEXIS 128 (1915).

The contract of the bank, through its officers, to purchase of the stockholders of another bank their stock therein, was void as being ultra vires. Wood v. Green, 131 Tenn. 583, 175 S.W. 1139, 1914 Tenn. LEXIS 128 (1915).

45-2-602. Subsidiary corporations.

    1. Any bank may exercise any of its powers through the medium of a subsidiary corporation or corporations. Any and all rights conferred upon banks shall be fully applicable to the subsidiary corporations of banks. Banks shall not be permitted, however, through the use of subsidiary corporations to circumvent the restrictions imposed by § 45-2-614. Whenever the commissioner deems it necessary, the commissioner may examine any corporation that is a subsidiary corporation of a state bank.
    2. A bank may organize, participate in or own an ownership interest in a limited liability company, or limited liability partnership, under this section and this title.
    1. For the purposes of this section, a minority stock ownership interest in a credit insurance company whose capital meets or exceeds the requirements of § 56-2-114, or in an insurance holding company system as defined in § 56-11-101, whose principal business is conducted through one (1) or more credit insurance companies whose capital meets or exceeds the requirements of § 56-2-114, shall be deemed to be a subsidiary; provided, that the original cost of the stock ownership interest does not exceed five percent (5%) of the capital and surplus of the bank; and provided further, that no one (1) bank shall own more than five percent (5%) of the stock in the credit insurance company or insurance holding company system.
    2. The existence and operation of any subsidiary corporation formed prior to June 9, 1981, shall not be impaired by subdivision (b)(1).

Acts 1969, ch. 36, § 1 (3.102); 1973, ch. 294, § 6; T.C.A., § 45-402; Acts 1981, ch. 253, §§ 1, 2; 1996, ch. 768, § 17.

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

45-2-603. Emergency powers.

In the event of an emergency resulting from fire, act of God, attack by a foreign nation, riot, insurrection, civil disorder or any similar disaster, any bank, without regard to any restrictions imposed by this chapter and chapter 1 of this title, may take any action that it deems necessary to preserve its assets and protect the interests of its depositors, shareholders or employees including, but not restricted to, suspending business activity or obtaining the benefit of, or participating in, emergency action authorized by the government of the United States, or the state of Tennessee or its political subdivisions.

Acts 1969, ch. 36, § 1 (3.103); T.C.A., § 45-403.

Textbooks. Tennessee Jurisprudence, 4 Tenn. Juris., Bailments, § 3.

45-2-604. Hours of operation — Days closed — Effect on transactions.

  1. A bank shall establish hours of operation it deems necessary or appropriate; provided, that a bank may not be closed for more than two (2) consecutive calendar days without the prior approval of the commissioner, except a bank, without prior approval, may be closed Saturdays, Sundays, legal holidays and during emergencies as provided in § 45-2-603.
  2. Nothing in any law of this state shall in any manner whatsoever affect the validity of, or render void or voidable, the payment, certification, or acceptance of a check or other negotiable instrument or any other transaction by a bank because it was done or performed during any time other than regular banking hours; provided, that nothing herein shall be construed to compel any bank that by law or custom is entitled to close or suspend business for the whole or any part of any day to keep open for the transaction of business, or to perform any of the acts or transactions aforementioned, on any optional closing day or legal holiday, except at its own option.

Acts 1969, ch. 36, § 1 (3.202); 1973, ch. 294, § 6; T.C.A., § 45-405; Acts 1996, ch. 768, § 18.

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

Cross-References. Holidays, title 15.

45-2-605. Transmitting money — Dealing in foreign exchange.

  1. A bank may accept money for transmission and may transmit money.
  2. A bank may buy and sell foreign exchange to the extent necessary to meet the needs of customers.

Acts 1969, ch. 36, § 1 (3.210); T.C.A., § 45-413.

45-2-606. Depositories.

Any bank may, for the convenience of its customers, provide suitable receptacles on, in, or as a part of the bank premises for the deposit of money, checks and other property, and may contract with its customers, through display of appropriate notice upon the receptacles or by written notice to its customers, that the receptacles are instrumentalities of the customer and that money, checks or other property placed in them shall not be considered to be deposited with the bank until received by an employee or officer of the bank. The receptacle shall not be placed in or located on, in or about any premises where the bank cannot legally carry on the business of banking.

Acts 1969, ch. 36, § 1 (3.211); T.C.A., § 45-414.

45-2-607. Investments.

  1. Investments by state banks shall be limited to:
    1. Obligations that satisfy the requirements of this chapter and chapter 1 of this title for loans;
    2. Obligations of the United States, a state of the United States or the Dominion of Canada;
    3. Obligations of the International Bank for Reconstruction and Redevelopment or the African Development Bank;
    4. Obligations of a territory of the United States, a province of the Dominion of Canada, a subdivision or instrumentality of a state or territory of the United States, an authority organized under state law, an interstate compact or by substantially identical legislation adopted by two (2) or more states;
    5. Obligations of a corporation chartered by the United States or a state thereof doing business in the United States;
    6. The stock of one (1) or more banks or corporations chartered or incorporated under the laws of the United States, or of any state of the United States, and principally engaged in international or foreign banking, or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in the dependencies or insular possessions, including the stock of one (1) or more banks or corporations chartered or incorporated under § 25a of the Federal Reserve Act, as approved December 24, 1919. Any state bank shall have the power to acquire and hold directly or indirectly stock or other evidences of ownership in one (1) or more banks organized under the law of a foreign country or dependency or insular possession of the United States and not engaged directly or indirectly in any activity in the United States, except that which is incidental to the international and foreign business of the foreign bank and to make loans or extension of credit to or for the account of the bank. Investments in the stock of banks or corporations under  this subdivision (a)(6) shall not exceed in the aggregate ten percent (10%) of the state bank's paid-in capital stock and surplus;
    7. The capital stock of joint stock land banks for carrying on the business of lending money on farm mortgage security created and organized under the act of congress of the United States, approved July 17, 1916, and known as the Federal Farm Loan Act. Any bank, firm, person, or corporation doing a banking business may invest its funds and accumulations in stocks, notes, bonds, debentures, or other obligations issued under  the act of congress of the United States entitled the Federal Home Loan Bank Act approved July 22, 1932, and in notes, bonds, debentures, or other obligations issued under  title IV of the act of congress of the United States entitled the National Housing Act, approved June 27, 1934;
    8. Stock, debentures, and other obligations of national mortgage associations or similar institutions now or hereafter organized under title III of the National Housing Act, to the same extent as national banks are now or hereafter permitted to invest in the stock and/or obligations;
    9. Real property to the extent that the total depreciated value thereof does not exceed the capital and surplus of the bank;
    10. Personal property acquired for lease to customers;
    11. The stock of any other bank located in this state; provided, that the investment in the stock of all the banks shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank; and provided further, that if the stock is voting stock, the investment shall not exceed five percent (5%) of the total of the voting stock. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner of financial institutions, and any investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform with the standards set forth in §§ 45-1-102 and 45-1-107, and gives written notice detailing the reasons for disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing before the commissioner under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. This investment shall be in addition to the right of any bank to invest in the stock of a banker's bank otherwise permitted under this section;
    12. Adjustable rate preferred stock of any publicly held corporation created or existing under the laws of the United States or any state, district, or territory of the United States that is rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved by the commissioner for rating the investments. The bank's investment in adjustable rate preferred stock shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness;
      1. Shares or certificates in any open-end management investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940, and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, solely to any investments in which a bank by law or regulation may invest;
      2. The bank's investment in the shares or certificates of the open-end investment companies shall be permitted to the same extent the investments are permitted to national banks domiciled in Tennessee, subject to limiting regulations promulgated by the commissioner pursuant to the Uniform Administrative Procedures Act, for the purpose of safety and soundness;
    13. Other investments that are authorized national banks or member banks of the federal reserve system;
    14. Subject to regulations promulgated by the commissioner for the purpose of maintaining the state bank's safety and soundness, a bank may invest in a Tennessee business and industrial development corporation (BIDCO) as provided in § 45-8-203; provided, that the investment in the stock of the BIDCO shall not exceed ten percent (10%) of the capital, surplus, and undivided profits of the investing bank. The investment shall be made only upon thirty (30) days' prior written notice to the commissioner and an investment that is consummated without giving notice shall be void. The commissioner shall have the right to disapprove the investment if the commissioner finds that the investment does not conform to the standards set forth in §§ 45-1-102 and 45-1-107 and gives written notice detailing the reasons for the disapproval on or before the end of the thirty-day period. If the commissioner disapproves the transaction, the bank shall have a right to a hearing under the Uniform Administrative Procedures Act. This investment shall be in addition to the right of any bank to invest in the stock of a bankers' bank, otherwise permitted under this section and in the stock of any other bank located in Tennessee, otherwise permitted by this section; and
    15. Stock, debentures, and other obligations of community development corporations subject to the rules the commissioner may prescribe.
  2. Any investment in property that is not authorized by subsection (a) may be acquired by any state bank to satisfy or protect a loan previously made in good faith and in the ordinary course of business. Property acquired in satisfaction of a loan shall be held subject to the following limitations:
    1. All property except real property shall be sold within six (6) months or such additional period as the commissioner may allow; and
      1. Except as provided in subdivision (b)(2)(B), real property shall be sold within ten (10) years;
      2. If the bank holds the real property for a period longer than five (5) years, then after an initial five-year period, the bank, in reporting its financial status to the department, shall write off twenty percent (20%) of the appraised value of the real property each subsequent year it is held until the real property is either sold or the ten-year period has elapsed. Upon application of the bank, the commissioner may, in extraordinary circumstances, adjust or waive the percentage a bank shall write off the real property each year, may extend the period in which the real property may be held beyond ten (10) years, or any combination of the foregoing. If the commissioner reduces, waives, or adjusts the amount of write-off, the real property may not be carried at more than the appraised value of the property;
      3. Real property which has been written off but not disposed of shall be maintained on the bank's books at some nominal value;
      4. If the bank's board of directors deems the real property owned to be a prudent investment for income or appreciation for the bank, the board may take action to maintain the real property on the bank's books as an investment, pursuant to subdivision (a)(9);
      5. Not more than one hundred twenty (120) days before or thirty (30) days after the date the parcel is acquired by the bank as real property owned, or from the date on which the bank legally acquires the real property for investment purposes, the bank shall obtain from an independent, qualified appraiser an appraisal of the parcel; provided, however, that:
        1. For parcels whose book value is two hundred fifty thousand dollars ($250,000) or less, the bank may obtain an evaluation in lieu of an appraisal; and
        2. For parcels whose book value is one hundred thousand dollars ($100,000) or less, no appraisal or evaluation shall be required; and
      6. Within twelve (12) months from the date the bank acquires the real property, and every twelve (12) months thereafter for as long as the bank owns the real property, the bank shall obtain another appraisal or evaluation, whichever is appropriate as provided for in subdivision (b)(2)(E).
  3. As used in this section, “investment” means the purchase of any interest in any property of any nature principally for the purpose of deriving profit from changes in the value of the property or from dividends, interest or rent thereon, as distinguished from the purpose of using the property in the conduct of the business of a bank. Notwithstanding the foregoing, the investment by a bank or trust company in one (1) or more subsidiaries, or the underwriting of or dealing in certificates of deposit, bankers' acceptances or those securities that are permissible investments for a bank under subdivisions (a)(1)-(14), shall not constitute an investment within the meaning of this section.
    1. In addition to the other provisions of this section, upon thirty (30) days' prior written notice to the commissioner, providing such detail as the commissioner may require, a bank may invest, in the aggregate, up to seventy-five percent (75%) of its unimpaired capital, surplus and undivided profits in the stock or purchase the assets of other corporations, firms, partnerships or companies, including limited liability corporations and limited liability partnerships, which are or will be:
      1. Primarily engaging in activities permissible for federally chartered financial institutions, their authorized subsidiaries or bank holding companies under applicable laws, rules, regulations or orders;
      2. Primarily engaging in activities of a financial nature, including, but not limited to, the transmission or processing of information, data or payments relating to the activities, all forms of securities activities not otherwise authorized, together with other activities that the commissioner shall determine and that may be permissible for other bank and non-bank financial institutions chartered by Tennessee or other states by regulation or order; or
      3. Engaging in any other activities approved by the commissioner.
    2. Unless denied by the commissioner within thirty (30) days following receipt of the written notice or upon approval prior to the expiration of the thirty (30) days, a bank may complete its investment in the stock or purchase the assets of the other corporation, firm, partnership or company, or commence a new activity through an existing subsidiary. The commissioner may extend the thirty-day period for approval or denial, for an additional thirty-day period, by notifying the applicant if the commissioner determines that the proposed investment or activity raises issues that require additional information or additional time for analysis.
    3. The commissioner shall monitor the impact of activities and investments of banks approved under this section on the safety and soundness of the banks. Any stocks owned or hereafter acquired in excess of the limitations herein imposed shall be disposed of at public or private sale within six (6) months after the date of acquiring the stocks, and if not so disposed of, they shall be charged to profit and loss account, and no longer carried on the books as an asset. The limit of time in which the stocks shall be disposed of or charged off the books of the bank may be extended by the commissioner if, in the commissioner's judgment, it is for the best interest of the bank that the extension be granted.
    4. The commissioner may, as a condition of approving an investment under this section, impose limits on the loans that each bank can make to the corporation, firm or partnership.
    5. The commissioner shall maintain a public file, available for inspection at the department's offices, which shall contain a summary or synopsis of any application submitted under this subsection (d). The summary shall include only the name of the institution applying, the proposed activity and the decision of the commissioner.
    6. Any state or national bank or subsidiary that engages in an activity that subjects it to licensure and/or regulation under other than title 45, chapter 2, shall be subject to licensure and/or regulation on a basis that does not discriminate by the appropriate regulatory agency that licenses and/or regulates non-banks that engage in the same activity.

Acts 1969, ch. 36, § 1 (3.242); 1973, ch. 294, § 6; T.C.A., § 45-436; Acts 1983, ch. 74, § 6; impl. am. Acts 1983, ch. 216, §§ 1-9; Acts 1986, ch. 602, § 1; 1987, ch. 86, §§ 1, 2; 1988, ch. 819, § 1; 1989, ch. 124, § 25; 1989, ch. 150, § 1; 1989, ch. 168, § 2; 1994, ch. 551, §§ 11, 12; 1996, ch. 768, § 19; 2013, ch. 233, § 1.

Compiler's Notes. Section 25a of the Federal Reserve Act, referred to in this section, is found in 12 U.S.C. §§ 611-631. The Federal Home Loan Bank Act is compiled throughout 12, 15 and 18. U.S.C. title III of the National Housing Act is found in 12 U.S.C. §§ 1716 and note, 1717-1723c, and title IV of the National Housing Act is found in 12 U.S.C. §§ 1721-1730. The Investment Company Act of 1940, referred to in this section, is compiled in 15 U.S.C. § 80a-1 et seq.

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

Acts 2013, ch. 233, § 2 provided that the department of financial institutions is authorized to promulgate rules and regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, or to issue departmental bulletins in lieu of such regulations, to implement the provisions of the act, which amended subdivision (b)(2).

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

Investing in obligations of public housing authority authorized, § 35-3-115.

Investment in obligations of federal housing administration, Federal National Mortgage Association and veterans' administration authorized, § 35-3-120.

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).

Attorney General Opinions. The general assembly did not intend to prohibit the department of commerce and insurance from enforcing the restrictions on bank holding company ownership of a title insurance agency or conditions on continued licensure of a title insurance agent, OAG 02-013, 2002 Tenn. AG LEXIS 12 (2/1/02).

The administrative entity or person charged with interpreting and determining whether an agency has engaged in the type of discrimination prohibited by T.C.A. § 45-2-607(d)(6) is the one charged by T.C.A. § 45-2-607(d)(6) to license and/or regulate any state or national bank or subsidiary on a basis that does not discriminate within the meaning of that subdivision, OAG 02-013, 2002 Tenn. AG LEXIS 12 (2/1/02).

A limited liability corporation with 15 members with equal ownership, each of which is a state or national bank, is not a subsidiary of a state or national bank within the meaning of T.C.A. § 45-2-607(d), OAG 02-013, 2002 Tenn. AG LEXIS 12 (2/1/02).

45-2-608. Acceptances.

  1. A bank may accept:
    1. A draft that has not more than six (6) months' sight to run, exclusive of days of grace, and is drawn to finance the purchase of goods with maturity in accordance with the original terms of purchase, or is secured by shipping documents transferring or securing title to goods or by receipt of a licensed or bonded warehouse or elevator transferring or securing title to readily marketable, nonperishable staples; and
    2. A draft that has no more than three (3) months' sight to run, exclusive of days of grace, and is drawn by a bank outside the continental limits of the United States for the purpose of furnishing dollar exchange for trade.
  2. A bank may issue a letter of credit, but unless the authority conferred to draw upon the bank or its correspondents is limited to the drafts that a bank is authorized by this section to accept, the amount of the credit outstanding at any one time shall be deemed to be a loan to the person for whose account the credit was issued.

Acts 1969, ch. 36, § 1 (3.243); T.C.A., § 45-437.

45-2-609. Sale of assets in ordinary course.

A bank may sell any asset in the ordinary course of business, but the sale of all or substantially all of the assets of a bank shall entitle dissenting shareholders to the rights provided by § 45-2-1309.

Acts 1969, ch. 36, § 1 (3.244); T.C.A., § 45-438.

45-2-610. Borrowing.

Any bank may borrow money and issue evidence of indebtedness for a loan.

Acts 1969, ch. 36, § 1 (3.245); T.C.A., § 45-439.

45-2-611. Pledge of assets.

  1. A bank may pledge its assets only:
    1. To enable it to act as an agent for the sale of obligations of the United States;
    2. To secure borrowed funds;
    3. To secure the public funds of a governmental entity; and
    4. For other purposes that are approved by the commissioner.
  2. As used in this section, unless the context otherwise requires:
    1. “Governmental entity” means:
        1. The United States government or any agency thereof; or
        2. Any instrumentality of the United States the funds of which are required by law to be secured; and
      1. The state of Tennessee or any other state, counties, incorporated municipalities and their political subdivisions or any utility district organized under the laws of a state or an interstate compact; and
    2. “Public funds” means:
      1. Funds in which the entire beneficial interest is owned by a governmental entity; or
      2. Funds held in the name of a public official charged with the duty to receive or administer funds and acting in the person's official capacity.
  3. A financial institution authorized to secure public funds of any governmental entity shall do so in the same manner and under the same conditions as state deposits under title 9, chapter 4, or as provided in a collateral pool as provided in title 9, chapter 4, part 5.

Acts 1969, ch. 36, § 1 (3.246); 1973, ch. 294, § 6; T.C.A., § 45-440; Acts 1990, ch. 1043, § 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 32.

Attorney General Opinions. Rural cooperative not a utility district, OAG 96-108, 1996 Tenn. AG LEXIS 133 (8/30/96).

45-2-612. Endorsement and signature guaranty.

  1. Any bank may assume secondary liability as an endorser of a negotiable or nonnegotiable instrument that it owns or has received for collection or that of the guarantor of the genuineness of a signature.
  2. A bank may disclaim all or any part of the foregoing obligation in its guaranty; however, nothing in this section shall conflict with the Uniform Commercial Code, compiled in title 47, and the Uniform Commercial Code shall govern.

Acts 1969, ch. 36, § 1 (3.247); T.C.A., § 45-441.

45-2-613. Exchange charges.

  1. Banks, both state and national, have the right to make an exchange charge for the handling of cash items, and when the cash items are presented to the payer bank for payment through or by any bank, banker, trust company, federal reserve bank, post office, express company, collection agency, or by any other agency whatever, the amount of the charge shall not exceed one-tenth of one percent (.1%) of the total amount of the cash item, so presented and paid at one (1) time, and the minimum charge shall be ten cents (10¢); provided, that the charge shall not be made on checks or drafts given or drawn in settlement of obligations due the state or any subdivision of the state, or of the United States, and that the charge may not be made by banks for the collection of checks deposited with the banks, when the check is drawn on any other bank in the same municipality, city, town or village; and provided further, that nothing in this section shall be deemed mandatory upon the banks to charge exchange on checks or drafts payable to a person in this state, and drawn on a bank, trust company, or persons within or without this state, but it shall be optional with the banks whether they shall so charge exchange.
  2. No officer shall protest for nonpayment the cash item when the nonpayment is solely on account of the failure or refusal of any of the agencies to pay the exchange, and there shall be no right of action, either at law or in equity, against any bank in this state for a refusal to pay the cash item when the refusal is based alone on the ground of the nonpayment of the exchange.
  3. If, by any law, rule, regulation or court decision, the national banks in this state are not permitted to charge and collect the exchange, subsections (a) and (b) shall remain in full force and effect as to all other banks in this state; and in the event of the holding by the courts, or the refusal of any national bank in this state to comply with the sections, it shall be optional with state banks located in the same municipality with national banks or state banks that are members of the federal reserve system as to whether the charge shall be made.

Acts 1969, ch. 36, § 1 (3.248); T.C.A., § 45-442.

45-2-614. Branch banking.

  1. Any Tennessee-chartered bank may establish or otherwise acquire and maintain branch offices, branch banks and other branch facilities for the conduct of its banking business at any location in Tennessee and, except as may be prohibited by applicable law of other jurisdictions, at any other location.
  2. No branch, branch office or other facility at which deposits may be accepted shall be established until approved by the commissioner. Notwithstanding the above, the commissioner shall provide by regulation that a bank with a regulatory rating of 1 or 2 may, in lieu of an application, file a written notification for a branch office with the commissioner providing the information as the commissioner may require, including, but not limited to, proof of public notice. Unless objected to by the commissioner with a request for additional information, the notice shall be deemed sufficient and approved at the expiration of the public notice comment period as established by regulation. For an application from any other bank, the application shall be deemed to have been approved by the commissioner unless disapproved within ninety (90) calendar days after the submission of the application. In the event the notification or application to open a branch bank is disapproved and the bank feels aggrieved, the bank may petition for a review by certiorari as provided in title 27, chapter 9. For purposes of this subsection (b), “regulatory rating” means a confidential regulatory rating established, assigned or accepted, pursuant to agreement with a federal regulatory agency, by the department to assess the condition of the bank. The rating shall at all times remain confidential.
  3. Any other laws to the contrary notwithstanding, any branch bank presently located in any county may be incorporated as a bank, with all of the rights and powers granted to a bank under this title, and without restriction on the acquisition or ownership of its stock by a bank holding company, as defined in the Federal Bank Holding Company Act of 1956, that owns controlling interest in the principal bank. The commissioner shall grant a charter and forthwith issue a certificate of authority to the bank if the charter is in the form prescribed by § 45-2-204, the proposed officers and directors are qualified under § 45-2-205, the proposed capital structure is adequate under § 45-2-207 and the conditions of § 45-2-214 have been satisfied, other requirements of this title relative to the initial organization of a bank not being applicable.
    1. A branch office, branch bank, or other branch facility shall not be established or acquired in Tennessee by any bank, except:
      1. A Tennessee-charted bank;
      2. A national bank that has its main office located in this state;
      3. A bank that merges or consolidates with a bank described in subdivision (d)(1)(A) or (d)(1)(B); or
      4. An out-of-state bank that acquires a branch in accordance with § 45-2-1412.(2)  Subdivision (d)(1) shall not be construed to prohibit the surviving or resulting bank following a merger or consolidation referenced in subdivision (d)(1)(C) or the out-of-state bank acquiring a branch referenced in subdivision (d)(1)(D) from establishing and acquiring additional branch offices, branch banks, and other branch facilities in this state.
  4. No Tennessee bank or branch office or facility of a Tennessee bank that conducts the following transactions as an agent on behalf of another Tennessee bank, whether or not the Tennessee banks are affiliated through common control or otherwise, and no bank that is a subsidiary of a bank holding company or branch office or facility of a bank holding company that conducts the following transaction on behalf of another bank that is a subsidiary of the same bank holding company, shall be deemed a branch of the principal bank: receipt of deposits, renewal of time deposits, closing of loans, servicing of loans, and receipt of payments on loans and other obligations. The commissioner may establish by rule additional types of agency transactions, the performance of which shall not cause the agent bank to be deemed a branch of the principal bank. With respect to the agency relationships to which a Tennessee-chartered bank is to be a party, the commissioner may establish rules requiring receipt of notification, or approval, by the commissioner before the agency transactions are conducted. For the purposes of this subsection (e), “Tennessee bank” and “bank holding company” have the meanings set forth in § 45-2-1402.

Acts 1969, ch. 36, § 1 (3.249); 1973, ch. 294, § 6; 1974, ch. 463, § 1; 1977, ch. 172, § 1; T.C.A., § 45-443; Acts 1980, ch. 510, § 6; 1984, ch. 570, § 1; 1985, ch. 165, § 1; 1987, ch. 119, § 1; 1989, ch. 85, § 1; 1990, ch. 644, §§ 1, 2; 1995, ch. 165, §§ 3, 4; 1996, ch. 768, §§ 20, 21; 1998, ch. 742, § 3; 2001, ch. 54, §§ 14, 15.

Compiler's Notes. The Federal Bank Holding Company Act of 1956, as amended, is compiled in 12 U.S.C. §§ 1841-1849.

Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

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

Cross-References. Acquisition of bank shares by holding company not a violation of this section, § 45-2-1404.

Branch banks, exception for national or state bank resulting from merger or conversion, §§ 45-2-1302, 45-2-1303.

Merger of financially troubled bank permissible notwithstanding this section, § 45-2-1313.

Trust officers, § 45-2-1009.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 65.

Law Reviews.

The Competitive Equality Doctrine and the Demise of Intrastate Bank Branching Restrictions (Henry N. Butler), 55 Tenn. L. Rev. 703 (1989).

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

Decisions Under Prior Law

1. Basis of Decision.

Method by that superintendent of banking acquires facts upon that to base decision rests in his discretion so long as it is based upon some material fact or facts and is not arbitrary or illegal. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

2. Review.

The granting or withholding of permission to establish a branch office of a bank is an administrative function and not a judicial function and the procedural requirements of §§ 27-901 — 27-913 (now §§ 27-9-10127-9-113) must be read in this light and review limited to determining legal validity of action of superintendent of banking. Peoples Bank of Van Leer v. Bryan, 55 Tenn. App. 166, 397 S.W.2d 401, 1965 Tenn. App. LEXIS 290 (Tenn. Ct. App. 1965).

45-2-615. [Reserved.]

  1. Every bank shall retain its business records for the periods that are or may be prescribed by or in accordance with the terms of this section.
  2. Each bank shall retain for a period of seven (7) years the minute books of meetings of its stockholders and directors, capital stock ledger and capital stock certificates ledger or stubs, general ledger, daily statements of condition, general journal, investment ledger, and copies of bank examination reports.
  3. All other bank records shall be retained for the periods that the commissioner shall, in accordance with the terms of this section, prescribe.
  4. The commissioner shall, from time to time, issue regulations classifying all records kept by state banks and prescribing the period for which records of each class shall be retained. The periods may be permanent or for a lesser term of years. The regulations may from time to time be amended or repealed. Prior to issuing the regulations, the commissioner shall consider:
    1. Actions at law and administrative proceedings in which the production of bank records might be necessary or desirable;
    2. State and federal statutes of limitation applicable to the actions or proceedings;
    3. The availability of information contained in bank records from other sources; and
    4. Other matters that the commissioner deems pertinent, in order that the commissioner's regulations will require banks to retain their records for as short a period as is commensurate with the interests of bank customers and shareholders and of the people of this state in having bank records available.
  5. Any bank may dispose of any record that has been retained for the period prescribed by or in accordance with the terms of this section for retention of records of its class, and shall thereafter be under no duty to produce the records in any action or proceeding.
    1. Any bank may cause any or all records at any time in its custody to be reproduced and/or preserved by itself, or by any other person who agrees in writing to submit its operations to the examination of the commissioner, to the extent that the operations directly affect the recordkeeping, by any:
      1. Microphotographic process;
      2. Electronic and/or mechanical data storage technique; or
      3. Any other means approved by the commissioner.
    2. A record reproduced and/or preserved by a process, technique or means approved under subdivision (f)(1) shall have the same force and effect as the original record and be admitted into evidence equally with the original.
  6. To the extent that they are not in contravention of any law of the United States, this section applies to all banks doing business in this state.

Acts 1969, ch. 36, § 1 (3.251); 1973, ch. 294, § 6; T.C.A., § 45-445; Acts 2020, ch. 605, § 5.

Amendments. The 2020 amendment in (b), substituted “for a period of seven (7) years” for “permanently”, and substituted “capital stock ledger and capital stock certificates ledger or stubs, general ledger,  daily statements of condition, general journal, investment ledger, and copies of bank examination reports” for “its capital stock ledger and capital stock certificates ledger or stubs, its general ledger, its daily statements of condition, its general journal, its investment ledger, its copies of bank examination reports, and all records that the commissioner shall, in accordance with the terms of this section, require to be retained permanently”.

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

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

Decisions Under Prior Law

1. Presumption of Payment.

Since a requirement that a bank must forever retain evidence of payment of its indebtedness would be contrary to the public policy of Tennessee, the presumption of payment after 16 years is applicable to deposits in a checking account. Commerce Union Bank v. Horton, 225 Tenn. 679, 475 S.W.2d 660, 1972 Tenn. LEXIS 382, 69 A.L.R.3d 1305 (1972).

45-2-617. [Reserved.]

  1. Compliance with the requirements of the Truth in Savings Act, 12 U.S.C. § 4301 et seq., contained in the Federal Deposit Insurance Corporation Improvement Act of 1991, (Pub. L. No. 102-242, 105 Stat. 2236, §§ 261-274), and applicable federal regulations shall be deemed compliance with any requirements of the laws and statutes of Tennessee relating to the disclosure of information in connection with deposit accounts.
  2. Notwithstanding subsection (a), in the case of a nonrenewable certificate of deposit having a term of more than one (1) month but no longer than one (1) year, the bank shall provide a maturity notice that meets those requirements of the Truth in Savings Act, as to both timing and content, that would be applicable to the certificate if its term exceeded one (1) year. The bank's liability for failing to provide the maturity notice shall equal but not exceed that liability the bank would have incurred under the Truth in Savings Act had the certificate's term exceeded one (1) year.

Acts 1979, ch. 163, § 1; T.C.A., § 45-449; Acts 1981, ch. 312, §§ 1, 2; 1993, ch. 77, § 1.

45-2-619. Definitions — Electronic cash dispensing devices.

  1. As used in this section, unless the context otherwise requires:
      1. “Depository institution” means:
        1. An insured bank as defined in § 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813);
        2. A mutual savings bank as defined in § 3 of the Federal Deposit Insurance Act;
        3. An insured credit union as defined in § 101 of the Federal Credit Union Act (12 U.S.C. § 1752);
        4. A member as defined in § 2 of the Federal Home Loan Bank Act (12 U.S.C. § 1422); a savings association as defined in § 3 of the Federal Deposit Insurance Act that is an insured depository institution as defined in the act; or
        5. An association or entity that is wholly owned by or that consists only of institutions referred to in subdivisions (a)(1)(A)(i)-(iv); and
      2. That:
        1. Is domiciled in Tennessee;
        2. Has a branch lawfully doing business in Tennessee pursuant to  this part;
        3. Is a federally chartered institution described in (a)(1)(A)(i)-(v); or
        4. Is a state chartered institution described in (a)(1)(A)(i)-(v); provided, that the home state of the institution does not prevent or limit a Tennessee chartered institution's ability to own or operate similar devices in the home state. If the home state has those restrictions, then out-of-state institutions from the home state may own or operate to the same extent and under the same terms and conditions that would apply to a Tennessee institution in the home state; and
    1. “Electronic cash dispensing device” means an electronic device other than a telephone operated by a consumer, through which a consumer may obtain cash by means of initiating an electronic fund transfer instruction to the consumer's depository institution to debit the consumer's deposit account. For purposes of this part, “electronic cash dispensing device” includes, but is not limited to, automated teller machines.
  2. A person other than a depository institution may own or operate, alone or in combination with other persons, one (1) or more electronic cash dispensing devices located or to be located in this state; provided, that the electronic cash dispensing device does not receive money on deposit.

Acts 1995, ch. 165, § 5; 2001, ch. 54, § 16; 2014, ch. 540, § 1.

Compiler's Notes. For the preamble to the act concerning electronic cash dispensing services, please refer to Acts 2014, ch. 540.

Attorney General Opinions. Ownership of automatic teller machine, OAG 96-056, 1996 Tenn. AG LEXIS 70 (3/28/96).

45-2-620. Acceptance of deposits or placement in federally insured institutions — Deposits by state or other governmental entities.

  1. A state or national bank or savings institution or savings bank may accept funds for deposit or placement in federally insured institutions, within or without the state; provided, that the bank has entered into a deposit agreement or deposit placement agreement with the depositor.
  2. The depository may also enter into a custodial agreement with the customer to maintain any certificate of deposit or other evidences of the deposits so received or placed. Depositors for these purposes shall include the state or any governmental entity.

Acts 2005, ch. 432, § 3.

Part 7
Deposits in Banks

45-2-701. Interest on accounts.

Banks shall be invested with the right and power to receive money on deposit, allowing therefor to the depositor, if the corporation chooses so to contract, interest at a rate not in excess of the maximum rate of interest authorized by the laws of the United States or by regulations issued under authority of these laws to be paid on deposits by member banks of the federal reserve system or by nonmember banks whose deposits are insured by the federal deposit insurance corporation, whichever is lower.

Acts 1969, ch. 36, § 1 (3.201); T.C.A., § 45-404.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 31, 41.

45-2-702. Deposit of minor.

A bank may operate a deposit account in the name of a minor or in the name of two (2) or more persons, one (1) or more of whom are minors, with the same effect upon its liability as if the minors were of full age.

Acts 1969, ch. 36, § 1 (3.203); T.C.A., § 45-406.

45-2-703. Deposits in two or more names — Multiple-party deposit accounts.

  1. When a deposit has been made or is hereafter made, in any bank, in the names of two (2) or more persons, payable to either, or survivor, the deposit, or any part of the deposit, or any interest or dividend on the deposit, may be paid to either person, whether the others are living or not; and the receipt or acquittance of the person so paid shall be a valid and sufficient release and discharge to the bank for any payment so made. Any balance so created, including, but not limited to, any balance held by spouses, shall be subject to assignment by, or the claim of any creditor of, either depositor, as if the depositor were the sole owner of the funds; provided, that if the creditor realizes its claim by any means other than enforcement of an assignment, pledge, or the grant of a security interest made by any one (1) of the depositors, any other depositor not indebted to the creditor may, by commencing a separate action against the creditor, establish the rights that the depositor may have in the funds.
  2. A bank paying a survivor in accordance with subsection (a) is not liable for any estate, inheritance or succession tax due this state.
  3. As used in subsections (c)-(f), “multiple-party deposit account” means a deposit account, including a certificate of deposit, established in the names of, payable to, or in form subject to withdrawal by two (2) or more natural persons, or any of them, including, but not limited to, an account of the type described in subsection (a).
    1. When opening a multiple-party deposit account, or amending an existing deposit account so as to create a multiple-party deposit account, each bank shall utilize account documents that enable the depositor to designate ownership interest therein in terms substantially similar to the following:
      1. Joint tenants with right of survivorship;
      2. Additional authorized signatory; and
      3. Other deposit designations that may be acceptable to the bank.
    2. Account documents that enable the depositor to indicate the depositor's intent of the ownership interest in any multiple-party deposit account may include any of the following:
      1. The signature card;
      2. The deposit agreement;
      3. A certificate of deposit;
      4. A document confirming purchase of a certificate of deposit; or
      5. Other documents provided by the bank or deposit institution that indicate the intent of the depositor.
  4. Accounts described in subsection (c) shall establish the following interests:
    1. A designation of joint tenants with right of survivorship, or substantially similar language, shall be conclusive evidence in any action or proceeding of the intentions of all named that title vests in the survivor;
    2. The designation of a person as an additional authorized signatory, or substantially similar language, shall be conclusive evidence in any action or proceeding that the person so designated has power of attorney with respect to the account and is not an owner of the account;
    3. Other designations acceptable to the bank shall establish interests in accordance with their respective provisions;
    4. In the absence of any specific designation in accordance with subsection (d), property held under the title, tenancy by the entireties, carries a right of survivorship; property held under the title, joint tenancy, carries no right of survivorship unless a contrary intention is expressly stated. Any other person to whose order the accounts or certificate of deposit is subject shall be presumed to have power of attorney with respect to the account or certificate of deposit and not to be an owner of the account or certificate of deposit. The presumptions may be rebutted by clear and convincing evidence presented in the course of legal or equitable proceedings. Final judicial determinations contrary to the presumptions shall not affect a bank's earlier payment in accordance therewith, or the limitations on liability conferred by  § 45-2-707(a) and (b); and
    5. Absent a specific designation in the account documents referenced in subsection (d) that an account holds funds of a tenancy by the entirety, funds deposited into an account held by spouses in accordance with this section are not held by a tenancy by the entirety.
  5. Without incurring any liability, any bank may, but shall not be required to, provide to depositors disclosures in form similar to the following:
    1. Joint tenants with right of survivorship.  This designation means that the deposit account or certificate of deposit shall become the property of each owner as joint tenants, and that the survivor is entitled to all moneys in the account or represented by the certificate even if the first person to die had a will specifically directing disposition to someone else. The bank may release all moneys in the account or represented by the certificate to, or honor checks or orders drawn by, or withdrawal requests from, the survivor upon the death of any joint tenant; and
    2. Additional authorized signatory.  This designation means that the person named as additional authorized signatory shall have authority during the lifetime of one (1) or more owners to withdraw moneys from the deposit account or represented by the certificate of deposit. Moneys remaining in the account or represented by the instrument upon the owner's death shall become part of the deceased owner's estate, subject to the deceased person's will or applicable law if the deceased person left no will. The bank may release all moneys in the account or represented by the certificate to, or honor checks or orders drawn by, or withdrawal requests from, the authorized signatory until notified of revocation of the authority.
  6. Without incurring any liability, any bank may, but is not required to, remove a joint owner on a multiple-party deposit where two (2) or more persons are joint tenants with right of survivorship upon the written request of another person designated as a joint owner of the account.
  7. Subsections (c)-(g) do not apply to any accounts in existence prior to January 1, 1989.

Acts 1969, ch. 36, § 1 (3.204); T.C.A., § 45-407; Acts 1983, ch. 110, § 1; 1988, ch. 926, §§ 1, 2; 2014, ch. 597, § 1; 2020, ch. 605, §§ 7, 8.

Amendments. The 2020 amendment added (e)(5); added (g); redesignated former (g) as present (h); and substituted “do not apply” for “shall not apply” in (h).

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), §§ 439, 629.

Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 34, 39, 40; 8 Tenn. Juris., Cotenancy, § 3.

Law Reviews.

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

TennCare: Expanded Estate Recovery - Recover at ALL Cost, 45 U. Mem. L. Rev. 711 (2015).

Where There's a Will: New Tennessee Trusts Map Route to Better Estate Planning for Married Clients, 50 Tenn. B.J. 28 (2014).

NOTES TO DECISIONS

1. In General.

This statute applies to joint accounts even where the account is not a joint survivorship account. Simmons v. Foster, 622 S.W.2d 838, 1981 Tenn. App. LEXIS 542 (Tenn. Ct. App. 1981).

This section was designed to protect the paying bank, not to change a basic and fundamental form of property ownership in bank deposits. Griffin v. Prince, 632 S.W.2d 532, 1982 Tenn. LEXIS 402 (Tenn. 1982).

T.C.A. § 45-2-703 which absolves a bank of liability upon its payment to either joint tenant or the survivor, was enacted for the protection of the bank and does not affect the rights of the joint tenants, as between themselves, during their lifetime. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

2. Construction.

T.C.A. § 45-2-703 directs banks to use a certain type of document when opening or amending a deposit account. The reference is obviously to the signature card that is ordinarily used by banks for accounts subject to withdrawals. The section does not apply to certificates of deposit that require no signature card and provide no withdrawal until maturity. Roberts v. Roberts, 827 S.W.2d 788, 1991 Tenn. App. LEXIS 834 (Tenn. Ct. App. 1991).

Trial court erred in holding that certificates of deposit held by a decedent at the time of death were not covered by T.C.A. § 45-2-703, as that statute applied to such certificates; a holding to the contrary in Roberts v. Roberts, 827 S.W.2d 788, 1991 Tenn. App. LEXIS 834 (Tenn. App. 1991) was wrongly decided. Guess v. Finlay, — S.W.3d —, 2012 Tenn. App. LEXIS 241 (Tenn. Ct. App. Apr. 16, 2012).

T.C.A. § 45-2-703, which absolves a bank of liability upon its payment to either joint tenant or the survivor, was enacted for the protection of the bank and does not affect the rights of the joint tenants, as between themselves, during their lifetime. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

3. Payment to Survivor.

The comma after “either” and the word “or” seem to indicate that if the account is payable to either party, or to either party or survivor that the bank is protected if it pays the funds to the survivor. Simmons v. Foster, 622 S.W.2d 838, 1981 Tenn. App. LEXIS 542 (Tenn. Ct. App. 1981).

During the lifetime of joint tenants (other than husband and wife), with right of survivorship, the funds deposited in the an account are held in divisible parts and, upon the death of one, the other takes the whole only by survivorship. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

4. Tenancies by the Entireties.

This section does not indicate any legislative intent to abolish tenancy by the entirety in bank deposits held by spouses or to convert the accounts into some other form of ownership merely because they are payable to either or subject to individual checking or withdrawal. Griffin v. Prince, 632 S.W.2d 532, 1982 Tenn. LEXIS 402 (Tenn. 1982).

The 1983 amendment, which relieved the depository bank of the responsibility to resist a third party's claim to an account, did not abolish tenancy by the entirety. Edwards v. Edwards, 713 S.W.2d 642, 1986 Tenn. LEXIS 834 (Tenn. 1986), cert. denied, 479 U.S. 1024, 107 S. Ct. 863, 93 L. Ed. 2d 819, 1987 U.S. LEXIS 3 (1987).

5. Actions to Determine Ownership.

When a party to a joint bank account (not husband and wife) with a right of survivorship has, during the lifetime of the parties to the joint account, filed a lawsuit alleging that he put about one-half of the money into the account and prayed that one-half thereof be adjudged to him (the other party by intervening petition alleged that the original plaintiff had not paid any amount into the joint account and prayed that the certificate be delivered to him) and, while suit is pending, the other party to the joint account dies, the plaintiff may not amend the complaint and enforce a claim for the entire fund that the survivor. The joint tenants having differed on the ownership of the funds and having, during their lifetime, brought suit to establish their respective interest therein, the ownership of the funds must be determined in that lawsuit, even though one claimant died while the suit was pending. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984).

6. Presumptions.

Where funds are on deposit in a joint account with right of survivorship, during the lifetime of the joint tenants a rebuttable presumption arises that the parties own the money on deposit equally. Leffew v. Mayes, 685 S.W.2d 288, 1984 Tenn. App. LEXIS 3055 (Tenn. Ct. App. 1984); Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

The presumption raised in T.C.A. § 45-2-703(e)(4) did not arise where depositor's friend was not listed as just an additional authorized signatory, but rather was designated as an owner of the account. Bligh v. Snider (Estate of Bligh), 30 S.W.3d 319, 2000 Tenn. App. LEXIS 94 (Tenn. Ct. App. 2000).

Probate court properly ruled that a caretaker acted in her capacity of attorney-in-fact during the transactions in question and that the transactions could be examined for undue influence, breach of fiduciary duty, and conversion because the decedent's intent in establishing a bank account was to name the caretaker as an authorized signatory and not create a joint account, and the caretaker did not rebut the presumption of undue influence where her actions, including writing more than $2,000,000 worth of checks as the decedent's attorney-in-fact payable to herself, were inconsistent with the intent of the decedent's will and the notion that the transactions were fair and freely approved by the decedent. In re Estate of Lipscomb, — S.W.3d —, 2020 Tenn. App. LEXIS 131 (Tenn. Ct. App. Apr. 1, 2020).

7. Estate of Decedent.

Where there was no evidence in the record regarding the issuance of certificates of deposit other than an agreement contained on the certificates showing son of deceased to be a joint tenant with the right of survivorship, the trial court's finding that the property represented by the certificates was includable in the deceased's estate could not be sustained. Nichols v. Nichols, 856 S.W.2d 397, 1993 Tenn. LEXIS 203 (Tenn. 1993).

8. Resulting Trusts.

The creation of a resulting trust is not a means to avoid the law with regard to joint tenancies with rights of survivorship. Nichols v. Nichols, 856 S.W.2d 397, 1993 Tenn. LEXIS 203 (Tenn. 1993).

9. Rights Between Depositors.

Even though a joint tenant may withdraw the entire fund, one who does withdraw funds in excess of his moiety is liable to the other joint tenant for the excess so withdrawn. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

A contractual agreement between the bank and the joint depositors does not conclusively determine the rights between the depositors during their lifetime. Knight v. Lancaster, 988 S.W.2d 172, 1998 Tenn. App. LEXIS 483 (Tenn. Ct. App. 1998), rehearing denied, — S.W.2d —, 1998 Tenn. App. LEXIS 567 (Tenn. Ct. App. 1998).

10. Delivery of Gift.

Delivery of gift was established where depositor of certificate of deposit designated a friend as joint owner of the funds giving the friend the unfettered right to withdraw them. Bligh v. Snider (Estate of Bligh), 30 S.W.3d 319, 2000 Tenn. App. LEXIS 94 (Tenn. Ct. App. 2000).

11. Garnishment.

Non-debtor depositor was entitled to dismissal of a garnishment of execution and a release of the funds in a joint bank account because the depositor was the sole source of the funds at issue and the judgment debtor had no right in or to the funds outside of a business partnership with the depositor. Trustmark Nat'l Bank v. Sunshine Carwash No. 5 Partners, — S.W.3d —, 2018 Tenn. App. LEXIS 179 (Tenn. Ct. App. Apr. 5, 2018).

12. Bank's Liability.

In a case in which plaintiff alleged that the bank modified a contract without plaintiff's consent by processing new signature cards that changed the ownership of the joint tenant with right of survivorship account, this statute did not provide the bank with protection from liability for removing plaintiff's name from a multiple-party joint tenancy with right of survivorship account because the bank did not pay the mother, the other joint tenant, all of the funds in the accounts. Estate of Haire v. Webster, — S.W.3d —, 2019 Tenn. LEXIS 146 (Tenn. Mar. 20, 2019).

45-2-704. Deposits in trust — Contracts with bank for payable-on-death accounts — Living trusts.

    1. Whenever any deposit is made in any bank by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust is given in writing to the bank, the bank is entitled to deem the following with respect to the deposit, that:
      1. The person designated as trustee is the owner of the deposit account;
      2. The owner retains the right during the owner's lifetime to withdraw, assign or pledge the balance of the deposit account, in whole or in part, as though no survivor beneficiary had been named, and to delete or change a survivor beneficiary; and
      3. The interest of a person designated as beneficiary shall not vest until the death of the owner, or in the case of joint owners, until the death of the last surviving owner, and the interest shall be subject to any lien, assignment, pledge, right of offset or other claim that the bank could have asserted against the owner.
    2. No change in the designation of the survivor beneficiary is valid unless executed on a form and in a manner prescribed by the bank.
    3. The following terms shall be deemed to apply to the account, unless the owner notifies the bank otherwise:
      1. The interest of the beneficiary in the account vests, only if the beneficiary survives the last surviving owner;
      2. Multiple beneficiaries surviving the last surviving owner shall be entitled to equal shares of the account; and
      3. If no beneficiary survives, the account shall remain in the estate of the last surviving owner.
    4. When a deposit account is so established, the account, or any part of the account, or any interest in the account, may be paid to any owner during the owner's lifetime. On the death of the last surviving owner, the deposit account, or any part of the account, or interest in the account, unless otherwise provided by notice to the bank and its acknowledgement, may be paid either:
      1. To each designated beneficiary in equal shares; or
      2. To all beneficiaries as tenants in common, the duty of any apportionment among beneficiaries devolving to the beneficiary or beneficiaries receiving payment; and the receipt or acquittance of the person or persons so paid shall be a sufficient release and discharge of the bank from liability to any person for payment.
    5. In the event that any beneficiary, or any other person, contests any payment to a beneficiary, the bank may interplead the funds into a general sessions court, circuit court, or probate court with appropriate jurisdiction. A bank initiating, joining in, joined into, or defending in any manner, an interpleader action shall be entitled to recover from the funds tendered or offered to be tendered the costs of the action, including reasonable attorneys' fees.
    6. In determining persons to be paid, or shares to be paid, if a bank chooses to pay more than one (1) beneficiary, a bank is entitled to presume the survival of an owner, or beneficiary, and no payment need be made to a beneficiary until the person's entitlement by right of survivorship is confirmed by official death certificate or other proof acceptable to the bank.
    1. Any person, or persons jointly as tenants with right of survivorship, owning a deposit account may enter into a written contract with any bank whereby the balance of the deposit account may be made payable on the death of the last surviving owner to another person or persons, notwithstanding any provisions of law to the contrary.
    2. In creating the account, “payable-on-death” or “payable on the death of” may be abbreviated to “P.O.D.”
    3. The contract shall be deemed to contain a right on the part of an owner during the owner's lifetime both to withdraw, assign or pledge the balance of the deposit account, in whole or in part, as though no death payee had been named, and to delete or change a designated death payee.
    4. The interest of a death payee shall be deemed not to vest until the death of the owner, or, in the case of joint owners until the death of the last surviving owner, and the interest shall be subject to any lien, assignment, pledge, right of offset or other claim that the bank could have asserted against the owner.
    5. The following terms shall apply to the account, unless the contract provides otherwise:
      1. The interest of a death payee in the account vests only if the payee survives the last surviving owner;
      2. Multiple death payees surviving the last surviving owner shall be entitled to equal shares of the account; and
      3. If no death payees survives, the account shall remain in the estate of the last surviving owner.
    6. No change in the designation of a death payee shall be valid unless executed on a form and in a manner prescribed by the bank and authorized by all account owners living at the time of the change.
      1. When a deposit account is so established, the account, or any part of the account or any interest in the account, may be paid to any owner during the owner's lifetime. On the death of the last surviving owner, the deposit account, or any part of the account or any interest in the account, unless otherwise provided in the contract, may be paid either:
        1. To each designated death payee in equal shares; or
        2. To all death payees as tenants in common, the duty of any apportionment among death payees devolving to the death payee or payees receiving payment;(B)  The receipt or acquittance of the person or persons paid shall be a sufficient release and discharge of the bank from liability to any person for payment.
    7. In the event that any death payee or any other person contests any payment to a death payee, the bank may interplead the funds into a general sessions court, circuit court, or probate court with appropriate jurisdiction. A bank initiating an interpleader action shall be entitled to recover from the funds tendered the costs of the action, including reasonable attorneys' fees.
    8. In determining persons to be paid, or shares to be paid, if a bank contracts or chooses to pay more than one (1) death payee, a bank is entitled to presume the survival of an owner, or death payee, and no payment need be made to a death payee until the person's entitlement by right of survivorship is confirmed by official death certificate or other proof acceptable to the bank.
  1. No bank so paying the survivor or death payee shall be liable for any estate, inheritance or succession taxes due this state.
    1. Notwithstanding any provision of this section or any other law to the contrary, nothing contained within  this section shall be construed to prevent a living trust from being designated as a beneficiary of a payable-on-death account.
    2. Prior to accepting the designation of a living trust as beneficiary, a bank may require the account owner to deliver a copy of:
      1. Certificate or affidavit of trust:
        1. In the form and containing the information required by the bank;
        2. Signed by the grantor, trustee or both; and
        3. Notarized; or
      2. Other documents establishing the trust as may be acceptable to the bank.
    3. A bank may rely on the continuance of the trust and the information provided in the certificate, affidavit or other documentation, until the bank receives actual notice of any amendment, revocation or change, including, but not limited to, appointment of a co-trustee or successor trustee, or removal of a trustee. Actual notice shall not be effective until delivery of documentation acceptable to the bank to support the amendment, revocation or change.

Acts 1969, ch. 36, § 1 (3.205); T.C.A., § 45-408; Acts 1983, ch. 110, §§ 2, 3; 1991, ch. 51, § 1; 1993, ch. 39, §§ 1-5, 7-9; 1994, ch. 655, § 1; 2017, ch. 264, § 5.

Cross-References. “Payable-on-death” share accounts and share deposits in trust held by credit unions, § 45-4-406.

Applicability to savings and loan associations and savings banks, § 45-2-106.

Law Reviews.

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

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, 568 S.W.3d 585, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018), appeal denied, — S.W.3d —, 2018 Tenn. LEXIS 464 (Tenn. July 19, 2018).

45-2-705. Final adjustment of statements of account.

  1. When a statement of account has been rendered by a bank to a depositor or has been mailed to the depositor's last known address, showing the condition of the depositor's account, the account shall, after the period of six (6) years from the date of the rendition of the statement, in the event no objection to the statement in writing has been theretofore made by the depositor or suit brought to correct same, be deemed finally adjusted and settled and its correctness conclusively presumed, and the depositor shall thereafter be barred from questioning the account for any cause. Banks shall accordingly not be required to preserve or keep their records or files relating thereto for a longer period than six (6) years.
  2. Nothing herein shall be construed to relieve the depositor from the duty now imposed by law of exercising due diligence in the examination of the account and vouchers, if any, accompanying the statement, when rendered by the bank and of immediate notification to the bank upon discovery of any error therein, nor from the legal consequences of neglect of that duty.

Acts 1969, ch. 36, § 1 (3.206); T.C.A., § 45-409.

45-2-706. Adverse claim to bank deposit.

Notice to any bank of an adverse claim to a deposit standing on its books to the credit of any person shall not be effectual to cause the bank to recognize the adverse claimant unless the adverse claimant shall procure a restraining order, injunction or other appropriate process against the bank from a court of competent jurisdiction.

Acts 1969, ch. 36, § 1 (3.207); T.C.A., § 45-410.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, 568 S.W.3d 585, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018), appeal denied, — S.W.3d —, 2018 Tenn. LEXIS 464 (Tenn. July 19, 2018).

45-2-707. Powers of attorney.

  1. A bank, which for the purposes of this section also includes a lessor, as defined in § 45-2-901, may recognize the authority of a power of attorney authorizing in writing an attorney-in-fact to operate, in whole or in part, the account of a depositor, or to access a customer's safe deposit box, until the bank receives written notice of the revocation of this authority.
  2. Written notice of the death or adjudication of incompetency of the depositor or customer shall constitute written notice of revocation of the authority of the attorney-in-fact, except where the Uniform Durable Power of Attorney Act, compiled in title 34, chapter 6, part 1, is applicable. Until the bank receives written notice of adjudication of incompetency of the depositor, the bank's authority to recognize a power of attorney shall not be rendered ineffective by the incompetency, whether existing at the time the power of attorney is granted or at the time the bank acts upon it.
  3. Notwithstanding that a bank has received written notice of revocation of the authority of the attorney-in-fact, it may, until ten (10) days after receipt of notice, pay any item made, drawn, accepted or endorsed by the attorney-in-fact prior to the revocation; provided, that the item is otherwise properly payable.
  4. No bank shall be liable for damages, penalty or tax by reason of any payment made or property withdrawn pursuant to this section.

Acts 1969, ch. 36, § 1 (3.208); T.C.A., § 45-411; Acts 1983, ch. 299, § 9; 1988, ch. 926, § 3.

Cross-References. “Payable-on-death” share accounts and share deposits in trust held by credit unions, § 45-4-406.

Applicability to savings and loan associations and savings banks, § 45-2-106.

Uniform Durable Power of Attorney Act, title 34, ch. 6.

Law Reviews.

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

45-2-708. Payment when no executor or administrator qualifies.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a deceased depositor has qualified and given notice of the person's qualifications to the bank, the bank may, in its discretion, and at any time after thirty (30) days from the death of the depositor, pay out of all accounts, maintained with it by the depositor in an individual capacity, all sums that do not exceed fifteen thousand dollars ($15,000) in the aggregate:
      1. To the executor named in any will known to the bank; or
      2. In the absence of knowledge of a purported will naming a surviving executor to:
        1. A creditor for expenses of the funeral;
        2. A creditor for the expenses of the last illness;
        3. The surviving spouse; and
        4. The next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1)(B).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, acknowledging the payment or transfer of funds, standing in the name of the person whose estate the fiduciary represents, in the form of deposits in banking institutions, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the banks against the demands or claims of all parties.
  2. No bank shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 1969, ch. 36, § 1 (3.209); T.C.A., § 45-412; Acts 1980, ch. 615, § 1; 1988, ch. 926, § 4; 1991, ch. 136, § 1; 1995, ch. 103, § 1; 1997, ch. 426, § 22; 2000, ch. 570, § 1; 2016, ch. 804, § 2.

Compiler's Notes. Acts 1995, ch. 103, § 2 provided that the amendment by that act applies to all estates where the decedent has died after July 1, 1995.

Acts 1997, ch. 426, § 26 provided that the amendments to this section by that act shall apply to all estates of decedents dying on or after January 1, 1998 and to all wills, other documents and proceedings related thereto.

Textbooks. Pritchard on Wills and Administration of Estates (5th ed., Robinson and Mobley), § 1133.

Law Reviews.

Joint Bank Accounts Jus Accrescendi in Tennessee, 7 Mem. St. U. L. Rev. 332.

45-2-709. Reserve against deposits.

A state bank shall maintain a reserve against deposits in the form and manner that the commissioner prescribes by regulation. In promulgating regulations hereunder, the commissioner shall consider the reserve requirements of the federal Monetary Control Act of 1980, 94 Stat. 132, and the liquidity needs of state banks.

Acts 1969, ch. 36, § 1 (3.249); 1973, ch. 294, § 6; T.C.A., § 45-427; Acts 1981, ch. 226, § 1.

Compiler's Notes. The Monetary Control Act of 1980, referred to in this section, is compiled as 12 U.S.C. §§ 248, 248a, 342, 347b, 355, 360, 412, 461, 463, 505, 1425a (repealed).

NOTES TO DECISIONS

1. Reserve.

The rule that the reserve may consist, not only of cash, but of the balance due by bank and bankers to the bank when payable on demand, does not include the portions of the balances as have been subjected to counter or offsetting obligations of an insolvent bank to a correspondent bank. State ex rel. Robertson v. Thomas W. Wrenne & Co., 170 Tenn. 131, 92 S.W.2d 416, 1935 Tenn. LEXIS 117 (1935).

45-2-710. Statute of limitations.

An action to enforce the obligation of a bank to pay all or part of the balance of a deposit account or certificate of deposit, collectively a deposit, must be commenced within six (6) years of the earlier of the following:

  1. The time that the six-year statute of limitations period begins to run under § 47-3-118(e)(1), if the deposit is a certificate of deposit subject to title 47, chapter 3; or
  2. The later of:
    1. The maturity date of the deposit, as set forth in the applicable original contract of deposit;
    2. The due date of the deposit indicated in the bank's last written notice of renewal sent pursuant to § 45-2-618;
    3. The date of the last written communication from the bank recognizing the bank's obligation with respect to the deposit; or
    4. The last day of the taxable year for which the owner of the deposit last reported interest income earned on the deposit on either a federal or state income tax return.

Acts 2005, ch. 30, § 1.

NOTES TO DECISIONS

1. Jurisdiction.

Because the origin of the decedent's surviving family members'  claim that the decedent's friend unduly influenced the decedent to close some of the decedent's bank accounts and to name the friend's spouse as the sole payable-on-death beneficiary on the remaining accounts did not change merely because the family members named the bank as a co-defendant, the undue influence claim arose from the common law, so that the issue of standing was not so interwoven with that of subject matter jurisdiction so as to be a jurisdictional prerequisite. Jarnigan v. Moyers, 568 S.W.3d 585, 2018 Tenn. App. LEXIS 118 (Tenn. Ct. App. Mar. 2, 2018), appeal denied, — S.W.3d —, 2018 Tenn. LEXIS 464 (Tenn. July 19, 2018).

45-2-711. Payment and negotiation of check when no estate has been opened or the estate has been closed.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a decedent has qualified and given notice of the person's qualifications to the bank, or where the qualified executor or administrator of a decedent has been discharged and a check or checks made payable to the decedent or the decedent's estate is presented to the bank for payment or collection, the bank may, in its discretion, and at any time after ninety (90) days from the death of the deceased, negotiate or send for collection and pay out the proceeds of one (1) or more checks made payable to the decedent or the decedent's estate, whether written or electronic, all sums that do not exceed ten thousand dollars ($10,000) in the aggregate:
      1. To the executor named in any will known to the bank whether probated or not;
      2. To any personal representative appointed by a court whether active or discharged; or
      3. In the absence of knowledge of a purported will naming a surviving executor or an administrator to the:
        1. Surviving spouse; or
        2. Next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, or of any spouse or next of kin acknowledging the negotiation, payment or transfer of funds of a check, standing in the name of the person whose estate the fiduciary represents, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the bank against the demands or claims of all parties.
  2. The negotiation or payment of a check under this section without an endorsement of the payee or with the endorsement of a person authorized by this section to negotiate the check shall not be a violation of or give rise to any claim under title 47, chapter 3 or 4.
  3. No bank shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 2014, ch. 597, § 2; 2016, ch. 804, §§ 3-5.

45-2-712. Acknowledgement or affidavit — Guarantee.

  1. A bank shall require any persons seeking to cash checks payable to a decedent as provided in § 45-2-711 to deliver to the bank an affidavit, given under the penalty of perjury, in a form acceptable to the bank that, at the minimum, contains the following:
    1. The name of the decedent;
    2. The decedent's date of death;
    3. The amount and payor of any checks, if the funds are from checks or electronic payments;
    4. The identity of the creditor or creditors to whom the funds are to be paid, if the funds are to be paid directly to a creditor of the decedent or the decedent's estate; and
    5. If the funds are to be paid other than to a creditor of the decedent or the decedent's estate, the affiant shall:
      1. Identify the decedent's surviving spouse and heirs at law, and provide their residence addresses; and
      2. Affirmatively state that:
        1. There are no unpaid creditors of the decedent;
        2. There are no unpaid income, gift, estate, inheritance or other transfer taxes owed by the decedent or the estate of the decedent; and
        3. The funds distributed to the affiant will be distributed by the affiant as provided in any will or testamentary document or in appropriate shares to the decedent's heirs at law.
  2. A bank may, in its discretion, require any persons seeking to collect monies from a deceased depositor's account or accounts, as provided in § 45-2-708, to deliver to the bank an affidavit, given under penalty of perjury in a form acceptable to the bank as provided in subsection (a).
  3. A bank may require any person who obtains funds from a deposit account pursuant to § 45-2-708 or to negotiate checks pursuant to § 45-2-711 to provide an indemnity and guarantee to the bank in the amount of the funds obtained.

Acts 2014, ch. 597, § 2.

Part 8
Deposit Insurance

45-2-801. Membership in federal deposit insurance corporation authorized.

Any state bank is empowered, on the authority of its board of directors or the majority of the board, and with the approval of the commissioner, to enter into contracts, incur obligations and generally to do and perform any and all acts and things whatsoever necessary or appropriate in order to take advantage of any and all memberships, loans, subscriptions, contracts, grants, rights or privileges that may at any time be available or inure to banking institutions or to their depositors, creditors, stockholders, conservators, receivers or liquidators, by virtue of those provisions of § 8 the Federal Banking Act of 1933, § 12B of the Federal Reserve Act, which established the federal deposit insurance corporation, and in order to provide for the insurance of deposits or to take advantage of any other provisions of that or any other act or resolution of congress to aid, regulate or safeguard banking institutions or their depositors, including any amendments or substitutions; and to subscribe for and acquire any stock debentures or other types of insurance of the federal deposit insurance corporation and to comply with all lawful regulations and requirements from time to time issued or made by that corporation.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-501.

Compiler's Notes. Section 8 of the Federal Banking Act of 1933, and § 12B of the Federal Reserve Act, are found in 12 U.S.C. §§ 1811-1831.

Cross-References. Applicability of part to industrial banks for thrift certificate purposes, § 45-5-604.

Negotiable instruments, title 47, ch. 3.

Trustees and guardians, investment of funds in certificates of deposit and saving accounts where insured, § 35-3-114.

45-2-802. Appointment of federal deposit insurance corporation as receiver of state bank — Powers and duties.

  1. The federal deposit insurance corporation may be appointed receiver of any state bank, the deposits in which are to any extent insured by that corporation and that has been closed on account of inability to meet the demands of its depositors, or otherwise by the law of Tennessee.
  2. The commissioner, after taking possession of a state bank, shall have the right to appoint the federal deposit insurance corporation as receiver.
  3. Upon acceptance of the appointment as receiver, the federal deposit insurance corporation shall not be required to post bond or security.
  4. If the corporation accepts the appointment, it shall have and possess all of the duties, powers, and privileges provided by the laws of this state with respect to receivers of closed banks, except insofar as the duties, powers, and privileges are in conflict with the Federal Deposit Insurance Act. In addition, the federal deposit insurance corporation as receiver shall have the right to make an emergency sale of assets of a closed bank, as provided in part 15 of this chapter.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-502; Acts 1980, ch. 510, § 1.

Compiler's Notes. The Federal Deposit Insurance Act referred to above is compiled in 12 U.S.C. §§ 1811-1832.

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).

NOTES TO DECISIONS

1. Receivership.

Where a statutory bank receivership has been instituted pursuant to statutory authority, the proceeding is pending until all statutory directives are complied with and the final accounting is approved. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

T.C.A. § 45-2-802 and § 45-2-805 give discretionary authority, co-extensive with that permitted by federal law, to the receiver to enter into a purchase and assumption agreement. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

2. Parties.

Debtors and prospective debtors have no standing to intervene at any stage of a bank receivership pursuant to chapters 1 and 2 of this title. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

45-2-803. Subrogation rights of federal deposit insurance corporation on payment of insured deposits.

Whenever any state bank is closed and the federal deposit insurance corporation has paid or made available for payment the insured deposit liabilities of the closed institution, the corporation, regardless of whether it has become liquidating agent, shall be and become subrogated to all rights against the closed bank of the owners of the deposits in the same manner and to the same extent as subrogation of the corporation is provided for in subsection (1) of § 12B of the Federal Reserve Act, § 8 of the Banking Act of 1933, in the case of the closing of a national bank, and shall be generally subrogated to all rights of the depositors as provided by the laws of Tennessee; provided, that the rights of depositors and other creditors of the closed institution shall be determined in accordance with the applicable provisions of the laws of this state.

Acts 1969, ch. 36, § 1 (3.322); T.C.A., § 45-503.

Compiler's Notes. Section 8 of the Banking Act of 1933 (formerly section 12B of Federal Reserve Act) is found in 12 U.S.C. §§ 1811 et seq.

NOTES TO DECISIONS

1. Purchase and Assumption Agreements.

When not all assets and liabilities are included in a purchase and assumption agreement, the FDIC, as a corporation, not only holds the subrogated claims of the assumed creditors, but it also becomes the surety of the FDIC, as a receiver, for the value of the transferred assets in an amount equal to the value of the assets of the insolvent. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-804. Commissioner to furnish deposit insurance corporation copies of examinations and other information.

The commissioner may furnish to the corporation, or to any official or examiner of the corporation, a copy or copies of any or all examinations made of the bank, and of any or all reports made by same, and shall give access and disclose to the corporation, or any official or examiner of the corporation, any and all information possessed by the office of the commissioner with reference to the conditions or affairs to the insured institution.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-504.

45-2-805. Loans to closed banks — Security — Sale of assets.

  1. With respect to any bank that is now or may hereafter be closed on account of inability to meet the demands of its depositors, or by action of the commissioner or of a court, or by action of its directors, or in the event of its insolvency or suspension, the commissioner and/or the receiver or liquidator of the institution, with the permission of the commissioner, may borrow from the federal deposit insurance corporation and pledge or mortgage any part or all of the assets of the institution to the corporation as security for a loan by it; provided, that where the corporation is acting as the receiver or liquidator, the order of a court of record of competent jurisdiction shall be obtained first approving the loan. The commissioner, upon the order of a court of record of competent jurisdiction, and upon a like order and with the permission of the commissioner, the receiver or liquidator of the institution may sell to the corporation any part or all of the assets of the institution.
  2. This section shall not be construed to limit the power of any bank, the commissioner or receivers or liquidators to pledge or sell assets in accordance with any existing law.

Acts 1969, ch. 36, § 1 (3.322); 1973, ch. 294, § 6; T.C.A., § 45-505.

NOTES TO DECISIONS

1. Purchase and Assumption Agreements.

T.C.A. § 45-2-802 and § 45-2-805 give discretionary authority, co-extensive with that permitted by federal law, to the receiver to enter into a purchase and assumption agreement. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-806. Depositories of public funds exempt from security requirements to extent of deposit insurance.

Notwithstanding any provisions of the existing laws of this state that may require security for the deposit of the public funds of the state or of any political subdivision of the state or of any municipality created under the laws of the state, in the form of a surety bond, deposit of collateral or otherwise, hereafter no bank receiving the deposits shall be required to furnish any security for the deposits, to the extent that the deposits are now insured under § 8 of the Banking Act of 1933 (12 U.S.C. §§ 1811 et seq.).

Acts 1969, ch. 36, § 1 (3.322); T.C.A., § 45-506.

Cross-References. Applicability to savings and loan associations and savings banks, § 45-2-106.

Part 9
Safe Deposit and Safekeeping

45-2-901. Part definitions.

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

  1. “Agent” means any person duly authorized in writing by a lessee to enter a safe deposit box rented by the lessee, whether the person be denominated as “agent,” “deputy,” “attorney-in-fact,” or otherwise. The agent's authority shall be established and shall continue until revoked, both in accordance with § 45-2-707;
  2. “Fiduciary” means trustee, agent, executor, administrator, committee, guardian or conservator for a minor or other incompetent person, receiver, trustee in bankruptcy, assignee for creditors or any holders of a similar position of trust;
  3. “Lessee” means a person contracting with a lessor for the use of a safe deposit box;
  4. “Lessor” means a bank or subsidiary corporation of a bank renting safe deposit facilities, and includes a safe deposit company organized and operating under the jurisdiction of the department solely for the purpose of leasing safe deposit facilities; and
  5. “Safe deposit box” means a safe deposit box, vault, or other safe deposit receptacle maintained by a lessor and the rules relating thereto apply to property or documents kept in safekeeping in the bank's vault.

Acts 1969, ch. 36, § 1 (3.220); T.C.A., § 45-415; Acts 1984, ch. 624, § 1; 1988, ch. 926, § 5.

Cross-References. Applicability of part to savings and loan associations and savings banks, § 45-2-106.

Negotiable instruments, title 47, ch. 3.

45-2-902. Authority to engage in leasing safe deposit facilities — Liability of lessor.

Any bank 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 bank to other persons on the terms agreed to by the parties, but it is understood that in no event shall the bank 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 bank not being the insurer of the safety of the property, nor in any manner liable for the safety of the property. The bank 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.

Acts 1969, ch. 36, § 1 (3.221); T.C.A., § 45-416.

Decisions Under Prior Law

1. Nature of Relationship with Renter.

Where a purchaser of a bond from a bank understood the bond was to be placed in her father's tin box in the bank's vault, but she relied on the promise of the bank president to take care of the bond for her, and he assured her that it would be safely kept, and he himself selected the father's box that the receptacle for the bond, the bank clearly became a bailee of the bond itself, and not a mere bailee of the father's box. Pennington v. Farmers & Merchants Bank, 144 Tenn. 188, 231 S.W. 545, 1920 Tenn. LEXIS 72, 17 A.L.R. 1213 (1921).

The relationship between a national bank and the renter of a safe deposit box installed in the bank's vault is that of bailor and bailee. Young v. First Nat'l Bank, 150 Tenn. 451, 265 S.W. 681, 1924 Tenn. LEXIS 20, 40 A.L.R. 868 (1924).

The rental of safe deposit boxes by banks creates a bailment relationship between the bank and the customer and the bank can be liable for loss or damage to bailed property if the bank fails to meet its duty of care to provide the customer with a level of care commensurate with that of banks in similar communities. Paehler v. Union Planters Nat'l Bank, 971 S.W.2d 393, 1997 Tenn. App. LEXIS 564 (Tenn. Ct. App. 1997).

2. Care Required.

Usage and custom in a particular business reflect on the care exacted of the bailee, but in an action against a bank to recover the value of a bond stolen from its vault by burglars, it was not competent to permit proof of what one or two other banks may or may not have done toward safeguarding their valuables, nor of the business policy of burglary insurance companies, nor of the advertisements of the bank, where the plaintiff relied wholly on the personal assurances from the bank president. Pennington v. Farmers & Merchants Bank, 144 Tenn. 188, 231 S.W. 545, 1920 Tenn. LEXIS 72, 17 A.L.R. 1213 (1921).

Proof that a bank in a small town, that did not represent or advertise that its safe deposit boxes were burglar proof, did not employ any night watchmen, only kept electric lights burning in bank until approximately 11 o'clock p.m., did not equip the building with burglar alarm, and deposited its own securities in a screw door steel safe, does not show lack of ordinary care to protect the complainant's bonds deposited in safe deposit box from burglary, for the term “safe deposit box” is a trade-name, and it does not mean that the boxes are burglar proof. Young v. First Nat'l Bank, 150 Tenn. 451, 265 S.W. 681, 1924 Tenn. LEXIS 20, 40 A.L.R. 868 (1924).

Plaintiff's action for loss of items placed in safety deposit box was properly dismissed where there was no allegation that the bank failed to exercise the care required of banks in safeguarding property deposited in a safety deposit box. Whitaker v. First Am. Corp., 779 S.W.2d 383, 1989 Tenn. App. LEXIS 482 (Tenn. Ct. App. 1989).

45-2-903. Access by fiduciaries.

  1. Where a safe deposit box is made available by a lessor to one (1) or more fiduciaries, the lessor may, except as otherwise expressly provided in the lease or the writings pursuant to which the fiduciaries are acting, allow access thereto to any one (1) or more of the fiduciaries or to any agent authorized in writing by any one (1) or more of the fiduciaries.
  2. The lessee, the lessee's estate or any successor fiduciary is bound by any dealings between the agent and the lessor pursuant to a power granting the agent access to a safe deposit box until the lessor has written notice of revocation of that power.

Acts 1969, ch. 36, § 1 (3.222); T.C.A., § 45-417.

45-2-904. Lease to minor.

A bank may lease a safe deposit box to and in connection therewith deal with a minor with the same effect as if leasing to and dealing with a person of full legal capacity.

Acts 1969, ch. 36, § 1 (3.223); T.C.A., § 45-418.

45-2-905. Death of persons having access.

  1. No lessor shall rent any safe deposit box without first requiring all persons entitled to access to the safe deposit box to agree in writing to notify the lessor of the death of a sole or last surviving lessee of the safe deposit box, and all persons having the right of access to the safe deposit box, upon the death of the other person having the right of access to the safe deposit box, before seeking access, shall notify the lessor of the death of the lessee, and the lessor may rely conclusively upon the absence of notification in allowing a person with a right of access to enter the box.
  2. Access to a safe deposit box shall be in accordance with the agreement between a lessor and lessee or lessees. The death of a person authorized access to a safe deposit box by the agreement shall not terminate the access of others so authorized in all cases where there is a surviving lessee, whether the surviving lessee is an individual, trust, corporation or other entity, unless further access is restricted by the agreement or by court order.
  3. Upon the death of the sole or last surviving lessee of a safe deposit box, access is authorized as follows:
    1. The duly qualified executor or administrator of the lessee may have access to and remove contents from the safe deposit box, without inventory unless an inventory is required by the lessor or by court order;
    2. In order to search for and remove any written instrument purporting to be the lessee's last will and testament, or any writing relating to a burial plot or burial instructions, or any writing purporting to be an insurance policy on the life of the lessee, a lessor shall permit a person named in a court order for that purpose, or if no order has been served upon the lessor, the lessee's spouse, parent, adult sibling or adult descendant, or a person named as executor in a copy of the lessee's purported will provided to the lessor, or any person with a right of access to the safe deposit box immediately prior to the death of the lessee, to open the safe deposit box with an officer or employee of the lessor and remove the documents. A record of items removed from the box by the person authorized entry shall be made by the lessor and the other person. If a purported will is found that does not name as executor the person conducting the will search with the lessor's representative, the lessor may make a copy thereof and mail or deliver it to the executor named therein, or to the court having jurisdiction of the decedent's estate according to the decedent's domicile as declared in the instrument; and
    3. If an executor or administrator of the lessee's estate has not requested access to the contents within sixty (60) days following the lessee's death, the lessor may then permit access by the surviving spouse or any next-of-kin of the lessee for the purposes of inventory and the removal of contents. Prior to removal, an officer or employee of the lessor and the surviving spouse or next-of-kin of the lessee shall inventory the contents of the box and prepare a record thereof to be retained by the lessor.
  4. Upon the death of the sole or last surviving lessee, the lessor shall notify the department of revenue of the death of the lessee and the existence of a safe deposit box within thirty (30) days of the time the lessor has actual knowledge of the lessee's death. The lessor shall retain records made pursuant to subsection (c) for a period of three (3) years after entry. Chapter 10 of this title notwithstanding, the lessor shall provide copies of the record to the department upon its request, to the executor or administrator of the decedent upon request, and to any party designated by court order, and the lessor may elect to provide copies to any person authorized access to the box at the time of the decedent's death, or to any person having a degree of kinship to the decedent equal to that of the next-of-kin who received contents following the death of the decedent.
  5. A lessor shall not be liable to any person for the removal or loss of any contents from a safe deposit box during a period of access by an executor or administrator of a deceased lessee, or by any other person or persons authorized access to open and examine contents, whether the property removed or lost is that of the decedent's estate, a surviving lessee, or any other person, and the lessor is entitled to its expenses in defending against such a claim of liability.
  6. To the extent that there is a conflict between this section and § 67-8-417 or § 67-8-418, this section shall control.

Acts 1969, ch. 36, § 1 (3.224); 1974, ch. 597, §§ 1, 2; T.C.A., § 45-419; Acts 1984, ch. 624, § 2; 1993, ch. 107, §§ 1, 2; 1998, ch. 1085, § 1.

Cross-References. Access to box after death, § 67-8-418.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), §§ 316, 964.

45-2-906. Adverse claims to contents of safe deposit box.

  1. An adverse claim to the contents of a safe deposit box, or to property held in safekeeping, is not sufficient to require the lessor to deny access to its lessee unless:
    1. The lessor is directed to do so by order of a court of competent jurisdiction; or
    2. The safe deposit box is leased or the property is held in the name of the lessee with the addition of words indicating that the contents or property are held in a fiduciary capacity, and the adverse claim is supported by a written statement of facts disclosing that it is made by or on behalf of a beneficiary and that there is reason to know that the fiduciary will misappropriate the trust property.
  2. A claim is also an adverse claim where one (1) of several lessees claims, contrary to the terms of the lease, an exclusive right of access, or where one (1) or more persons claim a right of access as agents or officers of a lessee to the exclusion of others as agents or officers, or where it is claimed that a lessee is the same person as one using another name.

Acts 1969, ch. 36, § 1 (3.225); T.C.A., § 45-420.

45-2-907. Special remedies for nonpayment of rent.

  1. Notice.  If the rental due on a safe deposit box has not been paid, the lessor shall, not sooner than thirty (30) days nor later than four (4) years after the rental was due, send a notice by certified mail, return receipt requested, or by registered mail to the last known address of the lessee, stating that unless payment of the rental is made within thirty (30) days after the date of the notice:
    1. The safe deposit box will be opened and its contents stored for a minimum of one (1) year at the expense of the lessee;
    2. Without additional notice to the lessee, the contents may be offered for sale and unsold or unsalable items will be destroyed; and
    3. The proceeds of the sale, less expenses, unpaid rental charges, and storage will be transferred to the state treasurer pursuant to title 66, chapter 29, part 1.
  2. Inventory and Report to State Treasurer.  If the rental is not paid within thirty (30) days from the mailing of the notice, the box shall be opened in the presence of an officer or employee of the lessor and a notary public who also may be, but is not required to be, an officer or employee of the lessor. Those persons shall take an inventory of the contents of the safe deposit box. The contents, together with the inventory, shall be sealed in a package by the notary public who shall write on the outside the name of the lessee and the date of the opening. The lessor shall report the name and last known address of the lessee and the contents of the box, as attested by the notary public, to the state treasurer pursuant to title 66, chapter 29, part 1. The report shall be delivered to the state treasurer in a format as prescribed by the state treasurer and shall be due on May 1 of the year following the calendar year in which the box is opened. The package shall then be retained by the lessor at a rental not exceeding the rental charges for the box.
    1. Disposition of Property.  Prior to an auction or sale, the following types of property may be rejected as unsalable by an independent appraiser, an auctioneer, or the lessor and disposed of in the following manners:
      1. Documents or writings of a private nature having little or no apparent value may be destroyed by the lessor;
      2. Coins or currency with a face value of twenty dollars ($20.00) or less each that are valued at no more than twice the face value, shall be treated as proceeds from a sale and deposited as provided in subsection (e);
      3. Coins or currency with a face value of greater than twenty dollars ($20.00) each that are valued at one hundred twenty-five percent (125%) or less of face value, shall be treated as proceeds from a sale and deposited as provided in subsection (e);
      4. Any tangible item having an estimated sale value of less than twenty-five dollars ($25.00) may be destroyed by the lessor; provided, that the aggregate value of the items for a specific lessee does not exceed two hundred fifty dollars ($250); and
      5. Any tangible property including, but not limited to, stocks, bonds and promissory notes, shall be delivered to the state treasurer pursuant to title 66, chapter 29, part 1.
    2. A current version of any recognized numismatist publication may be utilized for purposes of valuation of coins and currency.
  3. Sale of Property.  If the contents of the safe deposit box have not been claimed and redeemed by the payment of charges within one (1) year after filing the report with the state treasurer, but not before May 1 of the succeeding year, the lessor shall sell the contents of the box at public auction or by other commercially reasonable sale at whatever time and place affords, in the judgment of the lessor, the most favorable price for the property involved. For purposes of this section, “commercially reasonable” includes, but is not limited to, a sale that would be commercially reasonable under § 47-9-610, or a sale, or sale methodology, that is approved by the commissioner of financial institutions. A lessor may sell the contents of safe deposit boxes in a sale conducted exclusively for the lessor, or in a sale conducted jointly for the lessor and any number of other financial institutions or other entities. The time, place and manner of any public sale shall be posted conspicuously on the premise, of the lessor and advertised once in a newspaper of general circulation in the community, or in some other commercially reasonable manner of advertising. Property sold through other than a public auction shall be appraised, in writing, by a person who does not acquire the appraised contents and who is regularly engaged in the business of appraising, buying or selling like merchandise, or any other combination thereof. Firearms shall be sold through a federal firearm licensed dealer, or if sold at public auction, through an auctioneer who possesses a federal firearm license.
  4. Disposition of sale proceeds.  The monetary proceeds resulting from any sale conducted pursuant to this section, after deducting accumulated charges, including a proportionate share of the expense of advertising and conducting the sale, shall be deposited to the credit of the lessee in any existing account maintained by the lessor on behalf of the lessee; provided, that the deposit shall not constitute account activity under title 66, chapter 29, part 1. If no account exists, proceeds shall be delivered to the state treasurer pursuant to title 66, chapter 29, part 1.
  5. Immunity for Destruction of Property.  Property offered for sale at a public auction or other commercially reasonable sale for which no purchaser exists shall be destroyed by the lessor and no action or proceeding may be maintained against the lessor, the independent appraiser or auctioneer, the state treasurer or any of their employees for or on account of the action. If, prior to the sale, the property is rejected by an independent appraiser or auctioneer in accordance with subsection (c), the property shall be destroyed by the lessor and no action or proceeding may be maintained against the lessor, the independent appraiser or auctioneer, the state treasurer or any of their employees for or on account of the action.
  6. Final Report.  After disposition of all contents of a safe deposit box, the lessor shall provide to the state treasurer an updated inventory on the contents of the box, together with property not sold pursuant to subdivision (c)(5). The report shall include information that the state treasurer may, by rule and regulation, direct.

Acts 1969, ch. 36, § 1 (3.226); T.C.A., § 45-421; Acts 1983, ch. 78, §§ 6-8; 1985, ch. 181, § 1; 1994, ch. 773, § 1; 1999, ch. 194, § 1; 2008, ch. 677, § 1.

Compiler's Notes. Acts 1999, ch. 194, § 1 provided that for the purpose of transitioning from the law in effect prior to May 19, 1999, to the process specified in this section, the following provisions shall apply:

  1. The contents of all safe deposit boxes opened pursuant of this section, on and after May 19, 1999, shall be subject to the provisions of this section as amended by Acts 1999, ch. 194, § 1; and
  2. The contents of all safe deposit boxes opened pursuant of this section, prior to May 19, 1999, shall be subject to the notice provisions of prior law; provided, that the financial institution may elect to apply the provisions of subsections (c)-(g) of this section as amended by Acts 1999, ch. 194, § 1, to the sale and disposal of such property.

    Cross-References. Certified mail instead of registered mail, § 1-3-111.

    1. A state trust company;
    2. A state bank authorized to act as a fiduciary;
    3. A savings association or savings bank organized under the laws of this state and authorized to act as a fiduciary;
    4. A national bank having its principal office in this state and authorized by the comptroller of the currency to act as a fiduciary pursuant to 12 U.S.C. § 92a;
    5. A federally chartered savings association or savings bank having its principal office in this state and authorized by its federal chartering authority to act as a fiduciary;
    6. An out-of-state bank with a branch in this state established or maintained pursuant to this chapter, or a trust office authorized by the commissioner pursuant to this chapter;
    7. An out-of-state trust company with a trust office authorized by the commissioner pursuant to this chapter;
    8. A foreign bank with a trust office authorized by the commissioner pursuant to this chapter; or
    9. A private trust company to the extent authorized by the commissioner pursuant to this chapter.
    1. A bank authorized to act as a fiduciary, which includes a trust company for the purposes of this section and §§ 45-2-1002 — 45-2-1006, having and maintaining paid-in capital and surplus of five hundred thousand dollars ($500,000), may be appointed a fiduciary or cofiduciary by any person or any court having jurisdiction and authority to appoint fiduciaries.
    2. When appointed as a fiduciary for a minor or other incompetent person, a bank shall have only the custody, control, management and administration of the property or estate of the person.
    3. The personal care and custody of any minor or other incompetent person shall be committed and confided to those individuals who would otherwise be entitled by law to the guardianship or care and custody of the person of the minor or incompetent person.

Part 10
Fiduciary Powers

45-2-1001. Company authorized to act as fiduciary.

No company shall act as a fiduciary in this state except:

No company shall engage in an unauthorized trust activity. No company shall be deemed to be subject to this chapter and chapter 1 of this title, regulating fiduciary activities to the extent that the company's activities are permitted by existing statutory authority or are customarily performed as a traditional incident to the company's regular business activities.

Acts 1969, ch. 36, § 1 (3.230); T.C.A., § 45-422; Acts 1999, ch. 112, §§ 7, 9.

Cross-References. Applicability of part to savings and loan associations and savings banks, § 45-2-106.

Appointment and removal of trustees, title 35, ch. 1.

Bank acting as fiduciary on April 2, 1969, may continue without changing charter, § 45-2-218.

Negotiable instruments, title 47, ch. 3.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 526.

Law Reviews.

Yes, Virginia, Tax Loopholes Still Exist: An Examination of the Tennessee Community Property Trust Act of 2010 (J. Paul Singleton), 42 U. Mem. L. Rev. 369 (2011).

45-2-1002. Fiduciary powers.

  1. Unless otherwise expressly provided by statute, a bank acting as a fiduciary shall have, alone or with others, all of the rights, powers, privileges and immunities, and be subject to the same liabilities and duties as an individual fiduciary under like circumstances. The fiduciary powers include, but are not limited to, the power to act as:
    1. Fiduciary as defined in § 35-2-102;
    2. Custodian of property;
    3. Agent or attorney-in-fact;
    4. Registrar or transfer agent of securities;
    5. Fiscal agent or any political entity, public body, corporation, unincorporated association or individual;
    6. Investment advisor;
    7. Insurer of titles to, mortgages on, and other interests in any real estate; and
    8. Guarantor of the payment of bonds owned by other persons.
  2. A bank acting as fiduciary shall have the same investment powers as an individual fiduciary under like circumstances and other investment powers that are provided by law. In exercising the powers, a bank shall, unless otherwise authorized by law or by the instrument creating the relationship, exercise the judgment and care, under the circumstances then prevailing, or as related to the specific purposes for which the fiduciary relationship was created, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs under like circumstances. Within the limitation of the foregoing standard, a bank, as fiduciary, is authorized to acquire and retain interests in every kind of property, real, personal or mixed, and every kind of investment, specifically including, but not by way of limitation, bonds, debentures, and other corporate and governmental obligations, insurance policies, stocks, rights, warrants, and securities of any open or closed-end management fund that persons of prudence, discretion, and intelligence acquire for their own account; and within the limitations of the same foregoing standard, the bank may retain property properly acquired, without limitation as to time and without regard to its suitability for original purchase.
  3. A bank, acting as fiduciary in any capacity for which an annual or periodic court accounting is required, shall not be required to exhibit to the court or the clerk thereof the originals or copies of receipts and cancelled checks for disbursements or distributions made by the fiduciary to support the accounting; provided, that the accounting consists of the bank's computer prepared statements showing all income and principal transactions for the accounting period, but the court may require that receipts and cancelled checks be exhibited for the final distribution of assets on termination or transfer of the account to a successor.

Acts 1969, ch. 36, § 1 (3.231); T.C.A., § 45-423; Acts 1987, ch. 300, § 1.

NOTES TO DECISIONS

1. Responsibilities as Trustee.

A trust company advising its customers in legal matters assumes the same responsibilities as to good faith, frank and fair dealing as does an individual attorney in advising his client. Bank of Commerce & Trust Co. v. Dye, 1 Tenn. App. 486, 1926 Tenn. App. LEXIS 3 (1926).

45-2-1003. Segregation and registration of fiduciary assets — Nominee.

    1. A bank or trust company holding any asset as a fiduciary, cofiduciary, agent for a fiduciary or custodian shall segregate the assets from any other assets of the bank except as may be expressly provided otherwise by law or by the instrument creating the fiduciary relationship and the asset may be kept by the bank or trust company.
    2. Stocks, bonds, and other securities may be held by the bank or trust company in a manner such that all certificates representing the securities from time to time constituting the assets of a particular estate, trust or other fiduciary account are held separate from those of all other estates, trusts, or fiduciary accounts; or, in a manner such that certificates representing securities of the same class of the same issues from time to time constituting assets of particular estates, trusts, or other fiduciary accounts are held in bulk, without certification as to ownership attached; provided, that a bank or trust company when operating under the aforementioned method of safekeeping securities shall be subject to the rules and regulations now in effect or hereinafter promulgated by the state banking board with regard to state-chartered institutions and the comptroller of the currency in the case of national banking institutions.
    3. A bank or trust company holding the securities in bulk may also merge certificates of small denominations into one (1) or more certificates of large denominations and all banks or trust companies acting as a fiduciary with regard to the securities shall on demand certify in writing the securities held by it for any estate, trust or fiduciary account.
    1. Any bank, when acting as a fiduciary or a cofiduciary with others, or as an agent for other fiduciaries, may, with the consent of its cofiduciary or cofiduciaries, if any, who are hereby authorized to give consent, or the fiduciaries for whom it is acting, cause any investment held in such a capacity to be registered and held in its own name, or the name of a nominee, or nominees, of the bank.
    2. The bank shall be liable for the acts of the nominee with respect to any investment so registered.
    3. The records of the bank shall at all times show the fiduciary relationship under which the investment is held, and the securities, or a proper receipt therefor, shall be in the possession and control of the bank.
    4. The securities shall be kept separate and apart from the assets of the bank.
  1. Any bank may deposit funds of a fiduciary account awaiting investment or distribution in its commercial banking department or in the commercial banking department of any affiliate bank in the same bank holding company as defined in § 45-2-1402 where the funds may be used in the conduct of its business to the extent that the deposits do not exceed the aggregate of:
    1. The insurance on the deposits provided by the federal deposit insurance corporation;
    2. Cash on hand;
    3. The value of obligations of the United States or any state or any subdivision or instrumentality thereof owned by the bank; and
    4. Other property approved for this purpose for national banks or for member banks of the federal reserve system.

Acts 1969, ch. 36, § 1 (3.232); 1974, ch. 550, § 1; T.C.A., § 45-424; Acts 1988, ch. 926, § 6.

45-2-1004. Investment in undivided interest in property.

  1. A bank may, subject to the limitations of this section, create undivided interests in property of any nature for the purpose of sale from time to time to accounts held by the bank in any fiduciary capacity. The bank may retain a portion of the undivided interests for its own account if the property is one that it would be authorized to acquire pursuant to this chapter wholly for its own account.
  2. The limitations on the undivided interest shall be:
    1. The interest shall be one that:
      1. The bank would be authorized to acquire pursuant to this chapter and chapter 1 of this title wholly for its own account, and, in the absence of broader investment powers under the terms upon which it was designated as fiduciary, would also be authorized to acquire as a legal investment for funds held by fiduciaries; or
      2. The bank would be authorized to acquire as an investment by the terms upon which it was designated as fiduciary of each account in which it acquires an undivided interest;
    2. Interests not retained by the bank may be sold only to a fiduciary account.
  3. The bank shall exercise all rights of ownership in respect of an interest in which undivided interests have been sold pursuant to this section, and in respect of any property acquired by foreclosure or otherwise in connection with the interest, in its own name but for the benefit of itself and all other owners of the undivided interests in the property.
  4. The bank shall at all times maintain records of all undivided interests created pursuant to this section showing the extent of the undivided interest of each owner of the interest.
  5. The bank may issue a certificate evidencing each undivided interest created pursuant to this section, keep records showing the holders of the certificates, provide for transfer of a certificate by the registered holder of the certificate upon surrender of the certificate and deal with the registered holder of a certificate as the owner of the undivided interest represented by the certificate. Each certificate shall contain a summary of the rights of an owner of the undivided interest represented thereby and expressly disclaim any guarantee by the bank of payment of any amount.

Acts 1969, ch. 36, § 1 (3.233); T.C.A., § 45-425.

45-2-1005. Fiduciary bond or oath excused.

No oath or bond shall be required of a bank to qualify upon appointment as a fiduciary, unless the instrument creating a fiduciary position expressly provides otherwise.

Acts 1969, ch. 36, § 1 (3.234); T.C.A., § 45-426.

Cross-References. Bond of personal representative, § 30-1-201.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 526.

Tennessee Forms (Robinson, Ramsey and Harwell), No. 4-705.

45-2-1006. Deposit of securities in federal reserve bank when acting as fiduciary authorized.

    1. Any bank or trust company, when acting as a fiduciary, or when holding securities as custodian for a fiduciary, is authorized to deposit, or arrange for the deposit of, with the federal reserve bank in its district, any securities, the principal of and interest on which the United States, or any department, agency or instrumentality thereof, has agreed to pay, has guaranteed to pay, or has guaranteed payment in the manner so as to be credited to one (1) or more accounts on the books of the federal reserve bank in the name of the bank or trust company, to be designated fiduciary or safekeeping accounts.
    2. The bank or trust company so depositing securities with the federal reserve bank shall be subject to the rules and regulations with respect to the making and maintenance of the deposits that, in the case of state chartered institutions, the commissioner, and, in the case of national banking associations, the comptroller of the currency, may from time to time issue.
    3. The records of the bank or trust company shall at all times show the ownership of the securities held in the account.
    4. Ownership of, and other interest in, the securities credited to the account may be transferred by entries on the books of the federal reserve bank without physical delivery of any securities.
    5. A bank or trust company acting as a custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by the bank or trust company with the federal reserve bank for the account of the fiduciary.
    6. A fiduciary shall, on demand by any party to its accounting or on demand by the attorney for the party, certify in writing to the party the securities deposited by the fiduciary with the federal reserve bank for its account as the fiduciary.
  1. This section shall apply to all fiduciaries and custodians for fiduciaries, acting on May 3, 1973, or who thereafter may act, regardless of the date of the instrument or court order by which they are appointed.

Acts 1973, ch. 294, § 6; 1973, ch. 384, §§ 1, 2; T.C.A. § 45-447.

45-2-1007. Deposit of securities in central depository.

    1. Notwithstanding any other provision of law, any bank or trust company holding securities as a fiduciary, cofiduciary, agent for a fiduciary or custodian pursuant to § 45-2-1003(a) and (b), is authorized to deposit or arrange for the deposit of the securities in a clearing corporation, as defined in § 47-8-102.
    2. When the securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of the clearing corporation with any other securities deposited in the clearing corporation by any person, regardless of the ownership of the securities, and certificates of small denomination may be merged into one (1) or more certificates of larger denominations.
    3. The records of the bank or trust company acting as a fiduciary, cofiduciary, agent for a fiduciary or custodian, shall at all times show the name of the party for whose account the securities are so deposited.
    4. Title to the securities may be transferred by bookkeeping entry on the books of the clearing corporation without physical delivery of certificates representing the securities.
    5. A bank or trust company so depositing securities pursuant to this section shall be subject to the rules and regulations as, in the case of state-chartered institutions, the commissioner and, in the case of national banking associations, the comptroller of the currency may from time to time issue.
    6. A bank or trust company acting as agent for a fiduciary or custodian shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by the bank or trust company in the clearing corporation for the account of the fiduciary.
  1. This section shall apply to any bank or trust company holding securities as a fiduciary, cofiduciary, agent for a fiduciary or custodian acting on March 6, 1978, or who thereafter may act, regardless of the date, agreement, instrument, or court order by which it is appointed and regardless of whether or not the fiduciary, cofiduciary, agent for a fiduciary or custodian, owns capital stock of the clearing corporation.

Acts 1978, ch. 575, § 1; T.C.A., § 45-448.

45-2-1008. Transfer of fiduciary accounts — Substitute fiduciaries.

  1. Absent written objection from the commissioner, a bank, trust company or trust department, referred to in this section as the “transferor,” may transfer one (1) or more fiduciary accounts administered by the bank, trust company or trust department to another bank, trust company or trust department, referred to in this section as the “transferee”; provided that the transferee bank has trust powers.
  2. Approval of the commissioner shall be deemed granted in the absence of written objection from the commissioner within ten (10) business days after receipt by the commissioner of written notice from the transferor bank of the proposed transfer.
    1. Within thirty (30) days after the date of the transfer of the fiduciary accounts, the transferor shall send written notice by first class mail to the last known address (as then set forth on the records of transferor, or if not set forth, as may be determined by the transferor in the exercise of reasonable diligence) of the following persons or entities:
      1. For employee benefit plans, to the plan sponsors;
      2. For individual retirement accounts and retirement accounts for the self-employed, to the account owners;
      3. For agency and escrow accounts, to the principals;
      4. For securities for which a transferor bank serves as trustee, registrar, transfer agent or paying agent, to the issuers;
      5. For revocable trusts under agreement, to the settlors;
      6. For irrevocable trusts under agreement, to any co-fiduciary, to the settlor, to each current income beneficiary who is an adult, and if a current income beneficiary is a minor, to a parent of the minor with whom the minor resides or to the conservator or guardian of the minor. For purposes of this subsection (c), “current income beneficiary” means a person currently entitled to income from a trust or a person to whom the trustee, in the trustee's discretion, may currently pay principal or income;
      7. For testamentary trusts, to the persons notified under subdivision (c)(1)(F);
      8. For conservatorships, to any co-fiduciary, to the protected person for whom the conservatorship was created, or if the conservatorship was created for a minor, to a parent of the minor with whom the minor resides or to the guardian of the minor;
      9. For guardianships, to any co-fiduciary, to the minor or legally incapacitated person for whom the guardian was appointed if the ward is at least fourteen (14) years of age;
      10. For probate estates, to any co-fiduciary, to the surviving spouse, if any, and to those persons notified pursuant to subdivision (c)(1)(G); and
      11. For corporate trust indentures to the issuer of the securities subject to each indenture; provided, that notwithstanding the foregoing, the transferor may, if it deems it appropriate, comply with any notice procedures contained in the trust indenture instrument with respect to succession of trustees.
    2. For purposes of this section, notice shall be deemed effective when mailed by the transferor. Should the transferor learn after the expiration of thirty (30) days from the transfer that through inadvertence, error, neglect or otherwise, notice was not mailed as herein provided, delayed notice may be given in the manner set forth herein. The recipient of the notice shall then have thirty (30) days to object to the transfer as provided in subsection (d).
    1. Any person given notice pursuant to subsection (c) may file a written objection to the fiduciary transfer with the commissioner, stating grounds for objection, within thirty (30) days of receipt of notice of the transfer by the person notified pursuant to subsection (c). The transferor shall then have thirty (30) days to either:
      1. Abandon the transfer of fiduciary accounts to which objection was given and hold the transfer for nought; or
      2. Submit a written response to the commissioner addressing the objections to the transfer. The commissioner shall either approve or deny the transfer.
    2. Nothing shall preclude the transferor from appointing a related bank, trust company or trust department as its agent for the performance of any and all fiduciary obligations as provided in subsection (h).
    1. Within a reasonable time after the date of a transfer of the fiduciary accounts in accordance with the procedures set forth in subsections (c) and (d), the transferor shall file an affidavit in the office of the chancery court of the county in which the main office of the transferor is located; and from time to time, the transferor may file a copy of the affidavit in the office of the chancery court in other counties that the transferor deems appropriate. The affidavit shall set forth the names and addresses of the transferor and transferee, identification of the fiduciary accounts transferred that the transferor deems appropriate, and other information that the transferor deems desirable.
    2. In the event that notice of objection to the transfer is received by the transferor after the filing of record of the original affidavit with respect to the transfer, and in the event that pursuant to subsection (d), the transfer is abandoned, the transferor shall promptly file notice of the abandonment in the office of the appropriate chancery court.
  3. If a bank, trust company or trust department completes a fiduciary transfer, the bank, trust company or trust department to which the fiduciary accounts have been transferred shall be automatically substituted as the fiduciary of all the accounts so transferred without further action and without any order or decree by any court or public officer; and without the transfer being treated or considered as a resignation by the transferor as a fiduciary; and the transferee bank, trust company or trust department shall have all the rights, duties, responsibilities, obligations and liabilities, financial or otherwise, of the transferor bank with respect to the accounts. A bank, trust company or trust department that completes a fiduciary transfer shall be relieved as fiduciary without an accounting and without any order or decree of any court or public officer, and prospectively shall have no continuing duties, responsibilities, obligations or liabilities, financial or otherwise, with respect to the accounts transferred. The transfer shall not, however, relieve the transferor bank of liability on the transferee for action or inaction prior to the transfer, nor shall it impose liability on the transferee for action or inaction of the transferor prior to the transfer. The transfer shall not constitute a relinquishment of trust powers by the transferor bank.
    1. A transferor bank, trust company or trust department is related to a transferee bank, trust company or trust department if:
      1. The transferee controls the transferor;
      2. The transferor controls the transferee;
      3. The same entity controls, directly or indirectly, the transferor and the transferee;
      4. A majority of the directors of the transferor are directors of the transferee; or
      5. A majority of the directors of the transferee are directors of the transferor.
    2. “Control” and “controls,” as used in subdivision (g)(1), means the ownership of a majority of the voting shares of another bank, trust company or of the bank operating the trust department.
    1. Regardless of objection to any fiduciary transfer as provided in subsection (d) and the outcome of the objection, and notwithstanding any procedure under this chapter, any bank may appoint a related bank, trust company or trust department as its agent for the performance of any or all acts, obligations and responsibilities of the bank with respect to any fiduciary account. A bank, trust company or trust department may also delegate, to an unrelated party pursuant to a written agreement, any investment, management or administrative function if the bank, trust company or trust department exercises reasonable care, judgment and caution in:
      1. Selecting the agent, taking into consideration the agent’s financial standing and reputation;
      2. Establishing the scope and other terms of any delegation; and
      3. Reviewing periodically the agent’s actions in order to monitor overall performance and compliance with the scope and other terms of the delegation.
    2. In the event of a delegation pursuant to subdivision (h)(1), the appointing bank shall remain fully responsible and liable with respect to all actions of the related bank, trust company, trust department or unrelated party as if performed by the appointing bank itself. The agency relationship shall not:
      1. Be deemed an impermissible delegation of responsibility or duty by the appointing bank;
      2. Constitute a resignation or disqualification of the appointing bank as fiduciary or relinquishment of trust powers by the appointing bank; or
      3. Require the consent of any person, entity, court or other governmental authority.

Acts 1984, ch. 691, §§ 2-5; 1987, ch. 300, §§ 2, 3; 1995, ch. 768, § 22; 1999, ch. 112, § 8; 2010, ch. 725, § 23.

Compiler's Notes. Acts 1995, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996.

45-2-1009. Trust offices.

  1. No bank shall operate any trust office for the purpose of conducting a general banking business, including, but not limited to, receiving deposits, paying checks, making loans, or receiving or discounting bills and notes at any place where it is prohibited from establishing a branch bank for this purpose.
  2. A bank at any trust office may receive money or other things of value, disburse funds, extend credit and otherwise perform all acts necessary or appropriate for it to carry out its obligations and duties as fiduciary if the activity is otherwise lawful.

Acts 1984, ch. 691, § 6.

45-2-1010. Fiduciary activities of state trust institution.

  1. A state trust institution may act as a fiduciary in this or any other state or foreign country, subject to complying with applicable laws of the state or foreign country.
  2. In addition, a state trust institution may conduct any activities at any office outside this state that are permissible for a trust institution chartered by the host state where the office is located, except to the extent the activities are expressly prohibited by the laws of this state or by any regulation or order of the commissioner applicable to the state trust institution; provided, that the commissioner may waive the prohibition if the commissioner determines that the involvement of out-of-state offices of state trust institutions in particular activities would not threaten the safety or soundness of the state trust institutions.
  3. A state trust institution may:
    1. Perform any act as a fiduciary at each trust office established under this title and at an authorized branch; and
    2. Exercise any incidental power that is reasonably necessary to enable it to fully exercise commonly accepted fiduciary powers conferred in this chapter and chapter 1 of this title.
  4. A state trust institution may exercise any other power authorized by this chapter and chapter 1 of this title, or any power authorized to federally chartered trust institutions whose purposes and powers are limited to fiduciary purposes and powers, subject to the commissioner's regulation for safety and soundness. A state trust institution may exercise any power authorized to trust institutions chartered by another state whose purposes and powers are limited to fiduciary purposes and powers, subject to the commissioner's regulation for safety and soundness.

Acts 1984, ch. 691, § 6; 1999 ch. 112, § 10.

Cross-References. Branch banking, § 45-2-614.

45-2-1011. Fiduciary activities of out-of-state trust institution.

An out-of-state trust institution that establishes and maintains one (1) or more offices in this state under this chapter may conduct any activity at each office that would be authorized under the laws of this state for a state trust institution to conduct at the office.

Acts 1999, ch. 112, § 10.

45-2-1012. State trust company principal office.

  1. Each state trust company must have and continuously maintain a principal office in this state.
  2. A state trust company shall apply to the commissioner to change its location or the location of any of its offices pursuant to § 45-2-218.

Acts 1999, ch. 112, § 10.

45-2-1013. Trust office.

  1. A state trust institution may establish or acquire and maintain trust offices anywhere in this state. Any prohibition on the acquisition of an institution that has not been in operation for at least three (3) years shall not apply to trust companies. A state trust institution desiring to establish or acquire and maintain an office shall file a written notice with the commissioner setting forth the name of the state trust institution, the location of the proposed additional office, furnish a copy of the resolution adopted by the board authorizing the additional office and pay the filing fee prescribed by the commissioner. If acquiring a trust office, the trust institution shall provide evidence that all fiduciary obligations and liabilities of the parties have been properly discharged or otherwise assumed.
  2. The notificant may commence business at the additional office on the thirty-first day after the date the commissioner receives the notice, unless the commissioner specifies an earlier or later date.
  3. The acquiring trust institution shall succeed by operation of law to all of the rights, privileges and obligations of the selling trust institution.
  4. The thirty-day period of review may be extended by the commissioner on a determination that the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the state trust institution may establish the additional office only on prior written approval by the commissioner.
  5. The commissioner may deny approval of the additional office if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness or that the proposed office would be contrary to the public interest.
  6. A state trust institution may also establish and maintain a new trust office or acquire and maintain an office outside of this state. In addition to the notice required to be provided in subsection (a), the trust institution must also provide evidence that the laws of the jurisdiction where the office is to be located permit an office, a copy of the authorizing board resolution and the filing fee, if any, prescribed by the commissioner. The process of review in subsections (b), (d) and (e) shall be applicable. The commissioner shall also consider the views of the appropriate bank supervisory agencies.

Acts 1999, ch. 112, § 10; 2003, ch. 32, § 7.

45-2-1014. Out-of-state trust institution trust office.

    1. An out-of-state trust institution may act as a fiduciary from a trust office only if it maintains:
      1. An office in this state as permitted by this chapter; or
      2. A branch in this state.(2)  Similar institutions chartered under the laws of Tennessee are permitted to establish or acquire offices and engage in substantially similar activities permitted to out-of-state trust institutions by this chapter in the state where the out-of-state trust institution has its principal office.
  1. An out-of-state trust institution desiring to establish or acquire and maintain a trust office in this state pursuant to this part shall provide, or cause its home state regulator to provide, written notice of the proposed transaction to the commissioner on or after the date on which the out-of-state trust institution applies to the home state regulator for approval to establish and maintain or acquire the office. The notice shall set forth the name of the out-of-state trust institution, the location of the proposed office, satisfactory evidence that the notificant is a trust institution, furnish a copy of the resolution adopted by the board authorizing the office and pay the filing fee, if any, prescribed by the commissioner. If acquiring a trust office, the out-of-state trust institution shall provide evidence that all fiduciary obligations and liabilities of the parties have been properly discharged or otherwise assumed. Any prohibition on the acquisition of an institution that has not been in operation for at least three (3) years shall not apply to trust companies.
  2. The acquiring trust institution shall succeed by operation of law to all of the rights, privileges and obligations of the selling trust institution. The acquisition alone shall not result in the establishment of a branch.
  3. An out-of-state trust institution may not establish or acquire a trust office in this state unless:
    1. The notificant shall have provided satisfactory evidence to the commissioner of compliance with:
      1. Any applicable requirements of title 48; and
      2. The applicable requirements of its home state regulator for acquiring or establishing and maintaining the office; and (2)  The commissioner, acting within sixty (60) days after receiving notice, shall have certified to the home state regulator that the requirements of this section have been met and the notice has been approved or, if applicable, that any conditions imposed by the commissioner pursuant to subsection (e) have been satisfied.
  4. The out-of-state trust institution may commence business at the trust office on the sixty-first day after the date the commissioner receives the notice unless the commissioner specifies an earlier or later date; provided, that with respect to an out-of-state trust institution that is not a depository institution and for which the commissioner has conditioned approval on the satisfaction by the notificant of any requirement applicable to a state trust company, the institution shall have satisfied the conditions and provided the commissioner satisfactory evidence of satisfaction of the conditions. The sixty-day period of review may be extended by the commissioner on a determination that the written notice raises issues that require additional information or additional time for analysis. If the period of review is extended, the out-of-state trust institution may establish the office only on prior written approval by the commissioner.
  5. The commissioner may deny approval of the office if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness or that the proposed office is contrary to the public interest. In acting on the notice, the commissioner shall consider the views of the appropriate bank supervisory agencies.
  6. An out-of-state trust institution that maintains a trust office in this state under this section may establish or acquire additional trust offices in this state to the same extent that a state trust institution may establish or acquire additional offices in this state pursuant to the procedures for establishing or acquiring the offices.
  7. If an out-of-state trust institution does not act as a fiduciary through the establishment or acquisition of a trust office or through an authorized branch office, it may engage in other fiduciary related activities in Tennessee including, but not limited to, marketing, soliciting and operating through a trust representative office only to the extent that the home state of the out-of-state trust institution permits state trust institutions to engage in similar activities in the other state.

Acts 1999, ch. 112, § 10; 2002, ch. 656, § 1; 2003, ch. 32, § 8.

45-2-1015. Name of trust institution.

A state trust company or out-of-state trust institution may use any name in connection with establishing an office in this state pursuant to this chapter, except that the commissioner may determine that a name proposed to be used is potentially misleading to the public and require the company or institution to select a name that is not potentially misleading.

Acts 1999, ch. 112, § 10.

45-2-1016. Designation of trustee.

Any person residing in this state may designate any trust institution to act as a fiduciary on behalf of the person.

Acts 1999, ch. 112, § 10.

45-2-1017. Choice of law governing trust and fiduciary investments.

Any trust institution that maintains a trust office in this state and its affected clients may designate as the state whose laws shall govern any written agreement between the trust institution and its client or any instrument under which the trust institution acts for a client and with respect to the fiduciary investment standards applicable to the agreements, either:

  1. This state;
  2. A state where affected clients reside; or
  3. The state where the trust institution has its principal office.

Acts 1999, ch. 112, § 10.

45-2-1018. Engaging in commerce prohibited.

A state trust company may not invest its funds in trade or commerce by buying, selling, or otherwise dealing in goods or by owning or operating a business not related to its fiduciary business, except as necessary to fulfill a fiduciary obligation to a client.

Acts 1999, ch. 112, § 10.

45-2-1019. Pledge of assets.

  1. A state trust company may not pledge or create a lien on any of its assets except:
    1. To secure the repayment of money borrowed;
    2. As specifically authorized or required by § 45-2-611; or
    3. By rules adopted under this chapter.
  2. An act, deed, conveyance, pledge, or contract in violation of this section is void.

Acts 1999, ch. 112, § 10.

45-2-1020. Merger authority.

A state trust company may merge with another trust company or into a depository institution pursuant to the applicable provisions of part 13 of this chapter, or as otherwise permitted. However, any requirement that an institution must be in operation for three (3) years before engaging in a merger transaction shall not apply to trust companies. Mergers of state trust companies into a resulting out-of-state trust institution is permitted to the same extent that the other state's law permits Tennessee trust institutions to merge with trust companies of the other state. If a state trust company merges into an out-of-state trust institution, the resulting out-of-state trust institution may operate a trust office at the location of the state trust company pursuant to the notice requirements for the offices under this chapter, but the office shall not constitute a branch.

Acts 1999, ch. 112, § 10; 2003, ch. 32, § 9.

45-2-1021. Sale of assets.

  1. The board of a state trust company, with the commissioner's approval, may cause a state trust company to sell all or substantially all of its assets, including the right to control accounts established with the trust company, without shareholder approval if the commissioner finds the:
    1. Interests of the state trust company's clients and creditors are jeopardized because of insolvency or imminent insolvency of the state trust company; and
    2. Sale is in the best interest of the state trust company's clients and creditors.
  2. A sale under this section must include an assumption and promise by the buyer to pay or otherwise discharge:
    1. All of the state trust company's liabilities to clients;
    2. All of the state trust company's liabilities for salaries of the state trust company's employees incurred before the date of the sale;
    3. Obligations incurred by the commissioner arising out of the supervision or sale of the state trust company; and
    4. Fees and assessments due the department.
  3. This section does not affect the commissioner's right to take action under another law. The sale by a trust company of all or substantially all of its assets with shareholder approval is considered a voluntary dissolution and liquidation and is governed by § 45-2-1501.

Acts 1999, ch. 112, § 10.

Part 11
Loans

45-2-1101. Loans authorized.

Any state bank may lend money and discount or purchase evidences of indebtedness and any agreement for the payment of money.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-428.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Law Reviews.

“Bad Faith Breach”: A New and Growing Concern for Financial Institutions, 42 Vand. L. Rev. 891 (1989).

Lender Liability: A Survey of Common-Law Theories, 42 Vand. L. Rev. 855 (1989).

Lender Liability and Arbitration: Preserving the Fabric of Relationship, 42 Vand. L. Rev. 947 (1989).

Written Agreements in the Lender-Borrower Context: The Illusion of Certainty, 42 Vand. L. Rev. 917 (1989).

45-2-1102. Limit of loans to any one borrower — Classified loans.

    1. Except as provided in this section, no state bank shall be allowed to lend to any one (1) person, firm or corporation (including loans to a firm or loans to the several members thereof) more than fifteen percent (15%) of its capital, surplus and undivided profits. However, the loans may be in excess of that percent, but not above twenty-five percent (25%) except as provided in subsection (b), if each specific loan in excess of fifteen percent (15%) is first submitted to and approved in advance in writing by the board of directors or by the finance committee of the bank and a record is kept of the written approval.
    2. No loan limit shall be applicable to any state bank in any situation or circumstance in which no loan limit is applicable to national banks.
    3. No loan limit shall be applicable to the extent that the loan or extension of credit is secured by a segregated deposit account in the lending bank.
    1. Obligations of any person in the form of notes or drafts secured by shipping documents, warehouse receipts or other documents transferring or securing title covering readily marketable nonperishable staples shall be subject to a limitation equal to the percent of the sum of the lending bank's capital, surplus, and undivided profits shown in column A below, when the market value of the staples securing the obligations is not at any time less than the percent of the face amount of the obligation shown in column B below:

      Column A  Column B

      25%   115%

      30%   120%

      35%   125%

      40%   130%

      45%   135%

      50%   140%

    2. The exceptions listed in subdivision (b)(1) do not apply to obligations of any one (1) person, copartnership, association or corporation arising from the same staples, for more than ten (10) months.
    1. Notwithstanding any other provision of law, a state bank or bank holding company may not sell a classified loan or participation in a classified loan to, or purchase the loan or participation from, another financial institution without obtaining the prior approval of the commissioner.
    2. For purposes of subdivision (c)(1):
      1. “Classified loan” means a loan that is designated “substandard,” “doubtful,” or “loss” in the most recent state or federal report of examination; and
      2. “Financial institution” means a bank, savings bank, savings and loan association or any subsidiary of those entities, industrial loan and thrift company, credit union, mortgage broker, mortgage banker, or leasing company accepting deposits, making or arranging loans and making or arranging leases.
    1. The loan limit applicable to any one (1) person under this section shall take into consideration credit exposure arising from derivative transactions between the state bank and the person.
    2. For purposes of subdivision (d)(1), “derivative transaction” includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one (1) or more commodities, securities, currencies, interest or other rates, indices, or other assets.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-429; Acts 1983, ch. 69, § 1; 1984, ch. 573, § 1; 1985, ch. 226, § 1; 2001, ch. 54, §§ 17, 18; 2012, ch. 634, § 1.

Compiler's Notes. Section 3 of Acts 1984, ch. 573, provided that the 1984 amendment shall not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before April 27, 1984.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

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).

45-2-1103. Loans to officers and directors.

Compliance with the requirements of 12 U.S.C. §§ 375a, 375b, and 1828(j) and applicable federal regulations shall be deemed compliance with the laws of Tennessee concerning loans to directors and officers of state banks.

Acts 1969, ch. 36, § 1 (3.241); 1973, ch. 294, § 6; T.C.A., § 45-430; Acts 1989, ch. 591, § 1; 2001, ch. 54, § 19.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Decisions Under Prior Law

1. Approval After Loan.

Loans to bank officials during the year and approved at next annual meeting by the directory were not violative, though irregular. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

45-2-1104. Loans and transactions involving banks own stock as collateral or otherwise.

    1. A state bank may make a loan secured by not more than fifty percent (50%) of the book value of its own stock upon the approval of a majority of the bank's board of directors; provided, that this subsection (a) shall not permit a purchase money loan for the initial acquisition of the bank's own stock. Loans secured by the bank's own stock shall be limited to and shall not exceed:
      1. In the aggregate, twenty percent (20%) of the bank's capital, surplus and undivided profits; or
      2. To any one (1) borrower, ten percent (10%) of the bank's capital, surplus and undivided profits.(2)  A loan that is otherwise adequately secured to the extent required of loans of the type provided and in which the bank's stock is taken as additional or secondary collateral shall not be included in the limits provided in this subsection (a).
    1. Except as expressly limited or restricted in this title, a state bank may engage in transactions involving its own stock, including, but not limited to, the transfer, repurchase, holding, sale or division, to the same extent permitted to corporations under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27.
    2. The bank shall give the commissioner thirty (30) days' advance notice of any proposed transaction and may consummate the transaction at the end of the thirty-day period unless the commissioner advises the bank in writing of the commissioner's objection to the proposed transaction.

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-431; Acts 1996, ch. 768, § 23; 2001, ch. 54, § 20.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 48.

Decisions Under Prior Law

1. Bylaw Reserving Lien on Stock.

While there is no statute creating a lien in favor of the bank, upon its stock for debts of stockholders to it, in the absence of statutory or charter provisions to the contrary, it may by bylaw reserve the lien. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

Where the bank had reserved a lien upon its stock by bylaw and by reservation on the face of the certificate of shares, the mere possession of a certificate by the pledgee of the owner who was a debtor of the bank did not affect the lien. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

2. Contract Reserving Lien on Stock.

A banking corporation, under its general authority to contract, may acquire a lien on its stock for the security of the debts of its stockholders to it, in the absence of statutory or charter prohibition. Wilkinson v. Home Bank, 137 Tenn. 198, 192 S.W. 920, 1916 Tenn. LEXIS 71 (1916).

45-2-1105. Participation with other lenders.

A state bank may participate in a loan with another lender to the extent that its participation does not exceed its legal limit for the type of loan except that participation may not violate  § 45-2-1102(c).

Acts 1969, ch. 36, § 1 (3.241); T.C.A., § 45-432; Acts 1984, ch. 573, § 2.

Compiler's Notes. Section 3 of Acts 1984, ch. 573, provided that the 1984 amendment did not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before April 27, 1984.

45-2-1106. Installment loans — Interest and insurance.

  1. In addition to all other powers granted them elsewhere in this chapter and chapter 1 of this title, banks have the power to make installment loans, either secured or unsecured, with repayment in equal, or substantially equal, monthly or other periodic installments over the term of the loans.
      1. Interest computed on the principal amount of the loan for the entire term of the loan at a rate not to exceed six percent (6%) per annum may be either deducted in advance or added to the principal; provided, that if the unpaid balance of the loan is either paid or renewed prior to its maturity date, the borrower or other person paying or renewing the loan shall be refunded or credited with unearned interest in an amount that represents at least as great a proportion of the original charge as the sum of the periodical time balances after the date of prepayment bears to the sum of all the periodical time balances under the schedule of payments in the original installment loan; provided, that the bank shall not be required to make a refund or credit where the amount thereof would be less than one dollar ($1.00) for each loan. In no event, however, shall the effective rate of interest on any loan made pursuant hereto, when computed from its inception to its originally contracted maturity, exceed the annual rates as follows:
        1. Ten and fifty-three one hundredths percent (10.53%) on loans of less than six (6) months;
        2. Eleven and fifty-eight one hundredths percent (11.58%) on loans as long as six (6) months but less than twelve (12) months;
        3. Twelve and fifty-nine one hundredths percent (12.59%) on loans as long as twelve (12) months but less than twenty-four (24) months;
        4. Thirteen and thirty-eight one hundredths percent (13.38%) on loans as long as twenty-four (24) months but less than thirty-six (36) months;
        5. Fourteen and seventeen one hundredths percent (14.17%) on loans as long as thirty-six (36) months but less than forty-eight (48) months;
        6. Fifteen and four one hundredths percent (15.04%) on loans as long as forty-eight (48) months but less than sixty (60) months;
        7. Sixteen and two one hundredths percent (16.02%) on loans as long as sixty (60) months but less than seventy-two (72) months;
        8. Seventeen and fifteen one hundredths percent (17.15%) on loans as long as seventy-two (72) months but less than eighty-four (84) months; and
        9. Eighteen and zero one hundredths percent (18.00%) on all loans for a period of eighty-four (84) months or longer.
      2. Notwithstanding any other provision herein to the contrary, the nominal rate of interest on any loan permitted by this section shall not exceed six percent (6%) per annum.
      3. In addition to such interest, a bank may require a borrower to pay loan charges in accordance with the following:
        1. A bank may require a borrower to make, or require a borrower to reimburse the bank for having made, to third parties payments necessary or incidental to the loan, including insurance premiums, official fees, taxes, appraisal fees, fees for title examination, attorney fees for documenting or closing the loan, fees for inspection or control of collateral, and, upon default, all costs of collection, including reasonable attorney's fees;
        2. A bank may require a borrower to pay to the bank a reasonable sum to reimburse the bank for its direct cost in originating, making, securing, processing, servicing and collecting the loan, and the reasonable sum may be an approximation of the direct costs; provided, that the approximation may be based on the bank's actual average cost; and provided further, that the approximation shall never exceed an amount equal to four percent (4%) of the principal amount of the loan; and provided further, that a bank may make a flat charge of not more than twenty-five dollars ($25.00) on any loan in lieu of the direct cost and without regard to the four percent (4%) limitation;
        3. A bank may require a borrower to pay delinquency charges on installments past due by more than fifteen (15) days; provided, that no charge shall exceed five percent (5%) of any such installment, nor shall any bank impose a delinquency charge on a loan more than once on account of the same past due installment; and
        4. Notwithstanding any other provision herein or elsewhere to the contrary, no bank shall be permitted to charge a commitment fee or brokerage commission in connection with any installment loan made pursuant to this section. (2)  (A)  A bank, in making an installment loan in excess of three hundred dollars ($300) pursuant to this section, may require a borrower to insure tangible personal property offered as security for the loan against any substantial risk of loss, damage or destruction for any amount not to exceed the actual value of the property or the approximate amount of the loan, whichever is lesser, and for a term and upon conditions that are reasonable and appropriate considering the nature of the property and maturity and other circumstances of the loan; provided, that the insurance is sold by a licensed agent, broker or solicitor and the borrower may furnish the borrower's own insurance policy.
      4. The bank may also request as security for any loan obligation in excess of three hundred dollars ($300) insurance on the life of the borrower or one (1) of them, if there are two (2) or more. The initial amount of credit life insurance shall not exceed the total amount repayable under the total amount of the indebtedness. Not more than one (1) policy of life insurance may be written in connection with any installment loan transaction unless requested by the borrower, comaker or endorser.
      5. In accepting any insurance provided for in this subdivision (b)(2) as security for a loan, the bank may deduct the premiums for the insurance from the proceeds of the loan, and remit the premiums to the insurance company writing the insurance and any gain or advantage to the bank or any employee, officer, director, agent, affiliate, or associate from the insurance or its sale shall not be considered as additional or further charge or interest in connection with any loan made under this section.
      6. Every insurance policy or certificate written in connection with a loan transaction pursuant to this section shall provide for cancellation of coverage and a refund of the premium unearned upon the discharge of the loan obligation for which the insurance is security, without prejudice to any claim existing at the time of discharge. Whenever insurance is written in connection with a loan transaction, the bank shall deliver or cause to be delivered to the borrower a policy, certificate or other memorandum that shows the coverages and the costs of the insurance, if any, to the borrower within thirty (30) days from the date of the loan.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 205, §§ 1, 2; 1979, ch. 412, § 1; T.C.A., § 45-433.

Law Reviews.

Bank Credit Cards in Tennessee — Usury?, 3 Mem. St. U. L. Rev. 51.

Decisions Under Prior Law

1. Constitutionality.

The former provisions in subdivision (1)(A) of this section, that purported to authorize state banks to discount loans at a maximum rate of six percent, violated Tenn. Const., art. XI, § 7 to the extent that they authorized state banks to charge interest in excess of an effective annual rate of 10 percent. Ray v. American Nat'l Bank & Trust Co., 443 F. Supp. 883, 1978 U.S. Dist. LEXIS 19959 (E.D. Tenn. 1978).

45-2-1107. Disclosure of terms and conditions of loan.

When an installment loan is made and interest is charged as provided in § 45-2-1106(b)(1)(A) and (B), the lending bank or trust company shall make disclosures of the terms and conditions of the loan that may from time to time be required for the loan under the Federal Consumer Credit Protection Act, 15 U.S.C. § 1601 et seq.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 205, § 4; T.C.A., § 45-434.

Law Reviews.

Bank Credit Cards in Tennessee — Usury?, 3 Mem. St. U. L. Rev. 51.

45-2-1108. Same power to make loans as national banks.

Notwithstanding any provision to the contrary in this chapter and chapter 1 of this title or elsewhere, state banks have the power to make loans upon the same terms and at the maximum effective interest rates as loans are authorized and credit extended by national banks in this state. This power includes, but is not limited to, the right to take, receive, reserve and charge on any loan or discount made, or upon any notes, bills of exchange, or other evidence of debt, interest at a maximum effective interest rate of one percent (1%) in excess of the discount rate on ninety-day commercial paper in effect at the federal reserve bank in the federal reserve district where the state bank is located.

Acts 1969, ch. 36, § 1 (3.241); 1979, ch. 209, § 1; T.C.A., § 45-435.

Law Reviews.

Residential Mortgage Lending: Charting a Course Through the Regulatory Maze, 29 Vand. L. Rev. 957.

Part 12
Elderly and Vulnerable Adult Financial Exploitation Prevention Act

45-2-1201. Short title.

This part shall be known and may be cited as the “Elderly and Vulnerable Adult Financial Exploitation Prevention Act.”

Acts 2017, ch. 264, § 1.

Compiler's Notes. Former §§ 45-2-120145-2-1203 (Acts 1953, ch. 47, §§ 1-3; Williams, §§ 4129.4 — 4129.6; Acts 1957, ch. 111, § 1; 1959, ch. 28, §§ 1-3; 1959, ch. 310, §§ 1, 2; Acts 1968, ch. 523, § 1; T.C.A. (orig. ed.) §§ 45-1201 — 45-1203; Acts 1982, ch. 860, § 1; 1983, ch. 189, § 6), concerning foreign institutions investing in loans, were repealed by Acts 1990, ch. 1087, § 1.

Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022. However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

45-2-1202. Part definitions.

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

  1. “Account” means funds or assets held by a financial service provider, including, but not limited to, a deposit account, savings account, share account, certificate of deposit, trust account, IRA, guardianship or conservatorship account, investment or securities account, retirement account, or loan or extension of credit;
  2. “Department” means the department of financial institutions unless otherwise designated in this part;
  3. “Elderly adult” means a person sixty-five (65) years of age or older;
  4. “Financial exploitation” means the unlawful appropriation or use of an elderly or vulnerable adult's property, as defined in § 39-11-106(a), for one's own benefit or that of a third party;
  5. “Financial service provider” means any of the following engaged in or transacting business in this state:
    1. A state or national bank or trust company;
    2. A state or federal savings and loan association;
    3. A state or federal credit union;
    4. An industrial loan and thrift company, regulated by chapter 5 of this title;
    5. A money transmitter, regulated by chapter 7, part 2 of this title;
    6. A check casher, regulated by chapter 18 of this title;
    7. A mortgage loan lender, mortgage loan broker, mortgage loan originator, or mortgage loan servicer, regulated by chapter 13 of this title;
    8. A title pledge lender, regulated by chapter 15 of this title;
    9. A deferred presentment services provider, regulated by chapter 17 of this title;
    10. A flex loan provider, regulated by chapter 12 of this title; or
    11. A home equity conversion mortgage lender, regulated by title 47, chapter 30;
  6. “Financial transaction” means any of the following as applicable to the business or services provided by a financial service provider:
    1. A transfer or request to transfer or disburse funds or assets in an account;
    2. A request to initiate a wire transfer, initiate an automated clearing house (ACH) transfer, or issue a money order, cashier's check, or official check;
    3. A request to negotiate a check or other negotiable instrument;
    4. A request to change the ownership of an account;
    5. A request to sell or transfer securities or other assets if the person selling or transferring the securities or assets is not required to register pursuant to title 48, chapter 1, part 1;
    6. A request for a loan, extension of credit, or draw on a line of credit; or
    7. A request to transfer the title to any real property, or the title of any motor vehicle or mobile home, or to encumber such real property, motor vehicle, or mobile home;
  7. “Law enforcement agency” means a district attorney general, municipal police department, county sheriff, the Tennessee bureau of investigation, United States attorney, FBI, secret service, or other federal law enforcement agency; and
  8. “Vulnerable adult” means a person eighteen (18) years of age or older who, because of mental or physical dysfunction, is unable to fully manage the person's own resources, carry out all or a portion of the activities of daily living, or is unable to fully protect against neglect, exploitation, or hazardous or abusive situations without assistance from others.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Former §§ 45-2-120145-2-1203 (Acts 1953, ch. 47, §§ 1-3; Williams, §§ 4129.4 — 4129.6; Acts 1957, ch. 111, § 1; 1959, ch. 28, §§ 1-3; 1959, ch. 310, §§ 1, 2; Acts 1968, ch. 523, § 1; T.C.A. (orig. ed.) §§ 45-1201 — 45-1203; Acts 1982, ch. 860, § 1; 1983, ch. 189, § 6), concerning foreign institutions investing in loans, were repealed by Acts 1990, ch. 1087, § 1.

Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.  However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

45-2-1203. Refusal or delay of financial transaction due to suspicion of financial exploitation.

  1. If a financial service provider has reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted, the financial service provider may, but is not required to, refuse a financial transaction or delay a financial transaction on an account:
    1. Of the elderly or vulnerable adult;
    2. On which the elderly or vulnerable adult is a beneficiary, including a trust, guardianship, or conservatorship account; or
    3. Of a person suspected of perpetrating financial exploitation.
    1. A financial service provider may also refuse a financial transaction or delay a financial transaction under this section if the department of human services or a law enforcement agency provides information to the financial service provider demonstrating that it is reasonable to believe that financial exploitation may have occurred, may have been attempted, or is being attempted.
    2. Except as ordered by a court, a financial service provider is not required to refuse a financial transaction or delay a financial transaction when provided with information by the department of human services or a law enforcement agency alleging that financial exploitation may have occurred, may have been attempted, or is being attempted, but may use its discretion to determine whether to refuse a financial transaction or hold a financial transaction based on the information available to the financial service provider.
  2. A financial service provider that refuses a financial transaction or holds a financial transaction based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted shall:
    1. Except with regard to an account administered by a bank or trust company in a fiduciary capacity, make a reasonable effort to notify one (1) or more parties authorized to transact business on the account orally or in writing; and
    2. Report the incident, if it involves financial exploitation, to the department of human services adult protective services division, as provided in § 71-6-103.
  3. No notice under this section shall be required to be provided to any party authorized to conduct business on the account if the party is the suspected perpetrator of financial exploitation.
  4. Any refusal by a financial service provider to conduct a financial transaction or hold a financial transaction as authorized by this section based on the financial service provider's reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted expires upon the earlier of:
    1. Ten (10) business days after the date on which the financial service provider first refused or held the financial transaction unless earlier terminated by an order of a court of competent jurisdiction, if the transaction involved the sale of a security or offer to sell a security and the person selling or offering to sell is not required to register pursuant to title 48, chapter 1, part 1;
    2. Five (5) business days after the date on which the financial service provider first refused a financial transaction or held the financial transaction, if the transaction did not involve the sale of a security or offer to sell a security, unless earlier terminated by an order of a court of competent jurisdiction;
    3. The time when the financial service provider reasonably believes that the financial transaction will not result in financial exploitation; or
    4. The time when the customer requesting the transaction has been advised of a potential risk in the transaction and the customer has requested the transaction to continue as long as the customer is not the suspected perpetrator of financial exploitation.
  5. A financial service provider may extend the time permitted in this section to refuse a financial transaction or hold a financial transaction based on a reasonable belief that additional time is needed to investigate the financial transaction or to prevent financial exploitation.
  6. Notwithstanding subsection (e), a court of competent jurisdiction may enter an order extending the time that a financial service provider must refuse a financial transaction or hold a financial transaction based on reasonable cause to suspect that financial exploitation may have occurred, may have been attempted, or is being attempted.
  7. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability:
    1. For refusing or not refusing a financial transaction, or holding or not holding a financial transaction under this section; or
    2. For actions taken in furtherance of the determination made under subdivision (h)(1) if the determination was based upon a reasonable belief.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Former §§ 45-2-120145-2-1203 (Acts 1953, ch. 47, §§ 1-3; Williams, §§ 4129.4 — 4129.6; Acts 1957, ch. 111, § 1; 1959, ch. 28, §§ 1-3; 1959, ch. 310, §§ 1, 2; Acts 1968, ch. 523, § 1; T.C.A. (orig. ed.) §§ 45-1201 — 45-1203; Acts 1982, ch. 860, § 1; 1983, ch. 189, § 6), concerning foreign institutions investing in loans, were repealed by Acts 1990, ch. 1087, § 1.

Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.  However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

45-2-1204. List of contact persons.

  1. A financial service provider may offer to an elderly or vulnerable adult the opportunity to submit and periodically update a list of persons that the elderly or vulnerable adult authorizes the financial service provider to contact when the financial service provider has reasonable cause to suspect that the adult is a victim or a target of financial exploitation.
  2. Notwithstanding subsection (a), a financial service provider, or an officer or employee of the financial service provider, that has reasonable cause to suspect that an elderly or vulnerable adult is the victim or target of financial exploitation may convey the suspicion to one (1) or more of the following, provided that the person is not the suspected perpetrator:
    1. Persons on the list described in subsection (a), if a list has been provided by the elderly or vulnerable adult;
    2. A co-owner, additional authorized signatory, or beneficiary on the elderly or vulnerable adult's account; or
    3. A person known by the financial service provider to be a family member, including a parent, adult child, or sibling.
  3. When providing information under this section, the financial service provider may limit the information and disclose only that the financial service provider has reasonable cause to suspect that the elderly or vulnerable adult may be a victim or target of financial exploitation without disclosing any other details or confidential personal information regarding the financial affairs of the elderly or vulnerable adult.
  4. The financial service provider may choose not to contact one (1) or more persons on the list provided pursuant to subsection (a) if the financial service provider suspects that the person or persons are engaged in financial exploitation.
  5. The financial service provider may rely on information provided by the customer in compiling a list of contact persons.
  6. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability for contacting a person or electing not to contact a person under this section and for actions taken in furtherance of that determination if the determination was made based on reasonable belief.
  7. Contact with any person, and any information provided under this section, is exempt from the customer consent and customer notice provisions in §§ 45-10-105 and 45-10-106.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022. However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

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

45-2-1205. Refusal to accept power of attorney due to suspicion of financial exploitation.

  1. A financial service provider may refuse to accept an acknowledged power of attorney if the financial service provider has reasonable cause to suspect that the principal is or may be the victim or target of financial exploitation by the agent or person acting for or with the agent.
  2. A financial service provider, or an employee of a financial service provider, is immune from all criminal, civil, and administrative liability for refusing to accept a power of attorney or for accepting a power of attorney under this section and for actions taken in furtherance of that determination if the determination was based upon reasonable belief.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.  However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

45-2-1206. Legislative intent.

It is the intent of the general assembly in adopting this part to allow financial service providers the discretion to take actions to assist in detecting and preventing financial exploitation without liability. The general assembly recognizes that financial service providers are in a unique position by conducting financial transactions on behalf of and at the request of their customers. Financial service providers have duties imposed by contract and duties imposed by both federal and state law to conduct financial transactions requested by their customers faithfully and timely in accordance with the customer's instructions. Further, financial service providers do not have a duty to contravene the valid instructions of their customers, nor to prevent criminal activity directed at their customers, and nothing in this part creates such a duty.

Acts 2017, ch. 264, § 1.

Compiler's Notes. Acts 2017, ch. 264, § 1 enacted a new part 22, §§ 45-2-220145-2-2206, but the part has been redesignated as part 12, §§ 45-2-120145-2-1206 by authority of the Code Commission.

Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Acts 2017, ch. 264, § 7 provided that the act, which enacted this section, shall be repealed on June 30, 2022.  However, Acts 2020, ch. 605, § 9 deleted the language of chapter 264 of the Public Acts of 2017, which provided for the repeal.

Part 13
Voluntary Corporate Changes

45-2-1301. Part definitions.

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

  1. “Bank” means a state or a national bank;
  2. “Continuing bank” means a merging bank the charter of which becomes the charter of the resulting bank;
  3. “Converting bank” means a bank converting from a state to a national bank, or the reverse;
  4. “Merger” includes consolidation;
  5. “Merging bank” means a party to a merger;
  6. “National bank” means a national banking association located in this state;
  7. “Resulting bank” means the bank resulting from a merger or conversion; and
  8. “State bank” means a bank chartered by this state.

Acts 1969, ch. 36, § 1 (3.401); T.C.A., § 45-601.

Cross-References. Conversion of financial institutions, title 45, ch. 11.

Negotiable instruments, title 47, ch. 3.

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).

45-2-1302. Resulting national bank.

  1. Subject to this chapter and chapter 1 of this title, a state bank may convert into a resulting national bank, or a state or national bank in operation for at least three (3) years shall have the right to merge with any other bank in operation for at least three (3) years in this state so as to result in a national bank. The action to be taken by the merging or converting bank, if a state bank, and its rights and liabilities and those of its stockholders, shall be the same as those prescribed for national banks at the time of the action by the laws of the United States and not by the laws of this state, except that a vote of the holders of two-thirds (2/3) of each class of voting stock of a state bank shall be required for a merger or conversion and that, on conversion by a state bank into a national bank, the rights of dissenting stockholders shall be those specified in § 45-2-1309. The requirement that both banks be in operation for three (3) years shall not apply if:
    1. Both merging banks have their principal offices in the same county; or
      1. One (1) merging bank was in existence, as defined in [former] § 45-12-102, as a bank prior to July 1, 1985, and was located in one (1) of the counties in Tennessee having a population in excess of two hundred thousand (200,000), according to the 1970 federal decennial census, and the other merging bank has been in operation for three (3) years;
      2. Notwithstanding § 45-2-614, the resulting national bank may create and operate branch banks in the county where the merging banks or any branch of either of the merging banks was located prior to the merger.
  2. Upon the completion of the merger or conversion, the franchise of any merging or converting state bank shall automatically terminate.
  3. A national bank in operation for at least three (3) years shall have the right to merge with an association as defined in § 45-3-104, in operation for at least three (3) years in this state so as to result in a national bank. The action to be taken by the merging bank or association and its rights and liabilities and those of its stockholders shall be the same as those prescribed for national banks at the time of the action by the laws of the United States and not by the laws of this state, except that a vote of the holders of two-thirds (2/3) of each class of voting stock of a state association shall be required for a merger. The requirement that both financial institutions be in operation for three (3) years shall not apply if both merging institutions have their principal offices in the same county.

Acts 1969, ch. 36, § 1 (3.402); T.C.A., § 45-602; Acts 1983, ch. 74, § 1; 1985, ch. 174, § 3; 1985, ch. 204, § 1; 1986, ch. 615, § 1; 2001, ch. 54, § 21; 2003, ch. 32, § 5.

Compiler's Notes. Former § 45-12-102 referred to in this section, was repealed by Acts 1995, ch. 165, § 1.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

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

45-2-1303. Resulting state bank.

    1. Upon approval by the commissioner:
      1. Banks whose principal offices are located in this state and have been in operation for at least three (3) years may be merged to result in a state bank; or
      2. A national bank may convert into a state bank, except that the action by a national bank shall be taken in the manner prescribed by and shall be subject to limitations and requirements imposed by the laws of the United States, which shall also govern the rights of its dissenting shareholders.
    2. The requirement that both banks be in operation for three (3) years shall not apply if:
      1. Both merging banks have their principal offices in the same county; or
      2. One (1) merging bank was in existence, as defined in [former] § 45-12-102, as a bank prior to July 1, 1985, and was located in one (1) of those counties in Tennessee having a population in excess of two hundred thousand (200,000), according to the 1970 federal decennial census, and the other merging bank has been in operation for three (3) years.
  1. Notwithstanding § 45-2-614:
    1. The resulting state bank may create and operate branch banks in any county where the merging banks or any branch of either of the merging banks was located prior to the merger; and
    2. A state bank, whether or not a merging bank, with the approval of the commissioner, may create and operate branch banks in any county where a branch bank, office, or agency of the bank was maintained and operated on April 6, 1925.
  2. Upon approval of the commissioner, a state bank in operation for at least three (3) years shall have the right to merge with an association as defined in § 45-3-104 in operation for at least three (3) years in this state so as to result in a state bank. This part shall govern any merger or consolidation pursuant to this subsection (c). The requirement that both financial institutions be in operation for three (3) years shall not apply if both institutions have their principal offices in the same county. The resulting state bank may create and operate branch banks in accordance with § 45-2-614.

Acts 1969, ch. 36, § 1 (3.403); 1973, ch. 294, § 6; T.C.A., § 45-603; Acts 1983, ch. 74, § 2; 1984, ch. 555, § 1; 1985, ch. 174, § 4; 1985, ch. 204, § 1; 1986, ch. 615, § 1; 2001, ch. 54, § 22; 2003, ch. 32, § 6.

Compiler's Notes. Former § 45-12-102, referred to in this section, was repealed by Acts 1995, ch. 165, § 1.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

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

45-2-1304. Merger procedure — Resulting state bank.

  1. The board of directors of each merging state bank shall, by a majority of the entire board, approve a merger agreement, which shall contain:
    1. The name of each merging bank and location of each office;
    2. With respect to the resulting bank:
      1. Its name and the location of the principal and of each additional office, which shall not be at places other than pre-existing offices of any merging bank;
      2. The name and residence of each director to serve until the next annual meeting of the stockholders;
      3. The name and residence of each officer;
      4. The amount of capital, the number of shares and the par value of each share;
      5. Whether preferred stock is to be issued and the amount, terms, and preference; and
      6. The designation of the continuing bank, the charter of which is to be the charter of the resulting bank, together with the amendments to the continuing charter and to the continuing bylaws;
    3. Provisions governing the manner of converting the shares of the merging banks into shares of the resulting state bank;
    4. A statement that the agreement is subject to approval by the commissioner and by the stockholders of each merging bank;
    5. Provisions governing the manner of disposing of the shares of the resulting state bank not taken by dissenting stockholders of merging banks;
    6. Provisions for terminating any activities and disposing of any assets that do not conform to the requirements of the resulting institution when the merger involves an association; and
    7. Other provisions that the commissioner requires in order to discharge the commissioner's duties with respect to the merger.
  2. After approval by the board of directors of each merging state bank, the merger agreement shall be submitted to the commissioner for approval, together with certified copies of the authorizing resolutions of each board of directors showing approval by a majority of the entire board and evidence of proper action by the board of directors of any merging national bank.
  3. The commissioner shall approve the agreement if it appears that:
    1. The resulting state bank meets the requirements of state law as to the formation of a new state bank;
    2. The agreement provides an adequate capital structure, including surplus, in relation to the deposit liabilities of the resulting state bank and its other activities that are to continue or are to be undertaken;
    3. The agreement is fair;
    4. The merger is not contrary to the public interest; and
    5. When the merger involves an association, the schedule for termination of any nonconforming activities and disposition of any nonconforming assets is timely, and the plan for termination and disposition does not include any unsafe and unsound practices.
  4. If the commissioner disapproves an agreement, the commissioner shall state any objections and give an opportunity to the merging banks to amend the merger agreement to obviate the objections.
  5. The merger procedure prescribed in this section shall also apply to the merger of an association and state bank resulting in a state bank.

Acts 1969, ch. 36, § 1 (3.404); 1973, ch. 294, § 6; T.C.A., § 45-604; Acts 1985, ch. 174, §§ 5-7.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

NOTES TO DECISIONS

1. Bond to Protect Depositors.

It is proper for the superintendent of banks [now commissioner of financial institutions] to require as a condition precedent to the merger of banks that the directors execute a bond for the protection of depositors and creditors where the banks to be merged have liabilities far in excess of assets and where the resulting bank would be in an unsafe and unsound financial condition without the bond requirement and the action by the superintendent [now commissioner] did not amount to exacting the bond under duress. State ex rel. Robertson v. Moriarty, 20 Tenn. App. 51, 95 S.W.2d 70, 1935 Tenn. App. LEXIS 5 (1935).

Where, upon the formation of new bank to take over the assets and assume the liabilities of two other banks, the superintendent of banks [now commissioner of financial institutions] required the directors of the new bank to execute a bond to secure its depositors and unsecured creditors as a condition precedent to the opening of the bank for business on the superintendent's [now commissioner's] finding that the new bank was in an unsafe condition, the directors of new bank were not entitled to a reasonable time in that to strengthen the bank where the assets of new bank were impaired by frozen assets of old bank. State ex rel. Robertson v. Moriarty, 20 Tenn. App. 51, 95 S.W.2d 70, 1935 Tenn. App. LEXIS 5 (1935).

45-2-1305. Approval by stockholders of merging state banks.

  1. To be effective, a merger that is to result in a state bank must be approved by the stockholders of each merging state bank by a majority vote of the outstanding voting stock of each class eligible to vote for the merger; provided, that a greater vote may be required by the charter. The vote shall be held at a meeting called to consider the action. The vote shall constitute the adoption of the charter and bylaws of the continuing state bank, including the amendments in the merger agreement, as the charter and bylaws of the resulting bank.
  2. Notice of the meeting of the stockholders must be given by mail at least fifteen (15) days before the date of the meeting to each stockholder of record of each merging bank at the stockholder's address on the books of the stockholder's bank, who has not waived notice in writing. The notice shall state that a dissenting stockholder will be entitled to payment of the value of the stockholder's shares only if written notice of intent to demand payment is delivered to the bank before the vote is taken, and the stockholder does not vote the shares in favor of the plan.

Acts 1969, ch. 36, § 1 (3.405); T.C.A., § 45-605; Acts 1984, ch. 571, § 1; 1993, ch. 95, § 1; 1994, ch. 551, §§ 13, 14; 2020, ch. 605, § 1.

Compiler's Notes. Section 2 of Acts 1984, ch. 571, provided that:

“This act shall not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before its effective date.”

Amendments. The 2020 amendment, in (b), in the first sentence, substituted “must” for “shall”, deleted “publication in a newspaper of general circulation in the place where the principal office of each merging bank is located, at least once a week for four (4) successive weeks, and by” following “given by”, and deleted the second sentence, which read, “No notice by publication need be given if written waivers are received from the holders of two thirds (2/3) of the outstanding shares of each class of voting stock.”

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

45-2-1306. Effective date of merger — Certificate of merger.

  1. A merger that is to result in a state bank shall, unless a later date is specified in the agreement, become effective upon the filing with the commissioner of the executed agreement, together with copies of the resolutions of the stockholders of each merging bank approving it, certified by the bank's president or a vice president and a cashier. The charters of the merging banks, other than the continuing bank, shall thereupon automatically terminate.
  2. The commissioner shall then issue to the resulting bank a certificate of merger, which shall constitute a continuing charter, specifying the name of each merging bank and the name of the resulting state bank. The certificate shall be conclusive evidence of the merger and of the correctness of all proceedings therefor in all courts and places, and shall be recorded in the same manner as is provided for the recording of a charter of a new bank in § 45-2-205(c).

Acts 1969, ch. 36, § 1 (3.406); 1973, ch. 294, § 6; T.C.A., § 45-606.

45-2-1307. Conversion of national into state bank.

  1. Except as provided in § 45-2-1310, a national bank located in this state that follows the procedure prescribed by the laws of the United States to convert into a state bank may be granted a state charter by the commissioner if the commissioner finds that each office of the national bank is legally in operation, that the resulting state bank will have an adequate capital structure, including surplus, in relation to its deposit liabilities and its other activities, not less than the capital structure required for a new state bank, and that the officers and directors of the resulting bank are persons of sound judgment and discretion.
  2. The national bank may apply for the charter by filing with the commissioner:
    1. A certificate signed by its president and cashier and by a majority of the entire board of directors, setting forth the corporate action taken in compliance with the laws of the United States governing the conversion of a national to a state bank; and
    2. The plan of conversion and the proposed articles of incorporation approved by the stockholders, for the operation of the bank as a state bank.

Acts 1969, ch. 36, § 1 (3.407); 1973, ch. 294, § 6; T.C.A., § 45-607.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

45-2-1308. Continuation of corporate entity — Use of old name.

  1. A resulting state or national bank shall be considered the same business and corporate entity as each merging bank or as the converting bank with all the property rights, powers, duties, fiduciary appointments subject to § 45-2-1310 and obligations of each merging bank or the converting bank, except as affected by the state law in the case of a resulting state bank or the federal law in the case of a resulting national bank, and by the charter and bylaws of the resulting bank.
  2. A resulting bank shall have the right to use the name of any merging bank or of the converting bank whenever it deems it more convenient to do so.
  3. Any reference to a merging or converting bank in any writing, whether executed or taking effect before or after the merger or conversion, shall be deemed a reference to the resulting bank if not inconsistent with the other provisions of the writing.

Acts 1969, ch. 36, § 1 (3.408); T.C.A., § 45-608; Acts 1999, ch. 112, § 11.

45-2-1309. Dissenting stockholders.

The owners of shares of a state bank shall have dissenters rights as provided by  the Tennessee Business Corporation Act, compiled in title 48, ch. 23, part 1, with respect to any plan of merger, merger agreement, plan of conversion, plan of share exchange or any other corporate action described in § 48-23-102.

Acts 1969, ch. 36, § 1 (3.409); 1973, ch. 294, § 6; T.C.A., § 45-609; Acts 1981, ch. 330, § 2; 1983, ch. 441, § 2; 1994, ch. 551, § 15.

45-2-1310. Resulting bank without trust powers.

Where a resulting state bank is not to exercise trust powers, the commissioner shall not approve a merger or conversion until satisfied that adequate provision has been made for successors to fiduciary positions held by the merging banks or the converting bank.

Acts 1969, ch. 36, § 1 (3.410); 1973, ch. 294, § 6; T.C.A., § 45-610.

45-2-1311. Nonconforming assets or business.

If a merging or converting bank has assets that do not conform to the requirements of state law for the resulting state bank, or carries on business activities that are not permitted for the resulting state bank, the commissioner may permit a reasonable time to conform with state law.

Acts 1969, ch. 36, § 1 (3.411); 1973, ch. 294, § 6; T.C.A., § 45-611.

45-2-1312. [Reserved.]

  1. If a bank is determined to be in financial difficulty by the appropriate regulatory officials, as defined in § 45-2-1402, it may be merged into any other bank in this state, notwithstanding §§ 45-2-614 and 45-2-1302(a).
  2. The merger procedure shall be the same as that procedure required for a regular merger pursuant to this part except that no notice by publication need be given.
  3. Prior to approving a merger pursuant to this section, the appropriate regulatory officials shall determine that alternative methods of protecting the depositors and stockholders of a bank in financial difficulty are not feasible.

Acts 1981, ch. 330, § 1.

45-2-1314. Share exchanges.

  1. A corporation may acquire all of the outstanding shares of one (1) or more classes or series of a bank, and a bank may acquire all of the outstanding shares of one (1) or more classes or a series of another bank or corporation, if the board of directors of each corporation or bank adopts and its shareholders, if required by § 48-21-104, approve the exchange. The share exchange shall be subject to and in accordance with the Tennessee Business Corporation Act, compiled in title 48, chapter 21, except as chapter 21 of the Tennessee Business Corporation Act is inconsistent with this title.
  2. Any share exchange involving a bank or a bank holding company shall be subject to any regulatory approval required by applicable law.

Acts 1994, ch. 551, § 16.

45-2-1315. Review of exchange by commissioner — Hearings — Costs.

Upon the request of any person or entity that proposes to issue any security in exchange for one (1) or more bona fide outstanding securities of a bank or bank holding company or partly in exchange for outstanding securities of a bank or bank holding company and partly for cash, the commissioner is authorized to approve the terms and conditions of the issuance and exchange after a hearing on the fairness of the terms and conditions at which all persons to whom it is proposed to issue securities in the exchange shall have the right to appear. Nothing in this section shall require the commissioner to hold a hearing or to approve the terms or conditions of any specific exchange of securities. Any party requesting a hearing shall agree to pay the cost for the hearing, including the cost for the department to retain outside legal or investment advice as deemed necessary by the commissioner. The commissioner may require the requesting party to post a bond in cash or by accepted sureties to cover the cost.

Acts 1994, ch. 551, § 17.

Part 14
Bank Holding Companies—Bank Structure Act of 1974

45-2-1401. Short title.

This part shall be known and may be cited as the “Bank Structure Act.”

Acts 1974, ch. 469, § 1; T.C.A., § 45-619; Acts 1995, ch. 165, § 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Cross-References. Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Banking Act, title 45, ch. 12.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 64.

Law Reviews.

The Federal Income Tax Considerations Involved in Forming and Operating a Bank Holding Company (Clayton D. Smith), 11 Mem. St. U.L. Rev. 453 (1981).

45-2-1402. Part definitions.

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

  1. “Acquisition of a branch” means the acquisition of all or substantially all of the assets other than loans, cash or securities and the assumption of all or substantially all of the liabilities of or related to a branch that has been open and engaged in the business of banking for at least three (3) continuous years without the acquisition of the entire bank;
  2. “Affiliate” means any company that controls, is controlled by, or is under common control with another company;
  3. “Appropriate regulatory official” means:
    1. For any national bank, the comptroller of the currency of the United States; and
    2. For any Tennessee-chartered bank, the commissioner of financial institutions, the federal deposit insurance corporation, or the board of governors of the federal reserve system, if the bank is a member bank;
  4. “Bank” has the meaning stated in § 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(a)(1));
  5. “Bank holding company” has the meaning set forth in § 2(a)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(a)(1));
  6. “Branch” means a branch as defined in § 45-1-103;
  7. “Commercial activities” means any activities in which a bank holding company, financial holding company, a national bank, or a national bank subsidiary, may not engage under federal law;
  8. “Company” has the meaning set forth in § 2(b) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(b));
  9. “Control” has the meaning set forth in § 2(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1841(a)(2));
  10. “De novo acquisition” means acquisition of shares of a bank prior to the time it is authorized to commence operations;
  11. “De novo branch” means a branch of a bank that:
    1. Is originally established by the bank as a branch; and
    2. Does not become a branch of the bank as a result of:
      1. The acquisition by the bank of an insured depository institution or a branch of an insured depository institution; or
      2. The conversion, merger, or consolidation of the institution or branch;
  12. “Home state” means:
    1. With respect to a national bank, the state in which the main office of the bank is located;
    2. With respect to a state bank, the state by which the bank is chartered; and
    3. With respect to a bank holding company, the state in which the total deposits of all banking subsidiaries of the company are the largest on the later of:
      1. July 1, 1966; or
      2. The date on which the company becomes a bank holding company under the Bank Holding Company Act of 1956;
  13. “Host state” means a state, other than the home state of a bank, in which the bank maintains or seeks to establish and maintain a branch;
  14. “Interim bank merger” means the technique by which a new bank charter is obtained solely for the purpose of merging an existing bank into the bank for which the charter is sought, or solely for the purpose of merging the bank for which the charter is sought into an existing bank; the technique is a transaction intended to qualify the exchange of stock between the bank holding company and the stockholders of the existing bank as a reorganization within the meaning of § 368(a) of the Internal Revenue Code of 1986 (26 U.S.C. § 368(a));
  15. “Out-of-state bank” or “out-of-state bank holding company” means a bank or bank holding company of which Tennessee is not the home state; and
  16. “Tennessee bank” or “Tennessee bank holding company” means a bank or bank holding company for which Tennessee is the home state of the bank or company.

Acts 1974, ch. 469, § 2; T.C.A., § 45-620; Acts 1995, ch. 165, § 2; 1996, ch. 562, § 3; 1998, ch. 742, § 1; 2001, ch. 54, § 24; 2001, ch. 140, § 1; 2003, ch. 32, § 3; 2007 ch. 5, §§ 1, 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 provided that nothing in that act shall be deemed or construed as to: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Cross-References. Branch banks, § 45-2-614.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. No. 103-328, 108 Stat. 2338 (1994) (codified in various sections of 12 U.S.C. (1994)).

45-2-1403. Prohibition against acquiring shares of bank in operation less than three (3) years — Exceptions.

  1. Except as otherwise provided in subsection (b):
    1. No bank holding company acting directly or indirectly shall acquire control of, merge, or consolidate with a Tennessee bank that has not been in operation for at least three (3) years; and
    2. No out-of-state bank acting directly or indirectly shall acquire control of, merge, or consolidate with a Tennessee bank that has not been in operation for at least three (3) years.
  2. Subsection (a) shall not prohibit the following transactions:
    1. An interim bank merger for the purpose of acquiring control of a Tennessee bank that has been in operation for at least three (3) years, but the requirement of that period of operation shall not apply if the bank holding company owned more than fifty percent (50%) of the shares of the bank prior to the time of merger by reason of the purchase of the shares in a de novo acquisition;
    2. Acquisition of control, merger or consolidation of any Tennessee bank in financial difficulty, as determined by the appropriate regulatory officials; provided, that the officials determine that the acquisition will protect the stockholders and depositors by maintaining financial soundness;
    3. Acquisition of shares of stock given as collateral security upon a debt contracted in good faith; provided, that:
      1. The acquisition is necessary to prevent loss upon the debt;
      2. The making of the loan and the acquisition of the shares are in the ordinary course of business and not as a means of circumventing this part; and
      3. The shares so acquired shall be sold or disposed of at public or private sale within a period of one (1) year from the acquisition of the shares or by a later time that the appropriate regulatory officials deem required to permit the disposition of the shares without undue risk or loss;
    4. Acquisition of shares of stock by a bank acting solely in a fiduciary capacity in the ordinary course of its trust business and not for the purpose of circumventing this part;
    5. Acquisition of control of a bank by a company that will become a Tennessee bank holding company solely by reason of the acquisition; and
    6. The acquisition of shares of a bank holding company by another bank holding company where more than fifty percent (50%) of the total consolidated assets of the holding company being acquired are held by banks in operation for more than three (3) years.

Acts 1974, ch. 469, § 3; 1979, ch. 76, § 1; T.C.A., § 45-621; Acts 1980, ch. 616, § 1; 1981, ch. 228, § 1; 1983, ch. 74, § 3; 1987, ch. 45, § 1; 1995, ch. 165, § 2; 1996, ch. 768, § 24; 2003, ch. 32, § 4.

Compiler's Notes. Acts 1995, ch. 165, § 6 does not: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

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

45-2-1404. Acquisition by holding company prohibited.

A bank or bank holding company shall be prohibited from acquiring any bank in Tennessee if the bank or bank holding company, including all insured depository institutions that are affiliates of the bank or bank holding company, upon consummation of the acquisition, would control thirty percent (30%) or more of the total amount of the deposits of the insured depository institutions in Tennessee. For purposes of this part, “deposit” has the meaning set forth in § 3(l ) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(l )).

Acts 1974, ch. 469, § 4; T.C.A., § 45-622; Acts 1995, ch. 165, § 2.

Compiler's Notes. Acts 1995, ch. 165, § 6 does not: (i) authorize or permit, prior to June 1, 1997, merger or consolidation of any bank having its home state, as defined hereinabove in § 45-2-1402, in Tennessee with or into any bank which does not have its home state in Tennessee; or (ii) authorize or permit, whether before, on, or after June 1, 1997, a bank which does not have its home state in Tennessee to establish or acquire a branch in Tennessee by any means other than merger or consolidation, on or after June 1, 1997, of such bank with or into a bank having its home state in Tennessee.

45-2-1405. Power of commissioner.

The commissioner has the power to establish rules and regulations to carry out the legislative purposes of this part.

Acts 1974, ch. 469, § 5; T.C.A., § 45-623; Acts 1981, ch. 386, § 1; 1995, ch. 165, § 2.

Compiler's Notes. Former § 45-2-1405 (Acts 1974, ch. 469, § 5; T.C.A., § 45-623; Acts 1981, ch. 386, § 1), prohibiting Tennessee holding companies from acquiring certain banks, was effectively repealed by Acts 1995, ch. 165, § 2, which rewrote the part but did not include this section.

Cross-References. Acquisitions of Tennessee bank holding companies or banks, title 45, ch. 12.

45-2-1406. [Reserved.]

  1. An out-of-state state bank that establishes and maintains one (1) or more branches in Tennessee under this part may conduct any activities at the branch or branches that are authorized under the laws of this state for Tennessee state banks.
  2. Notwithstanding any other state law to the contrary and in addition to any other activities a state bank may conduct, a Tennessee state bank may conduct any activities at any branch outside Tennessee that are permissible for a bank chartered by the host state where the branch is located, subject to regulation by the commissioner for the purpose of maintaining the state bank's safety and soundness.

Acts 1996, ch. 562, § 1.

Law Reviews.

1996 Real Estate Legislation: What You Don't Know Can  Hurt You (William R. Bruce), 32 No. 6 Tenn. B.J. 12 (1996).

45-2-1408. Examinations — Periodic reports — Cooperative agreements — Assessment of fees.

  1. To the extent consistent with subsection (c), the commissioner may make the examinations of any branch established and maintained in this state pursuant to this part by an out-of-state state bank that the commissioner deems necessary to determine whether the branch is being operated in compliance with the laws of this state and in accordance with safe and sound banking practices. The commissioner may also participate in examinations of out-of-state state banks that have branches located in Tennessee. The applicable provisions of § 45-2-1602 shall apply to the examinations.
  2. The commissioner may prescribe requirements for periodic reports regarding any out-of-state bank that operates a branch in Tennessee pursuant to this part. The required reports shall be provided by the bank or may be provided by the bank supervisory agency having primary responsibility for the bank.
  3. The commissioner may enter into cooperative, coordinating and information-sharing agreements with any other bank supervisory agencies or any organization affiliated with or representing one (1) or more bank supervisory agencies with respect to the periodic examination or other supervision of any branch in Tennessee of an out-of-state state bank, or any branch of a Tennessee state bank in any host state, and the commissioner may accept the parties' reports of examination and reports of investigation in lieu of conducting the commissioner's own examinations or investigations.
  4. The commissioner may enter into contracts with any bank supervisory agency that has concurrent jurisdiction over a Tennessee state bank or an out-of-state state bank operating a branch in this state pursuant to this part to engage the services of the agency's examiners at a reasonable rate of compensation, or to provide the services of the commissioner's examiners to the agency at a reasonable rate of compensation to be paid by either the other bank supervisory agency or by the out-of-state state bank. The contract shall be deemed a sole source contract under Tennessee law.
  5. The commissioner may enter into joint examinations or joint enforcement actions with other bank supervisory agencies having concurrent jurisdiction over any branch in Tennessee of an out-of-state state bank or any branch of a Tennessee state bank in any host state; provided, that the commissioner may at any time take such actions independently if the commissioner deems the actions to be necessary or appropriate to carry out the commissioner's responsibilities under this part or to ensure compliance with the laws of this state.
  6. Each out-of-state state bank that maintains one (1) or more branches in this state may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of this state and regulations of the commissioner. The fees, as well as a portion of the banking fee assessed on a Tennessee state bank that maintains one (1) or more branches in other states, may be shared with other bank supervisory agencies or any organization affiliated with or representing one (1) or more bank supervisory agencies in accordance with agreements between the parties and the commissioner.
  7. In order to encourage the effective coordination and implementation of home state laws and host state laws with respect to interstate branching, the commissioner has the authority and the discretion to determine the applicability of Tennessee laws that are within the commissioner's regulatory authority as conferred by law to the operation of branches in Tennessee by out-of-state state banks.

Acts 1996, ch. 562, § 1; 1998, ch. 593, § 1.

45-2-1409. Notice and filing requirements.

Any out-of-state bank that will be the resulting bank pursuant to an interstate merger transaction involving a Tennessee state bank shall notify the commissioner of the proposed merger not later than the date on which it files an application for an interstate merger transaction with the responsible federal bank supervisory agency, and shall submit a copy of that application to the commissioner and pay the filing fee, if any, required by the commissioner. Any Tennessee state bank that is a party to the interstate merger transaction shall comply with all applicable state and federal laws. Any out-of-state bank that is the resulting bank in the interstate merger transaction shall provide satisfactory evidence to the commissioner of compliance with applicable requirements of Tennessee law.

Acts 1996, ch. 562, § 1.

45-2-1410. Notice of subsequent merger.

  1. Each out-of-state state bank that has established and maintains a branch in this state pursuant to this part shall give at least thirty (30) days' prior written notice to the commissioner of any merger, consolidation, or other transaction that would cause a change of control with respect to the bank or any bank holding company that controls the bank, with the result that an application would be required to be filed pursuant to the federal Change In Bank Control Act of 1978 (12 U.S.C. § 1817(j)), or the federal Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), or any successor statutes. In the case of an emergency transaction, the out-of-state state bank shall provide a shorter notice that is consistent with applicable state or federal law. The home state supervisory agency of the bank may provide the prior written notice required.
  2. The notice requirement of subsection (a) shall apply to out-of-state trust institutions that maintain an office in this state pursuant to this chapter. The notice shall also be required of:
    1. Any transfer of all or substantially all of the trust accounts or trust assets of the out-of-state trust institution to another person; or
    2. The closing or disposition of any office in this state.

Acts 1996, ch. 562, § 1; 1999, ch. 112, § 12.

45-2-1411. Enforcement.

If the commissioner determines that a branch maintained by an out-of-state state bank or a trust office maintained by an out-of-state trust institution in this state is being operated in violation of any provision of the laws of this state, or is being operated in an unsafe and unsound manner, the commissioner shall have the authority to take all enforcement actions that the commissioner would be empowered to take if the branch or office were a Tennessee state bank; provided, that the commissioner shall promptly give notice to the home state supervisory agency of each enforcement action taken against an out-of-state state bank or out-of-state trust institution. To the extent practicable, the commissioner shall consult and cooperate with the home state supervisory agency in pursuing and resolving the enforcement action. The commissioner may issue an order temporarily or permanently prohibiting a trust institution from acting as a fiduciary in this state.

Acts 1996, ch. 562, § 1; 1999, ch. 112, § 13.

45-2-1412. Acquisition of branch by out-of-state bank.

  1. An out-of-state bank that does not already maintain a branch in Tennessee and that meets the requirements of this title may establish and maintain a branch in Tennessee through the acquisition of a branch or establishment of a de novo branch.
  2. [Deleted by 2020 amendment.]
  3. No bank or out-of-state bank may establish or maintain a branch in this state on the premises or property of an affiliate if the affiliate engages in commercial activities.

Acts 1998, ch. 742, § 2; 2001, ch. 140, § 2; 2007, ch. 5, § 3; 2020, ch. 605, § 2.

Compiler's Notes. Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Amendments. The 2020 amendment deleted (b), which read, “No branch of an out-of-state bank may be established through the acquisition of a branch or establishment of a de novo branch, unless the laws of the home state of the out-of-state bank permit Tennessee banks to establish and maintain branches in that state through the acquisition of a branch or establishment of a de novo branch under substantially the same terms and conditions as set forth in this title.”

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

Cross-References. Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. 103-328, 108 Stat. 2338 (1994) (codified in various sections of 12 U.S.C. (1994)).

Part 15
Liquidation, Dissolution, and Reorganization

45-2-1501. Voluntary liquidation and dissolution.

  1. With the approval of the commissioner, a state bank may liquidate and dissolve. The commissioner shall grant approval if it appears that:
    1. The proposal to liquidate and dissolve has been approved by a vote of two-thirds (2/3) of the outstanding voting stock at a meeting called for the purpose of considering the action; and
    2. The state bank is solvent and has sufficient liquid assets to pay off depositors and creditors immediately.
    1. Upon approval by the commissioner, the bank shall cease to do business, shall have only the powers necessary to effect an orderly liquidation and shall proceed to pay its depositors and creditors and to wind up its affairs.
    2. Within thirty (30) days of the approval, a notice of liquidation shall be sent by mail to each depositor, creditor, person interested in funds held as a fiduciary, lessee of a safe deposit box or bailor of property. The notice shall be posted conspicuously on the premises of the bank and shall be published as the commissioner may require. The bank shall send with the notice a statement of the amount on the books to be the claim of the depositor or creditor. The notice shall demand that property held by the bank as bailee or in a safe deposit box be withdrawn by the person entitled thereto and that claims of depositors and creditors, if the amount claimed differs from that stated in the notice to be due, be filed with the bank before a specified date not earlier than sixty (60) days thereafter in accordance with the procedure prescribed in the notice.
    3. As soon after approval as may be practicable, the state bank shall resign all fiduciary positions and take the actions necessary to settle its fiduciary accounts.
    4. Safe deposit boxes, the contents of which have not been removed within thirty (30) days after demand, shall be opened and the contents dealt with in the manner provided for boxes upon which the payment of rental is in default and the sealed packages containing the contents and the certificates, together with any other unclaimed property held by the bank as bailee and certified inventories thereof, shall be reported to the state treasurer, who shall act in accordance with the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
    5. The approval of an application for liquidation shall not impair any right of a depositor or creditor to payment in full, and all lawful claims of creditors and depositors shall promptly be paid. The unearned portion of the rental of a safe deposit box shall be returned to the lessee.
    6. Any assets remaining after the discharge of all obligations shall be distributed to the stockholders, in accordance with their respective interests. Distribution shall not be made before:
      1. All claims of depositors and creditors have been paid or, in the case of any disputed claim, the bank has transmitted to the commissioner a sum adequate to meet any liability that may be judicially determined; and
      2. Any funds payable to a depositor or creditor and unclaimed have been transmitted to the commissioner. Any unclaimed distribution to a stockholder or depositor shall be transferred to the state treasurer, who shall deal with the unclaimed funds in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  2. If the commissioner finds that the assets will be insufficient for the full discharge of all obligations or that completion of the liquidation has been unduly delayed, the commissioner may take possession and complete the liquidation in the manner provided in § 45-2-1504 for involuntary liquidations.
  3. The commissioner may require reports of the progress of liquidation, and whenever satisfied that the liquidation has been properly completed, the commissioner shall cancel the charter and enter an order of dissolution.

Acts 1969, ch. 36, § 1 (3.501); 1973, ch. 294, § 6; 1978, ch. 561, § 34; T.C.A., § 45-901; Acts 1983, ch. 78, §§ 9, 10; 2017, ch. 457, § 2.

Cross-References. Applicability of part to industrial banks and industrial investment companies, § 45-5-602.

Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 56, 60.

45-2-1502. Commissioner in possession.

  1. The commissioner may take possession of a state bank if, after a hearing, the commissioner finds:
    1. Its capital is impaired or it is otherwise in an unsound condition;
    2. Its business is being conducted in an unlawful or unsound manner;
    3. It is unable to continue normal operations; or
    4. Its examination has been obstructed or impeded.
    1. The commissioner shall take possession by posting upon the premises a notice reciting that the commissioner is assuming possession pursuant to this section and the time, not earlier than the posting of the notice, when possession shall be deemed to commence. A copy of the notice shall be filed in a court of general or equity jurisdiction in the county in which the institution is located. The commissioner shall notify the federal reserve bank of the district of taking possession of any state bank that is a member of the federal reserve system, and shall notify the federal deposit insurance corporation of the taking possession of any insured bank.
    2. When the commissioner has taken possession of a state bank, the commissioner shall be vested with the full and exclusive power of management and control, including the power to continue or to discontinue the business, to stop or to limit the payment of its obligations, to employ any necessary assistants, to execute any instrument in the name of the bank, to commence, defend and conduct in its name any action or proceeding in which it may be a party, to terminate the commissioner's possession by restoring the bank to its board of directors, to appoint a receiver to have all of the rights, powers, duties and obligations granted to the commissioner in possession for the purpose of liquidation or reorganization, and to reorganize or liquidate the bank in accordance with §§ 45-2-1503 and 45-2-1504. As soon as practicable after taking possession, the commissioner shall make an inventory of the assets and file a copy of the inventory with the court in which the notice of possession was filed.
    3. When the commissioner has taken possession, there shall be a postponement until six (6) months after the commencement of possession of the date upon which any period of limitation fixed by a statute or agreement would otherwise expire on a claim or right of action of the bank, or upon which an appeal must be taken or a pleading or other document must be filed by the bank in any pending action or proceeding.
    1. If, in the opinion of the commissioner, an emergency exists that will result in serious losses to the depositors, the commissioner may take possession of a state bank without a prior hearing. Any person aggrieved and directly affected by this action of the commissioner may have a review by certiorari as provided in title 27, chapter 9.
    2. If the commissioner determines to liquidate the state bank, the commissioner shall give notice of the determination to the directors, stockholders, depositors and known creditors. Upon a determination to liquidate, the commissioner may, with ex parte approval of the court in which the notice of possession was filed, sell all or any part of the state bank's assets to another state or national bank or to the federal deposit insurance corporation. The commissioner may also, with ex parte approval of the court, borrow from the federal deposit insurance corporation any amount necessary to facilitate the assumption of deposit liabilities by a newly chartered or existing bank and may assign any part or all of the assets of the state bank as security for the loan.
    3. If the commissioner determines to reorganize the state bank, after according a hearing to all interested parties, the commissioner shall enter an order proposing a reorganization plan. A copy of the plan shall be sent to each depositor and creditor who will not receive payment of a claim in full under the plan, together with notice that, unless within fifteen (15) days the plan is disapproved in writing by persons holding one-third (1/3) or more of the aggregate amount of the claims, the commissioner will proceed to effect the reorganization. A department, agency or political subdivision of this state holding a claim that will not be paid in full is authorized to participate as any other creditor.
  2. No judgment, lien or attachment shall be executed upon any asset of the state bank while it is in the possession of the commissioner. Upon the election of the commissioner in connection with a liquidation or reorganization:
    1. Any lien or attachment, other than an attorney's or mechanic's lien, obtained upon any asset of the state bank during the commissioner's possession or within four (4) months prior to commencement thereof shall be vacated except liens created by the commissioner while in possession; and
    2. Any transfer of an asset of the state bank made after or in contemplation of its insolvency with intent to effect a preference shall be voided.
  3. The commissioner may borrow money in the name of the state bank and may pledge its assets as security for the loan.
  4. All necessary and reasonable expenses of the commissioner's possession of a state bank and of its reorganization or liquidation shall be defrayed from the assets thereof.

Acts 1969, ch. 36, § 1 (3.502); 1973, ch. 294, § 6; T.C.A., § 45-902; Acts 1980, ch. 510, §§ 2-4; 1999, ch. 112, § 14.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 59, 60.

NOTES TO DECISIONS

1. Preferences.

The purpose of the preference provision is to prevent dissolution or diminution of the fund held by the receiver for pro rata distribution to proven creditors and claimants. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

Subdivision (d)(2) does not affect the statutory authority provided in other sections to make discretionary sales of assets with the approval of a court of competent jurisdiction; this reading of the preference section construes it in pari materia with the entire statutory scheme. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

An intent to create a preference could be inferred where no provision of a fund for ratable distribution to unassumed creditors or claimants was made. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

A purchase and assumption agreement that provides for assumption of all liabilities does not create a preference as a general rule. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

If a pre-distribution purchase and assumption agreement, that is statutorily authorized as part of the conduct and administration of a receivership, provides for the disposition of losses, liabilities, and assets for a statutorily sanctioned purpose but the amount of the receivership fund available for distribution to any remaining proven, unassumed claimants is not thereby diminished, then a preference has not been created because nothing has been done to decrease the amount available for a pro rata distribution to satisfy the insolvent's liabilities. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

As long that the receiver takes the necessary steps to provide a fund for pro rata satisfaction of unassumed claims from an undiminished (or enhanced) fund, a purchase and assumption agreement that does not provide for assumption of all liabilities does not per se constitute a voidable or illegal preference under subdivision (d)(2). In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

Decisions Under Prior Law

1. Nature of Power — Liability for Wrongful Exercise.

The power to close and take over a bank is discretionary and for an erroneous exercise the superintendent [now commissioner] is liable only if he acts willfully or maliciously or transcends legal authority. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

2. Conditions Warranting Taking Possession.

The superintendent [now commissioner] has no power to regulate the internal management or assume authority over the bank unless facts appear that authorize a closing. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

The superintendent [now commissioner] is not empowered to take charge of a bank for misconduct of its officers or directors, but is so empowered where the bank is found to be insolvent or unable to pay demands in the ordinary course of business, or where its officers have misappropriated its funds or are using same contrary to provisions of the banking law. State ex rel. Robertson v. Farmers' State Bank, 162 Tenn. 499, 39 S.W.2d 281, 1930 Tenn. LEXIS 114 (Tenn. Dec. 1930).

3. Resolution and Assignment Distinguished.

The passage of a resolution by the directors declaring the bank insolvent and inviting bank examiner to take charge of its assets for administration under statutes is not an assignment, general or special. State ex rel. Robertson v. Liberty Bank & Trust Co., 165 Tenn. 40, 52 S.W.2d 150, 1931 Tenn. LEXIS 167 (1932).

45-2-1503. Requirements of reorganization plan.

  1. A plan of reorganization shall not be prescribed under this chapter unless:
    1. The plan is feasible and fair to all classes of depositors, creditors and stockholders;
    2. The face amount of the interest accorded to any class of depositors, creditors or stockholders under the plan does not exceed the value of the assets upon liquidation, less the full amount of the claims of all prior classes, subject, however, to any fair adjustment for new capital that any class will pay in under the plan;
    3. The plan provides for the issuance of common stock in an amount that will provide an adequate ratio to deposits;
    4. Any exchange of new common stock for obligations or stock of the bank will be effected in inverse order to the priorities in liquidation of the classes that will retain an interest in the bank and upon terms that fairly adjust any change in the relative interest of the respective classes that will be produced by the exchange;
    5. The plan assures the removal of any director, officer or employee responsible for any unsound or unlawful action or the existence of an unsound condition; and
    6. Any merger or consolidation provided by the plan conforms to the requirements this chapter and chapter 1 of this title.
  2. Whenever, in the course of reorganization, supervening conditions render the plan unfair or its execution impractical, the commissioner may modify the plan or liquidate the institution. The action shall be taken by order upon appropriate notice.

Acts 1969, ch. 36, § 1 (3.503); 1973, ch. 294, § 6; T.C.A., § 45-903.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 61.

45-2-1504. Liquidation by commissioner.

  1. In liquidating a state bank, the commissioner may exercise any power of the office of commissioner, but shall not, without the approval of the court in which notice of possession has been filed:
    1. Sell any asset of the organization having a value in excess of five hundred dollars ($500);
    2. Compromise or release any claim if the amount of the claim exceeds five hundred dollars ($500), exclusive of interest; or
    3. Make any payment on any claim, other than a claim upon an obligation incurred by the commissioner, before preparing and filing a schedule of the commissioner's determinations in accordance with this chapter.
  2. Within six (6) months of the commencement of liquidation, the commissioner may elect to terminate any executory contract under which the state bank has contracted either to receive or to provide services, the services specifically including advertising, or any obligation of the bank as a lessee. A lessor who receives sixty (60) days' notice of the commissioner's election to terminate the lease shall have no claim for rent other than rent accrued to the date of termination or for claims for damages for the termination.
  3. As soon after the commencement of liquidation as is practicable, the commissioner shall take the necessary steps to terminate all fiduciary positions held by the state bank and take any action necessary to surrender all property held by the bank as a fiduciary and to settle its fiduciary accounts. The fiduciary accounts may be transferred by the commissioner to another qualified corporate fiduciary as determined by the commissioner, and notice of the transfer must be given by registered mail to the parties by the transferee corporate fiduciary.
  4. As soon after the commencement of liquidation as practicable, the commissioner shall send notice of the liquidation to each known depositor, creditor and lessee of a safe deposit box or bailor of property held by the bank at the address shown on the books of the institution. The notice shall also be published in a newspaper of general circulation in the community once a week for three (3) successive weeks. The commissioner shall send with the notice a statement of the amount shown on the books of the institution to be the claim of the depositor or creditor. The notice shall demand that property held by the bank as bailee or in a safe deposit box be withdrawn by the person entitled thereto and that claims of depositors and creditors, if the amount claimed differs from that stated in the notice to be due, be filed with the commissioner before a specified date not earlier than sixty (60) days thereafter in accordance with the procedure prescribed in the notice.
  5. Safe deposit boxes, the contents of which have not been removed before the date specified, shall be opened by the commissioner in the manner provided for boxes upon which the payment of rental is in default, and the sealed packages containing the contents and the certificates, together with any unclaimed property held by the bank as bailee and certified inventories thereof, shall be reported to the state treasurer who shall deal with them in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  6. Within six (6) months after the last day specified in the notice for the filing of claims or a longer period that may be allowed by the court in which notice of possession has been filed, the commissioner shall:
    1. Reject any claim if the commissioner doubts the validity thereof;
    2. Determine the amount, if any, owing to each known creditor or depositor and the priority class of the claim under this chapter and chapter 1 of this title;
    3. Prepare a schedule of the commissioner's determinations for filing in the court in which notice of possession was filed; and
    4. Notify each person whose claim has not been allowed in full and publish once a week for three (3) successive weeks a notice of the time when and the place where the schedule of determinations will be available for inspection and the date, not sooner than thirty (30) days thereafter, when the commissioner will file the schedule in court.
  7. Within twenty (20) days after the filing of the commissioner's schedule, any creditor, depositor or stockholder may file an objection to any determination made. Any objections so filed shall be heard and determined by the court, upon such notice to the commissioner and interested claimants as the court may prescribe. If the objection is sustained, the court shall direct an appropriate modification of the schedule. After filing the schedule, the commissioner may, from time to time, make partial distribution to the holders of claims that are undisputed or have been allowed by the court, if a proper reserve is established for the payment of disputed claims. As soon as is practicable after the determination of all objections, the commissioner shall make final distribution.
    1. The following claims shall have priority:
      1. Obligations incurred by the commissioner;
      2. Wages and salaries of officers and employees earned during the three-month period preceding the commissioner's possession in an amount not exceeding six hundred dollars ($600) for any one (1) person;
      3. Fees and assessments due to the department; and
      4. Deposits to the extent of ten dollars ($10.00) for each depositor.
    2. After the payment of all other claims with interest at the maximum rate permitted on time deposits, the commissioner shall pay claims otherwise proper that were not filed within the time prescribed.
    3. If the sum available for any class is insufficient to provide payment in full, the sum shall be distributed to the claimants in the class pro rata.
  8. Any assets remaining after all claims have been paid shall be distributed to the stockholders in accordance with their respective interests.
  9. Unclaimed funds remaining after completion of the liquidation shall be transferred to the state treasurer to be dealt with in accordance with  the Uniform Unclaimed Property Act, compiled in title 66, chapter 29.
  10. When the assets have been distributed in accordance with this chapter and chapter 1 of this title, the commissioner shall file an account with the court. Upon approval thereof, the commissioner shall be relieved of liability in connection with the liquidation and the charter shall be cancelled.

Acts 1969, ch. 36, § 1 (3.504); 1973, ch. 294, § 6; 1978, ch. 561, § 34; T.C.A., § 45-904; Acts 1983, ch. 78, §§ 10, 11; 1999, ch. 112, § 15; 2017, ch. 457, § 2.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 60, 63.

NOTES TO DECISIONS

1. Receivership.

Where a statutory bank receivership has been instituted pursuant to statutory authority, the proceeding is pending until all statutory directives are complied with and the final accounting is approved. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

2. Parties.

Debtors and prospective debtors have no standing to intervene at any stage of a bank receivership pursuant to title 45, chapters 1 and 2. In re United Southern Bank, 718 S.W.2d 251, 1986 Tenn. LEXIS 797 (Tenn. 1986).

3. Sales of Assets.

Section 45-2-1502(d)(2) relating to voiding transfers of assets of state banks made with the intent to create a preference, does not affect the statutory authority provided in other sections to make discretionary sales of assets with the approval of a court of competent jurisdiction; this reading of the preference section construes it in pari materia with the entire statutory scheme. In re Liquidation of United Am. Bank, 743 S.W.2d 911, 1987 Tenn. LEXIS 1072 (Tenn. 1987).

45-2-1505. Formation of new bank.

  1. Upon application of either five (5) individual incorporators or a bank holding company domiciled in this state, the commissioner may grant a charter and may issue a certificate of authority to the incorporators if the commissioner finds that the immediate formation of a new state bank will protect the depositors of a state bank closed in accordance with § 45-2-1502.
  2. The requirements contained in this chapter pertaining to the formation and operation of a state bank shall not be applicable for a period of one (1) year after formation of a new state bank hereunder, unless the commissioner determines that the requirements are necessary to the operation of the new state bank.
  3. None of the restrictions contained in the Bank Structure Act of 1974, compiled in part 14 of this chapter, or as the same may be hereafter amended, shall apply to the formation of the new state bank.
  4. The new state bank may acquire all or any part of the assets or deposits of a closed bank in accordance with  this chapter.

Acts 1980, ch. 510, § 5.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 56, 61.

Part 16
Examination and Reports

45-2-1601. Supervision of banks.

  1. Every person doing a banking business under the laws of this state shall be subject to supervision and regulation by the commissioner.
  2. In addition to other powers conferred by chapters 1-9 of this title, the commissioner has the power to require banks subject to the commissioner's supervision to:
    1. Maintain their accounts and to value their assets in accordance with generally accepted principles of accounting;
    2. Charge off the whole or part of an asset that at the time of its acquisition could not lawfully have been acquired and that could not lawfully be retained at the time of the commissioner's action; provided, that the commissioner's action is within two (2) years of the aforementioned acquisition;
    3. Record liens and security in property or, at the option of the bank, insure against losses from not recording;
    4. Obtain a financial statement from a borrower to the extent that the bank can do so;
    5. Search, or obtain insurance of, the title to real estate taken as security; and
    6. Maintain adequate insurance against the risks that the commissioner determines are necessary and appropriate for the protection of depositors.
  3. 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 interpretation of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation or interpretation.

Acts 1969, ch. 36, § 1 (2.201); 1973, ch. 294, § 6; T.C.A., § 45-701.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1602. Examination of banks.

    1. The commissioner shall, either personally or by competent examiner appointed by the commissioner, visit and examine every bank subject to the commissioner's supervision at least once in each year. The commissioner has discretion to determine the scope of the examination; provided, that a full-scope examination, as set out in subsection (b), shall be conducted by the commissioner or the commissioner's designee at least once in every three (3) years. The commissioner has discretion to accept, in any calendar year, all or part of an examination report of a federal banking regulatory agency conducted of a state bank in that year.
    2. The provision of subdivision (a)(1) requiring an examination at least once in each year may be extended to eighteen (18) months; provided, that the bank meets the criteria applicable to the examination cycle imposed on federally insured depository institutions in Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. § 1820(d)).
    3. The commissioner shall examine a state trust company at least once in an eighteen-month period, except that the commissioner may extend this examination cycle up to an additional eighteen (18) months. In making this determination, the commissioner may consider the state trust company's quality of management, capitalization, risk profile and any other factors the commissioner deems relevant. In no event may a state trust company's examination cycle be extended if the company did not receive a composite rating of one (1) or two (2) at its last examination.
  1. On every examination, inquiry shall be made as to the condition and resources of the bank, the mode of conducting and managing the affairs of the bank, the action of its directors, the investment of the funds of the bank, the safety and prudence of the management of the bank, and whether the requirements of its charter and law have been complied with in the administration of the affairs of the bank, and as to any matters that the commissioner uniformly prescribes.
  2. In addition, the commissioner has the power, and it is the commissioner's duty in like manner, to examine or cause to be examined into the affairs of every bank whenever, in the judgment of the commissioner, the management and condition of the bank are such as to render an examination of its affairs necessary or expedient, or whenever, in the opinion of the commissioner, the interest of the public demands an examination.
  3. The commissioner also has the power to examine, or cause to be examined, every agency located in this state of any foreign bank or banking corporation, in the manner and for the same purpose that the commissioner shall examine domestic banks.
  4. The commissioner also has the power to examine or cause to be examined subsidiary corporations of banks subject to the commissioner's supervision.
  5. The commissioner, and every examiner acting under or appointed by the commissioner, has the power and authority to administer oaths and to examine under oath any person whose testimony may be required on the examination of any bank, or on the examination of any agency of any foreign bank or banking corporation, or on examination of any subsidiary of any bank subject to the commissioner's supervision, and has the authority and power to compel the appearance and attendance of the person for the purpose of the examination.
  6. Any stockholder in any incorporated bank, any corporation doing a banking business, or any person interested in a firm or individual bank may call upon the commissioner, at any time, to make an examination of the bank in which the stockholder, corporation or person is interested, which examination the commissioner, either in person or by an examiner, may or may not make, in the exercise of discretion, upon the one making the request depositing with the commissioner in advance a sum sufficient to cover the cost of the examination.
    1. Each examiner shall act under the direction of the commissioner, and shall forthwith examine fully into the books, papers, and affairs of the bank that the examiner may be directed by the commissioner to examine.
    2. The commissioner shall furnish to each examiner a commission under the signature of the commissioner and official seal of the department, which commission the examiner shall exhibit to the officer or officers of the bank proposed to be examined as the examiner's authority for making the examination.
    3. Each examiner shall report on oath to the commissioner the result of each examination made by the examiner, which report the commissioner shall keep on file in the commissioner's office; and when the commissioner in person makes an examination of the affairs of any bank, the commissioner shall in like manner make out a report under oath of the result of the examination, and the same shall be kept on file in the office of the commissioner, and a duplicate copy furnished the bank examined.
  7. In the discretion of the commissioner, a state bank may be notified in advance that an examination is about to commence in order to afford the bank an opportunity to prepare reports or other information requested by the commissioner. In the discretion of the commissioner, a state bank may be examined at any time without prior notice to the bank.
  8. The commissioner has the power to review the operations of any location engaging in activities as principal or on behalf of a state or out-of-state trust institution or any other company to determine if the location is engaging in unauthorized trust activity.

Acts 1969, ch. 36, § 1 (2.202); 1973, ch. 294, § 6; 1978, ch. 563, §§ 1, 2; T.C.A., § 45-702; Acts 1980, ch. 540, § 1; 1987, ch. 165, § 1; 1993, ch. 31, § 1; 1996, ch. 768, § 25; 1997, ch. 9, § 1; 1999, ch. 112, § 16; 2014, ch. 642, § 2.

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.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Law Reviews.

Local Government Law (Clyde L. Ball), 6 Vand. L. Rev. 1206.

45-2-1603. Confidentiality, disclosure and reproduction of information.

  1. The information obtained by the commissioner, or any bank examiner in making an examination into the affairs of the bank, shall be for the purpose of ascertaining the true condition of the affairs of the bank, shall be privileged and confidential, shall not be subject to subpoena, and shall not be disclosed by the party making the examination to any person, except that the examiner shall report the condition of the affairs of the bank to the commissioner, and except that the commissioner is authorized to make the following disclosures from reports of examination:
    1. Within the department in the course of official duties;
    2. To the federal deposit insurance corporation as provided in § 45-2-804 and to the federal reserve board, or its duly authorized representative, as provided in § 45-2-505;
    3. To the federal reserve board, or its duly authorized representative, in the case of an application to form a bank holding company if the principal affiliate bank to be acquired is a state bank or to the federal reserve board in any other circumstance when the commissioner believes that disclosure is in the interest of sound banking regulation;
    4. To the United States comptroller of the currency, or the comptroller's duly authorized representative, in the case of an application of a state bank for conversion to a national charter or to the comptroller in any other circumstance when the commissioner believes that disclosure is in the interest of sound banking regulation;
    5. To the United States department of justice, federal bureau of investigation, state district attorneys general, Tennessee bureau of investigation or the attorney general and reporter in the case of any suspected criminal violations discovered during the course of an examination;
    6. In any administrative proceeding or court action filed by the commissioner or the department to which the commissioner is an actual party;
    7. To the directors of a state bank as provided in § 45-2-1602;
    8. The comptroller of the treasury or the comptroller's designee for the purpose of an audit of the department of financial institutions;
    9. The state treasurer and commissioner of finance and administration pursuant to § 9-4-402;
    10. To other state financial institutions regulatory agencies;
    11. To the federal consumer financial protection bureau, federal trade commission, United States department of labor and the securities and exchange commission, or their duly authorized representative, when the commissioner believes that disclosure is in the best interest of sound banking regulation;
    12. The department of commerce and insurance; and
    13. The United States department of justice, federal bureau of investigation, state district attorneys general, Tennessee bureau of investigation, state attorney general and reporter, internal revenue service, Tennessee office of homeland security, United States department of the treasury and the financial crimes enforcement network for purposes of information sharing to promote enforcement of and compliance with the Bank Secrecy Act (12 U.S.C. § 1829b, 12 U.S.C. §§ 1951-1959, and 31 U.S.C. §§ 5311-5332).
  2. Disclosures made under subsection (a) shall be made under safeguards designed to prevent further dissemination of confidential information. If any agency or department that has received confidential information under  subsection (a) receives a valid subpoena to produce documents of the department of financial institutions or desires to use the documents in litigation, including, but not limited to, discovery proceedings, in which it is involved, the agency or department shall notify the department of financial institutions for permission to produce the documents. The commissioner may, in the commissioner's discretion, authorize the requesting agency or department to use the documents under a protective order approved by the commissioner and designed to prevent the unnecessary further dissemination of the documents.
  3. A bank may reproduce all or any part of a report of examination and send or deliver the reproduction to a bank holding company of which it is a subsidiary, and may also send or deliver the reproduced information to the bank's consultants, external auditors and legal counsel. The disclosure shall not affect the confidential nature of the disclosed information.
  4. As used in this section, unless the context otherwise requires:
    1. “Bank holding company” has the same meaning as in § 45-2-1402; and
    2. “Subsidiary,” with respect to a specified bank holding company, means:
      1. Any company, twenty-five percent (25%) or more of whose voting shares, excluding shares owned by the United States or by any company wholly owned by the United States, is directly or indirectly owned or controlled by the bank holding company, or is held by it with power to vote;
      2. Any company in which the election of a majority of whose directors is controlled in any manner by the bank holding company; or
      3. Any company with respect to the management or policies of which the bank holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the commissioner, after notice and opportunity for hearing.
  5. Notwithstanding any provision of this section to the contrary, the commissioner may, in the commissioner's discretion and in the interest of justice, and when under a validly issued subpoena, waive the privilege created herein and produce bank examination reports and other related documents under a protective order entered by a court or administrative tribunal of competent jurisdiction where the order is designed to protect the confidential nature of the information so disclosed from public dissemination.
  6. Notwithstanding any other law to the contrary, confidential information regarding insurance, securities and investment functions of financial institutions, and known or suspected violations of the insurance, banking or securities laws, may be shared among the departments of financial institutions and commerce and insurance, the district attorneys general for the respective counties, the Tennessee bureau of investigation and the attorney general and reporter. Information disclosed by the commissioner under this section shall not become matters of public record by virtue of the disclosure absent a waiver by the commissioner, or a protective order as provided for in this section.
  7. Notwithstanding any other law to the contrary, the commissioner may, in the commissioner's discretion and in the interest of sound banking regulation, publicly disclose any written agreement jointly issued to a bank by the commissioner and the federal deposit insurance corporation, the federal reserve board, or the federal reserve board's duly authorized representative.

Acts 1969, ch. 36, § 1 (2.203); 1973, ch. 294, § 6; T.C.A., § 45-703; Acts 1980, ch. 642, § 1; 1983, ch. 58, § 1; 1985, ch. 176, § 1; 1986, ch. 556, § 1; 1989, ch. 29, §§ 1-4; 1991, ch. 235, §§ 1-3; 1993, ch. 205, § 1; 2001, ch. 54, §§ 25-29; 2006, ch. 596, § 1; 2007, ch. 29, §§ 2, 3; 2013, ch. 36, §§ 1, 2; 2020, ch. 581, § 1.

Amendments. The 2020 amendment added (g).

Effective Dates. Acts 2020, ch. 581, § 4. March 19, 2020.

Cross-References. Confidential records, § 10-7-504.

Textbooks. Tennessee Criminal Practice and Procedure (Raybin), § 27.78.

Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Tennessee Law of Evidence (2nd ed., Cohen, Paine and Sheppeard), § 501.21.

45-2-1604. Reports by banks.

  1. All banks shall make to the commissioner, on the call of the commissioner for the reports, at least two (2) reports during each year according to the form, including electronic transmission, that may be prescribed by the commissioner. The report must be verified by the oath or affirmation of the executive officers or agents thereof, and in the case of a corporation, by the president or cashier or secretary, and must be attested by the signature of at least three (3) directors of the corporation. The commissioner shall make one (1) of the calls in the first one-half (½) of the year and another in the latter one-half (½) of the year.
  2. Each report shall exhibit in detail and under appropriate heads the resources and liabilities of each bank at the close of business on any past day specified by the commissioner. The day for reports shall be uniform throughout the state, and shall be transmitted by the bank to the commissioner within the period the commissioner prescribes, but in no instance less than five (5) days after receipt of a request or requisition thereof from the commissioner. Instead of the report required under this subsection (b), the commissioner may accept a copy of a call report required by federal regulatory agencies or deems the filing of the report, electronic or otherwise, as required by federal regulatory agencies to constitute compliance with this section.
  3. The commissioner may call for a special report from any particular bank whenever, in the commissioner's judgment, the same is necessary or deemed necessary for the protection of the public or for a full and complete knowledge of the condition of the bank by the commissioner. Special reports called for shall be made in all particulars as required in subsections (a) and (b); provided, that a bank is not required to publish a copy of a special report in a newspaper.

Acts 1969, ch. 36, § 1 (2.204); 1973, ch. 294, § 6; 1977, ch. 56, § 1; T.C.A., § 45-704; Acts 1996, ch. 768, § 26; 2001, ch. 54, § 30; 2004, ch. 455, § 1.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 55.

Part 17
Prohibited Acts

45-2-1701. Unauthorized conduct of banking or fiduciary activity — Violation a criminal offense.

  1. It is unlawful for any person not so authorized to carry on a banking business under this chapter and chapter 1 of this title, falsely and with intent to defraud, to act as a bank, or to represent that the person is or is acting for a bank, or to use an artificial or corporate name that is the name of a bank. The right to receive money on deposit and the right to pay out money on checks are declared to be the exclusive privileges of the banking business.
  2. No trust company hereafter may be incorporated or be qualified to act as a fiduciary unless it is incorporated under this chapter and chapter 1 of this title, or the laws governing national banking associations. The foregoing, however, shall not be deemed to restrict the activity of a foreign bank or trust company acting as a trustee under  § 35-50-107; nor shall it be deemed to restrict the fiduciary activity of any other class of regulated financial institutions that may now have, or hereafter acquire, fiduciary powers; provided, that nothing herein shall be construed to increase the powers of other classes of regulated financial institutions.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.601); T.C.A., § 45-1101; Acts 1980, ch. 620, § 4; 1989, ch. 591, § 113.

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.”

Cross-References. Negotiable instruments, title 47, ch. 3.

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

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 23.

Law Reviews.

A Realistic Duty of Care for Outside Bank Directors, 51 Tenn. L. Rev. 569 (1984).

45-2-1702. Receiving deposit, premium payment or investment in failing financial institution.

  1. A person directing or participating in the direction of a financial institution commits an offense who receives or permits the receipt of a deposit, premium payment or investment in the institution knowing that, due to the financial condition of the institution:
    1. It is or will be unable to make payment of the deposit on demand, if it is a deposit ordinarily payable on demand; or
    2. It is about to suspend operations or go into receivership.
  2. It is a defense to prosecution under this section that the person making the deposit, premium payment or investment was adequately informed of the financial condition of the institution.
  3. An offense under this section is a Class E felony.

Acts 1969, ch. 36, § 1 (3.602); T.C.A., § 45-1102; Acts 1989, ch. 591, §§ 111, 118.

Sentencing Reform Notes.

Although the penalty provided in this section was purportedly changed to a Class A misdemeanor by Acts 1989, ch. 591, § 111, the code commission deems the later amendment of this section by § 118 of that act, which contains Class E felony provisions, to control.

Cross-References. Penalty for Class E felony, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 32, 58.

45-2-1703. Unlawful service as officer or director — Exceptions at commissioner's discretion.

  1. It is unlawful for any person to serve as an officer or director of a bank who:
    1. Has been convicted of an offense constituting, in the jurisdiction in which the judgment was rendered, a felony involving a violation of banking laws, fraud, embezzlement, or breach of trust;
    2. Would be disqualified by federal law from serving as a director or officer of a federally chartered bank; or
    3. Is indebted to the bank for more than thirty (30) days upon judgment that has become final.
  2. Notwithstanding subsection (a), the commissioner shall have the discretion to approve the application of any person to become a director or officer of a bank chartered under Tennessee law, if the commissioner finds the person has demonstrated fitness to participate in the conduct of the affairs of the bank through evidence of the person's rehabilitation, including, but not limited to, the person's reputation since the person's conviction, the person's age at the time of conviction, and the time that has elapsed since the conviction and other factors as the commissioner determines.

Acts 1969, ch. 36, § 1 (3.603); T.C.A., § 45-1103; Acts 2006, ch. 660, § 5.

Compiler's Notes. Acts 2006, ch. 660, § 6 provided that the act shall not apply to any notice of intention filed on or after May 12, 2006.

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

45-2-1704. Unlawful gratuity or compensation.

  1. It is unlawful for an affiliate of a bank or for an officer, director or employee of a bank or affiliate of a bank to willfully and knowingly and without authority from the board of directors or governing body of the bank or two (2) or more of the active managing officers of the bank to receive, consent to receive, or agree to receive, any commission, emolument, gratuity or reward, or any promise of any commission, emolument, reward, property or thing of value or of personal advantage for procuring, or endeavoring to procure, for any person any loan from, or the purchase or discount of, any paper, note, draft, check or bill of exchange by the bank.
  2. As used in this section, “affiliate” includes:
    1. Any person who holds a majority of the stock of a bank, any other corporation in which the person owns a majority of the stock and any partnership in which the person has an interest;
    2. Any corporation in which the bank or an officer, director, or employee thereof holds a majority of the stock and any partnership in which the person has an interest; and
    3. Any corporation of which a majority of the directors are officers, directors, or employees of the bank or of which officers, directors, trustees or employees constitute a majority of the directors of the bank.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.604); T.C.A., § 45-1104; Acts 1989, ch. 591, § 113.

Cross-References. Alcoholic beverage commission, receipt of gifts or bribes by members, § 57-1-109.

Officers and employees of mental health hospitals or developmental center, receipt of gift or bribe from patient, § 33-3-106.

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

45-2-1705. Unlawful concealment of transactions.

  1. It is unlawful for an officer, director, or employee of a bank to conceal or endeavor to conceal any transaction of the bank from any officer, director or employee of the bank or any official or employee of the department to whom it should properly be disclosed.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.605); T.C.A., § 45-1105; Acts 1989, ch. 591, § 113.

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

45-2-1706. Improper maintenance of accounts — False or deceptive entries and statements.

  1. It is unlawful for an officer, director, employee or agent of a bank to:
    1. Maintain or authorize the maintenance of any account of the bank in a manner that, to the person's knowledge, does not conform to the requirements prescribed by this chapter and chapter 1 of this title or by the commissioner;
    2. Make any false or misleading statement or entry or omit any statement or entry that should be made in any book, account, report or statement of the institution, with intent to deceive; or
    3. Obstruct or endeavor to obstruct a lawful examination of the institution by an officer or employee of the department.
  2. A violation of this section is a Class B misdemeanor.

Acts 1969, ch. 36, § 1 (3.606); 1973, ch. 294, § 6; T.C.A., § 45-1106; Acts 1989, ch. 591, § 112.

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

45-2-1707. Payment of penalties and judgments against others.

  1. It is unlawful for a state bank to pay a fine or penalty imposed by law upon any other person or any judgment against the person or to reimburse directly, or indirectly, any person by whom the fine, penalty or judgment has been paid, except in settlement of its own liability or in connection with the acquisition of property against which the judgment is a lien, or as provided in § 45-2-211.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.607); T.C.A., § 45-1107; Acts 1989, ch. 591, § 113.

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

45-2-1708. Unlawful use of term “safe deposit.”

  1. It is unlawful for any person to use the terms “safe deposit,” “safety deposit,” or other words deceptively similar, in connection with the rental of storage space, or in the title or name under that business is done, except:
    1. A person subject to the jurisdiction of the department;
    2. A manufacturer or dealer in safe deposit facilities or equipment; or
    3. An association, the membership of which is composed of officers or institutions subject to regulation under this chapter and chapter 1 of this title, or the laws of the United States or any state.
  2. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.608); T.C.A., § 45-1108; Acts 1989, ch. 591, § 113.

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

45-2-1709. Unlawful use of banking terms.

      1. It is unlawful for any person, firm or corporation, other than those defined in § 45-1-103, to use or employ in any manner the terms bank, banks, or banking in connection with the carrying on or operation of business in this state; provided, that this section shall have no application to national banking associations or existing persons whose name contains these terms. The commissioner of financial institutions may permit, upon application or by rule, the subsidiary of a bank or bank holding company to employ the terms bank, banks, or banking.
      2. Notwithstanding this section, the commissioner may permit, upon application, a person, corporation, partnership or other business entity to employ the term “bank”, “banks”, or “banking” if the commissioner, in the commissioner's discretion, determines that the person, corporation, partnership, or business entity has not or will not mislead the public by employing the terms and the person, corporation, partnership or business does not provide financial services. Upon proper showing, the commissioner may rescind approval if the public welfare so requires. For purposes of this section, any person, corporation, partnership, or business that provides financial services shall include, but not be limited to, insurance companies and agents, money order or exchange companies, investment companies, stock brokers or dealers, mutual funds, industrial loan and thrift companies, credit unions and business and industrial development corporations (BIDCOs).
      3. It is unlawful for any person, firm or corporation, other than those defined as a trust institution pursuant to § 45-1-103, to use or employ in any manner the term “trust” in connection with the carrying on or operation of business in this state. This section shall have no application to existing persons as of July 1, 1999, whose name contains the term “trust.” Notwithstanding the above, the commissioner may permit the use of the term “trust” upon application on the same basis as under subdivisions (a)(1)(A) and (B).
      4. It is unlawful for a person to use the trade name or trademark, or a confusingly similar trade name or trademark, of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in a solicitation for the offering of services or products if such use is likely to cause confusion, mistake or deception as to the source of origin, affiliation or sponsorship of such products or services; or, to use the trade name or trademark, or confusingly similar trade name or trademark, to that of any bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary in any manner in a solicitation for the offering of services or products unless the solicitation clearly and conspicuously states the following in bold-face type on the front page of the solicitation:
        1. The name, address and telephone number of the person making the solicitation;
        2. A statement that the person making the solicitation is not affiliated with the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary; and
        3. A statement that the solicitation is not authorized or sponsored by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary.
      5. It is unlawful for a person, other than the lender or a person authorized by the lender, to use a loan number, loan amount, or other specific loan information that is not publicly available in a solicitation for the purchase of services or products, unless the solicitation clearly and conspicuously states the following in bold-face type on the front page of the solicitation:
        1. The name, address, and telephone number of the person making the solicitation;
        2. A statement that the person making the solicitation is not affiliated with the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary;
        3. A statement that the solicitation is not authorized or sponsored by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary; and
        4. A statement that the loan information used was not provided by the bank, savings and loan association, savings bank or subsidiary or affiliate of any bank, saving and loan association, saving bank or subsidiary.
    1. A violation of subdivision (a)(1) is a Class C misdemeanor.
  1. The commissioner or attorney general and reporter in the name of the state is given the power and right by bill of complaint in any court of competent jurisdiction of the parties, to seek injunctive relief to compel compliance by any offending parties with this section.

Acts 1969, ch. 36, § 1 (3.609); 1973, ch. 294, § 6; T.C.A., § 45-1109; Acts 1989, ch. 591, § 113; 1990, ch. 759, § 1; 1993, ch. 397, § 1; 1999, ch. 112, § 17; 2003, ch. 31, § 4; 2011, ch. 89, §§ 2, 3.

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

Attorney General Opinions. T.C.A. § 45-2-1709(a)(1)(D) and (E), which regulate commercial speech and prescribe criminal penalties, are constitutional and do not offend either the First Amendment of the United States Constitution or Article I, § 19 of the Tennessee Constitution.    OAG 13-54, 2013 Tenn. AG LEXIS 55 (7/11/13).

45-2-1710. Advance notice of bank examination.

  1. If the department notifies a bank of an examination, a department employee who, before the notification of the visitation, gives notice or information to any officer or agent or employee of a bank as to when a bank will be visited for examination commits a criminal offense.
  2. If the department does not notify a bank of an examination, a department employee who, before a visitation, gives notice or information to any officer or agent or employee of a bank as to when a bank will be visited for examination commits a criminal offense.
  3. A violation of this section is a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.610); T.C.A., § 45-1110; Acts 1989, ch. 591, § 113; 1993, ch. 31, § 2.

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

45-2-1711. False reports.

Any employee of the department who makes a report on oath, as to the result of any examination made by the employee, that is knowingly and willfully false, commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.611); T.C.A., § 45-1111; Acts 1989, ch. 591, § 113.

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

45-2-1712. False swearing on examination by commissioner or bank examiner.

Any person who willfully and corruptly swears or affirms falsely when being examined under oath by any bank examiner or the commissioner in regard to any material matter or thing commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.612); 1973, ch. 294, § 6; T.C.A., § 45-1112; Acts 1989, ch. 591, § 113.

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

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

Any bank examiner or commissioner who knowingly and willfully discloses the condition and affairs of any bank ascertained by an examination as examiner of the bank, or who knowingly and willfully, except to the extent as authorized by this chapter and chapter 1 of this title, reports or gives information as to who are depositors or debtors of a bank where the information is obtained as examiner of the bank, commits a Class C misdemeanor and shall be removed from office; and the fact of the disclosure shall be prima facie evidence that the information was obtained by virtue of the person's office.

Acts 1969, ch. 36, § 1 (3.616); 1973, ch. 294, § 6; T.C.A., § 45-1113; Acts 1989, ch. 591, § 113.

Cross-References. Confidential records, § 10-7-504.

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

45-2-1714. Director voting to impair capital or other acts detrimental to bank.

Any director of a bank commits a Class B misdemeanor who concurs in any vote or act of the directors of the bank by which it is intended to:

  1. Make a dividend except from the surplus profits arising from the business of the bank;
  2. Divide, withdraw or in any manner pay to the stockholders or any of them any part of the capital stock of the bank, or to reduce the capital stock, except in pursuance of law;
  3. Discount or receive any note, or other evidence of debt in payment of capital stock required to be paid or with intention to provide the means of making the payment;
  4. Receive or discount any note or other evidence of debt with the intent to enable any stockholder to withdraw any part of the money paid in by the stockholder or the stockholder's stock; or
  5. Apply any portion of the funds of the bank except as allowed by law, directly or indirectly, to the purchase of shares of its own stock.

Acts 1969, ch. 36, § 1 (3.613); T.C.A., § 45-1114; Acts 1989, ch. 591, § 112.

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

Decisions Under Prior Law

1. Notes Given by Stockholders — Validity.

A former similar statute was enacted for the protection of depositors and creditors, and to declare void a note given by a stockholder to the bank upon security of capital stock belonging to the borrowers would defeat the purpose of the statute and enable officers and stockholders of a failing bank to secure to themselves its funds with no fear of punishment except that meted out to misdemeanants. Tennessee-Hermitage Nat'l Bank v. Bruce, 9 Tenn. App. 321, 1928 Tenn. App. LEXIS 238 (1928).

45-2-1715. Unlawful increase of capital stock.

Any officer or director of a bank who knowingly and willfully issues, participates in issuing, or concurs in a vote to issue, any increase of its capital stock beyond the amount of the capital stock thereof duly authorized by or in pursuance of law, or who knowingly and willfully sells or agrees to sell, or is interested directly or indirectly in the sale of the shares of stock of the bank, or in any agreement to sell the same, commits a Class C misdemeanor.

Acts 1969, ch. 36, § 1 (3.614); T.C.A., § 45-1115; Acts 1989, ch. 591, § 113.

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

45-2-1716. Appropriation of property, false entries, or refusal to make reports.

  1. Any director, officer, or employee of any bank commits a Class C misdemeanor who:
    1. Knowingly receives or possesses any of the bank's property, otherwise than in payment for a just demand, or with intent to defraud, and omits to make, or causes the omission of, a full and true entry thereof in its books and accounts;
    2. Concurs in omitting to make any material entry in its books or accounts; or
    3. Knowingly by letterhead, newspaper advertisement, or otherwise represents its capital stock to be in excess of the actual capital paid in, or knowingly concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary conditions, making any material statement that is false and by which the bank is made to appear in better condition than it really is, or knowingly omits or concurs in omitting any statement required by law.
  2. This section shall not be construed to conflict with § 39-14-103.

Acts 1969, ch. 36, § 1 (3.615); T.C.A., § 45-1116; Acts 1989, ch. 591, § 113; 1996, ch. 675, § 46.

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

45-2-1717. Criminal sanctions for violations — Reports — Confidential information.

  1. It is the duty of the commissioner to submit to the district attorneys general for the respective counties of the state any criminal violation of the banking laws known by the commissioner to have occurred in the county. The commissioner shall also report the violation to the appropriate division of the Tennessee bureau of investigation.
  2. The commissioner may submit to the district attorneys general, to the attorney general and reporter, and to the appropriate division of the Tennessee bureau of investigation any criminal violation of the securities laws known by the commissioner to have occurred.
  3. Confidential information that is communicated by the commissioner pursuant to this section, whether the reporting is required or authorized by law, remains confidential in the hands of the agency to which the information is reported, and does not become a matter of public record by virtue of this communication.

Acts 1969, ch. 36, § 1 (3.617); 1973, ch. 294, § 6; modified; T.C.A., § 45-1117; Acts 1984, ch. 632, § 1; 1991, ch. 235, § 4.

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

Violations indictable without prosecutor, § 40-13-104.

45-2-1718. Criminal sanctions for violations.

  1. Except as otherwise specifically provided in this chapter and chapter 1, any person responsible for an act or omission expressly declared to be a criminal offense by this chapter and chapter 1 of this title commits:
    1. A Class C misdemeanor; or
    2. If the act or omission was intended to defraud, a Class E felony.
  2. An officer, director, or employee of a bank is responsible for an act or omission of the institution declared to be a criminal offense against this chapter and chapter 1 of this title whenever, knowing that the act or omission is unlawful, the person participates in authorizing, executing, ratifying or concealing the act, or in authorizing or ratifying the omission or, having a duty to take the required action, omits to do so.
  3. Unless otherwise provided in this chapter and chapter 1 of this title, it is no defense to a criminal prosecution hereunder that the defendant did not know the facts establishing the criminal character of the act or omission charged, if the defendant could and should have known the facts in the proper performance of the defendant's duty.

Acts 1969, ch. 36, § 1 (3.618); T.C.A., § 45-1118; Acts 1989, ch. 591, §§ 38, 113.

Cross-References. Forgery, § 39-14-114.

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

Penalty for Class E felony, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 23.

45-2-1719. Injunction.

Whenever a violation of this chapter and chapter 1 of this title by a bank or an officer, director or employee thereof is threatened or impending and will cause substantial injury to the institution or to the depositors, or stockholders thereof, a court of competent jurisdiction shall, upon the suit of the commissioner, issue an injunction restraining the violation.

Acts 1969, ch. 36, § 1 (3.619); T.C.A., § 45-1119.

45-2-1720. False advertising.

  1. It is unlawful for any entity to make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster or over the internet or any radio or television, or in any other way, an advertisement, announcement or statement containing any assertion, representation, or statement with respect to the sale, distribution, offering for sale or advertising of any loan, refinance, insurance or any other product or service that is untrue, deceptive, misleading, or that uses the name or logo of any other lender without the express written consent of the lender whose name is used. For purposes of this section, “lender” means any bank, savings and loan association, savings bank, trust company, credit union, industrial loan and thrift company, mortgage company, mortgage broker, or any subsidiary or affiliate therof.
  2. Each solicitation to an individual in violation of this section shall be considered a separate act. The commissioner of financial institutions, the commissioner of commerce and insurance, and the attorney general and reporter are entitled to enforce  this section against any regulated entity within their jurisdiction or against any other person. The commissioners shall have authority to issue a cease and desist order and to impose a civil penalty of up to one thousand dollars ($1,000) per violation.
  3. Any lender whose name or logo is used in violation of this section is entitled to sue for damages, which shall include any actual damages, statutory penalties of one thousand dollars ($1,000) per violation, and court costs and attorney's fees.

Acts 2006, ch. 801, § 11.

Part 18
Investment and Security Powers

45-2-1801. Legislative intent.

  1. It is the intention of the general assembly both to broaden the permissible activities available to state chartered banks and to ensure the soundness of the state's banking system by protecting depositors.
  2. It is further the intention of the general assembly to provide for the sound conduct of the business of banks while authorizing the availability of expanded services under the authority of the appropriate state regulatory entities.

Acts 1989, ch. 168, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1802. Powers generally.

An authorized state bank, directly or indirectly through a subsidiary, may:

  1. Provide portfolio investment advice to customers;
  2. Serve as investment advisor to investment companies, including, but not limited to, open-end and closed-end mutual funds, private investment companies and investment companies registered under the Investment Companies Act of 1940;
  3. Serve as investment or financial advisor to states, counties and municipalities or subdivisions or instrumentalities thereof;
  4. Act as general partner to investment partnerships;
  5. Act as dealer-manager or financial advisor to corporations or partnerships, including, but not limited to, providing valuation advice, opinions with respect to sales or purchases or assets, corporate restructuring, issuances of securities, mergers and other acquisitions;
  6. Engage in the sale, distribution, and underwriting of, and deal in, commercial paper issued by any entity;
  7. Engage in the sale, distribution, and underwriting of, and deal in, promissory notes secured by real estate mortgages, credit obligations secured by real or personal property or manufactured housing, participation interests in promissory notes and credit obligations, and mortgage related payment bonds secured by promissory notes; and
  8. Engage in the sale, distribution and underwriting of, and deal in, stocks, bonds, debentures, notes, mutual fund shares or unit investment trust interest, and other securities which may be sold by a broker-dealer, financial institution or investment company under Tennessee law.

Acts 1989, ch. 168, § 1.

45-2-1803. Regulations — Adoption — Office of subsidiaries.

  1. The commissioner of financial institutions shall adopt regulations, for the protection of depositors, that state banks, or any class of state banks determined by the commissioner to be appropriate, are required to apply to and receive approval of the commissioner before engaging in one (1) or more of the activities permitted in § 45-2-1802, and may be required to conduct certain of the activities, other than those activities that may be conducted directly by a national bank, only through a subsidiary.
  2. Any offices of the subsidiary shall not be considered branches of the bank for purposes of § 45-2-614.
  3. In addition, the commissioner of commerce and insurance may adopt regulations, if the commissioner determines that the action is necessary for the protection of investors and in the public interest, to require the underwriting, market making or dealing in securities (other than securities which may be underwritten or dealt in by national banks or in which national banks may make a market) activities of state banks be conducted through a subsidiary.

Acts 1989, ch. 168, § 1.

45-2-1804. Duties of commissioner.

The commissioner of financial institutions, in adopting regulations pursuant to § 45-2-1803, shall:

  1. Determine the appropriate level of capital or assets required for a bank to engage directly in an activity permitted in § 45-2-1802;
  2. Determine whether the risk to depositors is sufficiently significant as to require that the activity permitted in § 45-2-1802 must be conducted in a separately capitalized subsidiary;
  3. Determine the appropriate minimum level of capital required for the subsidiary;
  4. Condition the bank's or subsidiary's engaging in an activity permitted in § 45-2-1802, upon a specified level of demonstrated expertise or training;
  5. In connection with subsidiaries engaged in the activities specified in § 45-2-1802(6)-(8), adopt regulations restricting transactions between the subsidiary and a state bank parent or affiliate of the subsidiary to those transactions which are permissible under and consistent with the federal deposit insurance corporation regulations; the regulations may be adopted by reference; and.
  6. Adopt other regulations that are necessary to provide adequate protection for depositors of the state bank, giving due consideration to the limitations, or lack of limitations, on the same or similar activities conducted by other financial institutions.

Acts 1989, ch. 168, § 1.

45-2-1805. Lending limits.

  1. The lending limit provisions of § 45-2-1102 shall apply to extensions of credit by a state bank to any subsidiary engaging in one (1) or more of the activities permitted in § 45-2-1802, and the sale and purchase of classified loans or loan participations restrictions of § 45-2-1102 shall apply to sales or purchases of classified loans from a state bank to any subsidiary engaged in one (1) or more of the activities permitted in § 45-2-1802.
  2. The amount of any outstanding underwriting commitment or obligation of a state bank or its subsidiary with respect to any single issuer shall not exceed:
    1. The total of the combined lending limits, state and federal, of the state bank and all other banks that are controlled by the same holding company as the state bank; less
    2. The total of all outstanding extensions of credit to the issuer from the state bank and from all other banks that are controlled by the same bank holding company as the state bank; provided, that:
      1. The distribution of open-end mutual funds shall not be considered underwriting; and
      2. An obligation authorized by § 45-2-607 that is held as an investment by a state bank shall not be considered an extension of credit by the bank.

Acts 1989, ch. 168, § 1.

45-2-1806. Investment advisors — Registration.

Any state bank or state bank subsidiary that acts as an investment advisor to any mutual fund shall register as an investment advisor with the United States securities and exchange commission and with the department of commerce and insurance. For purposes of this section, a bank common trust fund, investment in which is limited to accounts in which the bank acts as fiduciary or co-fiduciary, shall not be considered a mutual fund.

Acts 1989, ch. 168, § 1.

Law Reviews.

SEC Injunctions, 68 Tenn. L. Rev. 427 (2001).

45-2-1807. Uninsured depository accounts.

Any depository account with a state bank or state bank subsidiary upon which drafts, checks, or other negotiable instruments can be drawn and that is not insured or partially insured by a corporation or subdivision of the United States government must in the application for the account inform the customer of the lack of deposit insurance, and the customer must acknowledge by signature and date of the same.

Acts 1989, ch. 168, § 1.

45-2-1808. Insured and noninsured deposits and investments — Disclosures to customers.

  1. Any state bank, or securities broker-dealer that offers both insured deposit accounts, including, but not limited to, insured management accounts or insured certificates of deposit, and noninsured investments shall in any advertisement, brochure, prospectus or other advertising statement and in documents opening a customer account provide the disclosures provided in subsection (b).
    1. The disclosure required in subsection (a) shall, with regard to the account or investment offering, indicate:
      1. In the case of a noninsured investment, the fact that the investment is not insured; and
      2. In the case of an insured deposit account or insured certificate of deposit, the fact that the deposit is insured. In addition, prior to the acceptance of a deposit or sale of a certificate of deposit, the bank or securities broker-dealer shall disclose the name of the insured institution where the deposit is or will be located if other than the institution accepting or selling the deposit.
    2. Compliance with the disclosure requirements of the federal deposit insurance corporation under 12 C.F.R. 337.4 (repealed) or 12 C.F.R. 328.0 et seq., applicable to the investments, insured deposits, or institutions, shall be deemed to comply with this section. This section shall not entitle any bank or securities broker-dealer to advertise that the institution is a federally insured institution in violation of applicable federal rules.

Acts 1989, ch. 168, § 1.

Part 19
Credit Card State Banks

45-2-1901. Part definitions.

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

  1. “Control” has the meaning set forth in 12 U.S.C. § 1841(a)(2);
  2. “Credit card state bank” means a state bank chartered under the laws of Tennessee and whose principal office is in this state and the activities of which are limited to those permitted under § 45-2-1902;
    1. “Domestic holding company” means a company or other affiliate, that either:
      1. Controls a domestic or foreign lender and has its principal place of business in this state; or
      2. [Deleted effective July 1, 2020.]
    2. [Deleted effective July 1, 2020.]
    3. Effective July 1, 2020, subdivisions (3)(A)(ii) and (3)(B) are hereby deleted. Also effective July 1, 2020, the language “, itself or through its parent company, subsidiary, or other affiliate,” in subdivision (3)(A) is hereby deleted. However, any company that organized pursuant to subdivision (3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part;
  3. “Domestic lender” means any bank, savings and loan association, savings bank, or credit union organized and supervised under the laws of this state or the United States, that has its principal place of business in this state or any other business organization that is authorized by law to accept deposits and make loans and has its principal place of business in this state;
  4. “Foreign lender” means any bank, savings and loan association, savings bank, credit union, organized or chartered under the laws of the United States, or any state other than this state, or the District of Columbia, that has its principal place of business outside this state, or any other business organization that is authorized by law to accept deposits and make commercial loans and has its principal place of business outside this state;
  5. “Holding company” means any company that controls a domestic or foreign lender; and
  6. “Qualifying organization” means a corporation, partnership, or other entity that at all times maintains an office in this state, at which it employs at least one hundred (100) persons residing in this state, and that is directly engaged in providing the following services, either for the qualifying organization or on behalf of other domestic or foreign lenders or credit card state banks:
    1. The distribution of credit cards or other devices designed and effective to access credit card accounts;
    2. The preparation of periodic statements of amounts due under credit card accounts;
    3. The receipt from credit card holders of amounts paid on or with respect to the accounts; and
    4. The maintenance of financial records reflecting the status of the accounts from time to time. “Qualifying organization” also includes any domestic bank or credit card bank satisfying the employment and activities requirements set forth in this subdivision (7)(D).

Acts 1993, ch. 447, § 4; 2007 ch. 6, §§ 1, 4; 2012, ch. 646, § 1; 2015, ch. 230, §§ 1, 2; 2018, ch. 550, § 1.

Compiler's Notes. Acts 2007, ch. 6, § 4 provided that the provisions of the act shall sunset effective July 1, 2012, unless reenacted or extended by the general assembly prior to that date; however, any company that has organized and continues to own or control a credit card state bank pursuant to the provisions of the act on July 1, 2012, shall retain the authority to own or control a credit card state bank under the terms and conditions provided in title 45, chapter 2, part 19. Acts 2012, ch. 646, § 1 reenacted and extended the provisions of Acts 2007, ch. 6, § 4 until July 1, 2015, effective June 30, 2012.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-1902. Organization — Filing fees — Authorized activities.

    1. Subject to this chapter and to the approval of the commissioner, any domestic lender, foreign lender, or holding company may organize, own, and control a credit card state bank on the terms and conditions provided in this part. Notwithstanding § 45-2-607(11), a state bank may own up to one hundred percent (100%) of the shares of a credit card state bank.
    2. Effective July 1, 2020, the language “, including a domestic holding company,” in subdivision (a)(1) is hereby deleted. However, any company that organized pursuant to such language, § 45-2-1901(3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part.
  1. If the credit card bank is to be organized under the laws of this state, the bank shall be organized as provided in this chapter, and the commissioner shall supervise, regulate, examine, and exercise enforcement authority as provided for in this chapter and chapter 1 of this title, and all applicable rules and regulations, to the extent the commissioner deems applicable to the entities. The credit card state bank shall at all times maintain capital stock and paid-in surplus of not less than two million dollars ($2,000,000).
  2. In connection with the application to organize, own, and control a credit card state bank, the applicant shall pay a filing fee in an amount determined by rule by the commissioner.
  3. A credit card state bank shall:
      1. Engage only in credit card operations or the making of loans;
      2. Effective July 1, 2020, the language “or debit, including prepaid debit,” in subdivision (d)(1)(A) is hereby deleted. However, any company that organized pursuant to such language, § 45-2-1901(3)(A)(ii) or (3)(B), and this part prior to July 1, 2020, and that continues to own or control a credit card state bank after July 1, 2020, shall retain authority to own or control a credit card state bank under the terms and conditions provided in this part;
    1. Not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others;
    2. Not accept any savings or time deposits of less than one hundred thousand dollars ($100,000);
    3. Maintain only one (1) office that accepts deposits; and
      1. If in existence on May 17, 1999, not engage in the business of making commercial loans, unless the charter is amended to include a provision electing to engage in commercial lending; or
      2. If organized on or after May 17, 1999, not engage in the business of making commercial loans, unless the charter contains a provision or is subsequently amended to include a provision electing to engage in commercial lending.
  4. A credit card state bank, unless the subsidiary of a domestic lender or domestic holding company, shall either:
    1. Have, within one (1) year of the date it commences operations, fifty (50) employees located in this state devoted to the credit card activities contemplated by this part; or
    2. Contract with a qualifying organization for the performance of the services.
  5. A credit card state bank may issue credit in accordance with §§ 45-2-1903 — 45-2-1908.
  6. A domestic lender is not required to establish a credit card state bank in order to issue credit cards, create credit card accounts and make loans, but may itself issue credit cards, create credit card accounts and make loans in accordance with §§ 45-2-1903 — 45-2-1908, or as otherwise permitted by law.

Acts 1993, ch. 447, § 5; 1999, ch. 168, §§ 1, 2; 2007, ch. 6, §§ 2-4; 2012, ch. 646, §§ 2, 3; 2015, ch. 230, § 3; 2018, ch. 550, § 1.

Compiler's Notes. Acts 2007, ch. 6, § 4 provided that the provisions of the act, which amended subsection (a) and subdivision (d)(1), shall sunset effective July 1, 2012, unless reenacted or extended by the general assembly prior to that date; however, any company that has organized and continues to own or control a credit card state bank pursuant to the provisions of the act on July 1, 2012, shall retain the authority to own or control a credit card state bank under the terms and conditions provided in title 45, chapter 2, part 19. Acts 2012, ch. 646, §§ 2 and 3 reenacted and extended the provisions of Acts 2007, ch. 6, § 4 until July 1, 2015, effective June 30, 2012.

Attorney General Opinions. By providing that three different defined entities, i.e., a domestic lender, a foreign lender, or a holding company, may organize, own, and control a credit card bank, the general assembly meant to exclude entities that fall outside these defined terms from exercising the same powers, OAG 01-129, 2001 Tenn. AG LEXIS 136 (8/17/01).

45-2-1903. Part definitions — Credit card accounts.

  1. For purposes of this part, unless the context otherwise requires:
    1. “Bank” means a credit card state bank established and operated in accordance with § 45-2-1902 or a domestic lender;
    2. “Credit card account” or “credit card plan” means any account that can be accessed by a credit card, including a debit card with a credit feature, whereby the cardholder may obtain loans from time to time either by credit card cash advance or by the purchase or satisfaction by the bank of obligations of the cardholder incurred pursuant to a credit card. “Cardholder” includes borrowers and other primary obligors on loans. With regard to a state credit card bank electing to make loans pursuant to § 45-2-1902(d)(5), and with regard to a domestic lender electing to make loans pursuant to §§ 45-2-1901 — 45-2-1908, “credit card account” or “credit card plan” also includes loans; and
    3. “Loan” means any extension of credit, including, but not limited to, credit extended under plans or in transactions for which no credit card is issued, whether by way of installment, single payment, add-on, discount factoring, or otherwise for personal, consumer, agricultural or commercial purposes.
  2. A bank may extend credit under this part through a credit card account.
  3. This part governs the entire credit card account and all transactions thereunder, including transactions made by check or by another access device or instrument not constituting a credit card. Regardless of the cardholder's place of residence, a credit card account authorized by this part shall be governed solely by federal law and the law of this state, except to the extent the agreement relating to the account provides otherwise. Any other law of this state, including any statute, regulation, or common law, that limits the authority provided by this part or the rate or amount of interest, discount, points, finance charges, time-price differential, service charges or other fees and charges that may be charged, taken, collected, received, or reserved, shall not apply to extensions of credit under a credit card plan that is subject to this part.

Acts 1993, ch. 447, § 6; 1999, ch. 168, §§ 3, 4; 2001, ch. 54, § 34.

45-2-1904. Interest — Fees and charges.

  1. With respect to extensions of credit made on credit card accounts, a bank may charge and collect interest at an annual rate not exceeding thirty percent (30%) per year or at an equivalent daily, weekly, monthly, or quarterly rate.
  2. In addition to the interest charges authorized by subsection (a), a bank may charge and collect with respect to credit card accounts additional types of fees and charges that are agreed upon between the bank and the cardholder, in amounts that are specified in or determined in accordance with the agreement between the bank and the cardholder. The additional fees and charges may include, but are not limited to, a monthly, annual or other periodic charge, and/or a one-time charge, for the privileges or services made available to the cardholder under the plan; transaction charges for each purchase or cash advance under the plan; a minimum charge for each monthly, annual or other scheduled billing period under the plan during any portion of which there is an outstanding unpaid indebtedness; a late payment or delinquency charge; fees incident to the application for and/or the opening, administration and termination of a plan, which in the case of secured plans, may include, but not be limited to, fees and charges relative to the inspection, verification, and protection of the collateral and the establishment, perfection, enforcement and release of the security interest; returned payment charges; charges for providing sales slips, invoices, checks, duplicate periodic statements or other documents; stop payment fees; charges for exceeding a predetermined credit limit or for initiating a transaction that, if consummated, would result in an outstanding balance in excess of the credit limit; automated teller machine charges or similar electronic or interchange fees or charges; charges for issuing additional or replacement credit cards; and other fees and charges that may be agreed upon between the bank and the cardholder.
  3. If credit under a credit card plan is offered and extended in connection with overdrafts under a demand deposit account or other transaction account maintained by the cardholder with a bank, the bank may continue to impose any charges customarily imposed by it under the terms governing the demand deposit or other transaction account, including, but not limited to, check charges, monthly maintenance charges, checkbook charges, debit card charges, charges for checks drawn on funds in excess of an available line of credit and other similar charges, without the necessity of the bank making specific reference to the charges in the agreement governing the credit card plan, and the amount of the charge may be charged to the cardholder's account under the plan.
  4. In the event a borrower defaults under the terms of a plan and the bank refers the borrower's account to an attorney (including a regular salaried employee of the bank) for collection, the bank may, if the agreement governing the credit card plan so provides, charge and collect from the cardholder a reasonable attorney's fee and, in addition, if the agreement governing the plan (or, in the case of secured plans, the security agreement or similar instrument) so provides, the bank may recover from the cardholder all court and other collection costs, including, in the case of secured plans, all costs of enforcing the security agreement or similar instrument, actually incurred by the bank, including those incurred on appeal. Banks may charge and collect interest charges following default of the cardholder and/or judgment in favor of the bank at the rates permitted by this part.
  5. If a bank purchases or satisfies an obligation of the cardholder at less than the face amount of the obligation, the discount is not considered a fee or charge limited by this section.

Acts 1993, ch. 447, § 7; 2017, ch. 225, § 1.

45-2-1905. Variable interest rates.

If the agreement governing the credit card plan so provides, the rate or rates of interest under the plan may vary in accordance with a schedule or formula, and/or upon the happening of any event or circumstance specified in the agreement, including, but not limited to, the failure of the cardholder to perform in accordance with the terms of the agreement. The interest rates, as so varied, may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the variation, including the indebtedness arising out of extensions of credit made prior to the variation in the interest rates.

Acts 1993, ch. 447, § 8.

45-2-1906. Computation of interest.

  1. A bank may charge and collect the interest charges authorized by § 45-2-1904(a) on each credit extension under the credit card plan from the date the cardholder makes a purchase or obtains a cash advance through the date payment is credited to the account in accordance with applicable federal law.
  2. Subject to the terms of the written agreement between a bank and a cardholder, outstanding balances may be computed at the beginning or end of any period or on an average basis for the period. Outstanding balances may include any interest charges and other fees and charges posted to the account. Accordingly, a bank may compound interest charges on extension of credit under this part, on a daily or other basis.
  3. For purposes of determining the daily, weekly, monthly or quarterly rate of interest equivalent to an annual rate, the annual rate shall be divided by: three hundred sixty (360), if the written agreement so provides, or three hundred sixty-five (365), fifty-two (52), twelve (12), or four (4), as the case may be, without regard to the effect of leap years, periods of varying lengths, compounding of interest charges or other factors. A billing period shall be deemed to be a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four (4) days from the same day.
  4. Payments received by a bank under a credit card account may be applied by the bank to purchases, cash advances and/or fees and charges imposed by the bank, in any order, and a bank shall not be required to set forth its payment allocation method in the account agreement or give notice of a change in its payment allocation method, except as required by federal law.

Acts 1993, ch. 447, § 9; 2001, ch. 54, § 33.

45-2-1907. Amendment of credit card agreement.

  1. Except as otherwise provided in subsection (b), a bank may amend its credit card agreement with a cardholder by any method permitted therein upon complying with applicable federal disclosure laws, including, but not limited to, by sending a written change-in-terms notice prior to the effective date of the change, if the change-in-terms notice is required by federal law. The agreement, as so amended, may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the amendment, including indebtedness arising out of extensions of credit made prior to the amendment.
  2. An amendment that materially increases applicable interest rates or other charges or is otherwise materially adverse to the cardholder shall take effect only if the cardholder consents. If the cardholder does give any required consent, the amendment may be made applicable to all or any part of the outstanding indebtedness under the plan on or after the effective date of the amendment, including indebtedness arising out of extensions of credit made prior to the amendment. If the cardholder does not give any required consent, the cardholder shall be permitted to pay the outstanding unpaid indebtedness in accordance with the terms of the agreement, without giving effect to the amendment, and the bank may terminate any further credit extensions under the plan, unless the credit card agreement provides otherwise.
  3. The cardholder's consent, for purposes of subsection (b), may be expressed by any affirmative act, including, but not limited to, continued usage of the account after a date specified in a change-in-terms or amendment notice sent by the bank. As an alternative, the change-in-terms or amendment notice may require that the cardholder take specified action, such as returning all credit cards and other access devices to the account by a specified date, in which case the cardholder's failure to take action shall be deemed consent by the cardholder to the changed or amended terms.

Acts 1993, ch. 447, § 10.

45-2-1908. Security for cardholders' obligations.

A bank may take security of any type, including, but not limited to, a mortgage or deed of trust on residential property or a deposit account or certificate of deposit, for a cardholder's obligations under a credit card account.

Acts 1993, ch. 447, § 11.

Part 20
Private Trust Companies

45-2-2001. Private trust company.

  1. A private trust company acting as a fiduciary in this state is a company that does not transact a trust business with the general public. The company shall comply with this chapter and chapter 1 of this title, and the rules of this chapter and chapter 1 of this title applicable to a public trust company unless expressly exempted therefrom in writing by the commissioner pursuant to this part or by rule adopted by the department.
    1. A private trust company or proposed private trust company may request in writing that it be exempted from any provision of the Banking Act or the rules thereof. The commissioner may grant the exemption in whole or in part if the commissioner finds that the private trust company does not and will not transact business with the general public.
    2. As used in this part, unless the context requires otherwise:
      1. “Collateral kinship” means a relationship that is not lineal, but stems from a common ancestor;
      2. “Designated ancestor” means one (1) or more ancestors of the family designated as such in the application submitted under this part. A designated ancestor may be either living or deceased. If two (2) designated ancestors are designated, they must be or have been spouses to each other, and if more than such first two (2) designated ancestors are designated, each such additional designated ancestor must be or have been a spouse of either of the first two (2) designated ancestors;
      3. “Family affiliate” means a company or other entity in which one (1) or more family members, directly or indirectly, through ownership of voting securities or equity, by contract, through power of direction, through beneficial or other ownership in one (1) or more other entities, or otherwise:
        1. Owns a majority interest; or
        2. May direct or cause the direction of the management and policies of the company or other entity, whether alone or in combination with others;
      4. “Family client” means:
        1. A family member;
        2. An organization, foundation, or trust:
          1. Whose primary purpose is not-for-profit or charitable, whether or not tax-qualified; and
          2. Of which one (1) or more family clients is an organizer, incorporator, officer, member of the governing board, trustee, or donor, alone or in combination with other family clients, of a substantial portion of its assets;
        3. The officers, directors, individual trustees and managers of the entity defined in subdivision (b)(2)(D)(ii), and their immediate family;
        4. An estate of a family client;
        5. An inter vivos or testamentary trust established by one (1) or more family clients, whether or not in combination with a third party;
        6. An inter vivos or testamentary trust if the noncharitable beneficiaries with vested interests consist of one (1) or more family clients;
        7. A family affiliate, its directors, officers, managers, or trustees and their immediate family;
        8. A family services provider; and
        9. A maximum of thirty-five (35) individuals designated by the private trust company if each individual is a full-time employee of a family affiliate. Any individual described in subdivisions (b)(2)(D)(i)-(viii) does not count against the maximum number of individuals established by this subdivision (b)(2)(D)(ix);
      5. “Family member” means a designated ancestor and:
        1. An individual within the twelfth degree of lineal kinship of a designated ancestor;
        2. An individual within the eleventh degree of collateral kinship of a designated ancestor;
        3. A spouse or former spouse of a designated ancestor or of an individual defined as a family member in subdivision (b)(2)(E)(i) or (ii); and
        4. An individual who is a relative of a spouse or former spouse specified in subdivision (b)(2)(E)(iii) who is within the fifth degree of lineal or collateral kinship of the spouse or former spouse;
      6. “Family services provider” means:
        1. A full-time employee of the private trust company; or
        2. A full-time employee of a family member providing personal services to the family member, including, but not limited to, household, legal, or accounting services;
      7. “Foster child” means an individual raised or being raised by someone who is not the individual's natural or adoptive parent;
      8. “Immediate family” means an individual's spouse or former spouse, any descendant of that individual, and any relative living in the same residence as that individual;
      9. “Lineal kinship” means the direct ancestors and descendants of an individual; and
      10. “Transact a trust business with the general public” means any sale, solicitation, arrangement, agreement, or transaction to provide fiduciary services as described in § 45-2-1002, whether or not for a fee, commission, or any other type of remuneration, with any client that is not a family client.
    3. For purposes of this part:
      1. A legally adopted person shall be treated as a natural child of the adoptive parents;
      2. A stepchild shall be treated as a natural child of the individual who is or was the stepparent of that child;
      3. A foster child, or an individual who was a minor when an adult became the individual's legal guardian, shall be treated as a natural child of the adult appointed as foster parent or guardian;
      4. A child of a spouse or former spouse of an individual shall be treated as a natural child of that individual;
      5. Degrees are calculated by adding the number of steps from a relevant designated ancestor through each individual to the family member either directly, in case of lineal kinship, or through a designated ancestor, in the case of collateral kinship; and
      6. A person who was a family client at the time of becoming a client of the private trust company shall not cease to be a family client solely due to a death, divorce, retirement, or other similar event.
  2. At the expense of the private trust company, the commissioner may examine or investigate the private trust company in connection with an application for exemption. Unless the application presents novel or unusual questions, the commissioner shall approve the application for exemption not later than the sixty-first day after the date the commissioner considers the application complete and accepted for filing. Otherwise, the application shall be deemed approved unless the commissioner extends the time for review by requiring the submission of additional information as considered necessary to an informed decision.
  3. Any exemption granted under this section may be made subject to conditions or limitations imposed by the commissioner consistent with this chapter.
  4. The department may adopt rules defining other circumstances that do not constitute transaction of business with the public, specifying the provisions of the Banking Act that are subject to an exemption request, and establishing procedures and requirements for obtaining, maintaining, or revoking exempt status.

Acts 1999, ch. 112, § 18; 2011, ch. 26, § 1; 2012, ch. 793, §§ 1, 2; 2016, ch. 714, §§ 1, 2; 2018, ch. 632, § 1; 2020, ch. 581, § 2.

Amendments. The 2020 amendment deleted the former second sentence of (a), which read, “All individuals who control the private trust company, who establish trusts or charitable organizations controlling the private trust company, or who control corporations, sole proprietorships, partnerships, joint ventures, associations, trusts, estates, business trusts, limited liability companies, or other companies controlling the private trust company must be family members.”

Effective Dates. Acts 2020, ch. 581, § 4. March 19, 2020.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-2-2002. Requirements to apply for and maintain status as a private trust company.

  1. Application.
    1. A private trust company requesting an exemption from provisions of the Banking Act shall file an application with the commissioner containing the following:
      1. A nonrefundable application fee as set by the department;
      2. A detailed statement under oath showing the private trust company's assets and liabilities as of the end of the month previous to the filing of the application;
      3. A statement under oath of the reason for requesting the exemption;
      4. A statement under oath that the private trust company is not currently transacting business with the public and that the company will not conduct business with the public without the prior written permission of the commissioner;
      5. The current street mailing address and telephone number of the physical location in this state at which the private trust company will maintain its books and records, together with a statement under oath that the address given is true and correct and is not a United States postal service post office box or a private mail box, postal box, or mail drop;
      6. A listing of the specific provisions for which the request for exemption is made; and
      7. A statement under oath of the name of the individual who will be the designated ancestor of the private trust company.
    2. The commissioner shall not approve a private trust company exemption unless the application is completed as required in this section.
  2. Requirements.  To maintain status as an exempt private trust company under this chapter, the private trust company shall comply with the following:
    1. An exempt private trust company shall not transact business with the public;
    2. An exempt private trust company shall file an annual certification that it is maintaining the conditions and limitations of its exempt status. This annual certification shall be filed on a form provided by the commissioner and be accompanied by a fee determined by the department. The annual certification shall be filed on or before June 30 of each year. The commissioner may examine or investigate the private trust company, at the company's expense, periodically as necessary to verify the certification; and
    3. An exempt private trust company shall comply with the principal office provisions, address and telephone requirements of this section.
  3. Change of Control.
    1. Control of an exempt private trust company may not be transferred or sold with exempt status. In any change of control, the acquiring control person must comply with this chapter, and the exempt status of the private trust company shall automatically terminate upon the effective date of the transfer. A separate application for exempt status must be filed if the acquiring person wishes to obtain or continue an exemption pursuant to this section.
    2. For the purposes of this part, a transfer of control of an exempt private trust company to a family member shall not be a change of control resulting in the termination of private trust company's exempt status regardless of whether the transfer is:
      1. Direct or indirect;
      2. Inter vivos; or
      3. A result of death.

Acts 1999, ch. 112, § 18; 2012, ch. 793, §§ 3, 4.

45-2-2003. Remedies.

  1. If a private trust company violates any provisions of this chapter, the commissioner may:
    1. Institute any action or remedy prescribed by this chapter and chapter 1 of this title, or any applicable rule; or
    2. Refer the private trust company to the attorney general and reporter for institution of a quo warranto proceeding to revoke the charter.
  2. After notice and an opportunity for a hearing pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, the commissioner shall have authority to revoke the exempt status of a private trust company in the following circumstances:
    1. The exempt private trust company makes a false statement under oath on any document required to be filed by the department;
    2. The exempt private trust company fails to submit to an examination as required by this chapter;
    3. The exempt private trust company withholds requested information from the commissioner; or
    4. The exempt private trust company violates any provision applicable to exempt private trust companies.
  3. After taking effect, the revocation is final and nonappealable as to that private trust company. The private trust company shall then be subject to all of the requirements and provisions applicable to non-exempt state trust companies within the period of time that the commissioner determines reasonable and circumstances warrant.

Acts 1999, ch. 112, § 18.

45-2-2004. Conversion to public trust company.

  1. A private trust company may terminate its status as a private trust company and commence transacting business with the general public. A private trust company desiring to commence transacting business with the general public shall file a notice on a form prescribed by the commissioner, which shall set forth the name of the private trust company and an acknowledgment that any exemption granted or otherwise applicable to the private trust company shall cease to apply on the effective date of the notice, furnish a copy of the resolution adopted by the board authorizing the private trust company to commence transacting business with the general public, and pay the filing fee, if any, prescribed by the commissioner. The commissioner may examine or investigate the private trust company, at the company's expense, in order to act on the notice.
  2. The notificant may commence transacting business with the general public on the thirty-first day after the date the commissioner receives the notice, unless the commissioner specifies an earlier or later date.
  3. The thirty-day period of review may be extended by the commissioner on determination that the written notice raises issues that require additional information or additional time for analysis. If the period for review is extended, the notificant may commence transacting business with the public only on prior written approval by the commissioner.
  4. The commissioner may deny approval of the notice of the private trust company to commence transacting business with the general public if the commissioner finds that the notificant lacks sufficient financial resources to undertake the proposed expansion without adversely affecting its safety or soundness, or that the proposed transacting of business with the general public would be contrary to the public interest, or if the commissioner determines that the notificant will not within a reasonable period be in compliance with any provision from which the notificant had been previously exempted.
  5. Upon the effective date of conversion, the private trust company shall then be subject to all of this chapter and chapter 1 of this title, and the rules thereof that are applicable to non-exempt state trust companies.

Acts 1999, ch. 112, § 18.

45-2-2005. Modification or revocation of exemption — Commissioner's authority — Notice — Hearing.

  1. The commissioner shall not modify or revoke any exemption granted to a private trust company under § 45-2-2001 unless:
    1. The commissioner determines that, based upon the safety and soundness of the private trust company or any action that the private trust company has taken or proposes to take, modification or revocation is necessary to protect the viability of the private trust company; or
    2. The private trust company fails to comply with any conditions or limitations imposed by the commissioner in connection with granting the exemption.
  2. The commissioner's authority to modify an exemption under subsection (a) includes the authority to impose conditions or limitations with respect to the exemption.
    1. The commissioner must provide notice in writing to the private trust company at least thirty (30) days prior to the effective date of the proposed modification or revocation of an exemption.
    2. Within thirty (30) days following receipt of the notice provided pursuant to subdivision (c)(1), the private trust company may request in writing that the commissioner hold a hearing for the private trust company to show cause as to why the proposed modification or revocation of an exemption should not become effective.
    3. If a hearing is requested within the time period set forth in subdivision (c)(2), the commissioner shall schedule and conduct the hearing, and the proposed modification or revocation shall not become effective until the commissioner's final determination following the hearing.
    4. If a hearing is not requested within the time period set forth in subdivision (c)(2), the proposed modification or revocation shall become effective without further notice or hearing on the date specified in the notice provided pursuant to subdivision (c)(1).
  3. This section does not modify, limit, or repeal § 45-2-2003.

Acts 2018, ch. 632, § 2.

Part 21
State Trust Companies

45-2-2101. Parts of chapter applicable to trust companies.

  1. Parts 1, 2, 3, 4, 5, 7, 8, and 19 of this chapter do not apply to trust companies, except for §§ 45-2-104, 45-2-105, 45-2-208, 45-2-211, 45-2-215(b), 45-2-217, 45-2-218, 45-2-219, 45-2-220, 45-2-402(d) and (e), 45-2-404 and 45-2-405, and as otherwise provided in this part or as determined by the commissioner.
  2. Part 14 of this chapter does not apply to trust companies, except for §§ 45-2-1408 — 45-2-1411; and, in regards to § 45-2-1409, for a state trust company, the “application for an interstate merger transaction with the responsible federal bank supervisory agency,” means the merger application that is filed with the responsible state agency.
  3. All provisions referenced in this section are in addition to those other statutes in this chapter that are not applicable to trust companies, as determined by the commissioner under § 45-1-124.

Acts 2014, ch. 642, § 3.

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

45-2-2102. Organization of state trust company.

  1. Any number of persons may act as incorporators or organizers of a state trust company.
  2. Subject to this chapter, a state trust company shall be organized as a corporation under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, or a limited liability company under the Tennessee Revised Limited Liability Company Act, compiled in title 48, chapter 249.
  3. To form a state trust company, the incorporators or organizers shall:
    1. Submit an application for charter, pursuant to § 45-2-2103; and
    2. If the application is approved by the commissioner, submit an application for a certificate of authority, pursuant to § 45-2-2106.
  4. For purposes of this part, if the trust company is being formed as a limited liability company, all references to an application for charter shall also mean an application for articles of organization; all references to incorporators shall also mean organizers; and all references to stock or shareholders shall also include membership interests or members, respectively. Any reference to a director shall also mean a manager, if the trust company is being formed as a manager-managed limited liability company. Any reference to applicant shall mean the incorporators or organizers, or the trust company itself, once its corporate existence has begun.
  5. Prior to submitting an application for charter, each incorporator or organizer shall subscribe and pay in full, in cash, for common stock in a minimum amount representing in aggregate at least ten percent (10%) of the proposed capital of the company. Subscriptions paid by the incorporators for their shares in the proposed trust company may be used to pay organizational expenses, but, in that case, shall not be commingled with funds in any account in which any non-incorporator funds have been or will be deposited.

Acts 2014, ch. 642, § 3.

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

45-2-2103. Application for charter — Records check — Notifications — Withdrawal.

  1. The application for charter shall be filed with the commissioner, in the form the commissioner prescribes, containing the following information:
    1. The name, residence and occupation of each incorporator or organizer, or of each individual controlling any entity acting as an incorporator or organizer, as determined by the commissioner, as well as the amount of stock subscribed to, and paid for, by each;
    2. The name and contact information of an individual to whom correspondence relative to the application may be sent;
    3. The names and addresses, and other biographical information as the commissioner may require, of the initial directors or managers and officers of the trust company;
    4. The proposed charter or articles of organization of the company, which, in addition to the provisions required by the Tennessee Business Corporation Act, compiled in title 48, chapters 11–27, or the Tennessee Revised Limited Liability Company Act, compiled in title 48, chapter 249, shall contain the following:
      1. The proposed name of the trust company, which, in the commissioner's judgment, is not likely to cause confusion to the affected public; and
      2. A statement that the company is being formed under the Tennessee Banking Act, as compiled in chapters 1 and 2 of this title, to act as a state trust company;
    5. The proposed bylaws or operating agreement;
    6. The address of the principal office in this state and of each proposed office, or, if not yet known, the communities in which the offices will be located;
    7. A three-year business plan for the trust company including pro forma financial projections specifically identifying the opportunities for profitable employment of its fiduciary services;
    8. The proposed capital structure of the trust company, complying with § 45-2-2107;
    9. The offering circular or offering letter if capital is to be raised by public offering or private placement offering whether at the trust company level or by an entity that will control the state trust company and a copy of the escrow agreement for the escrow account in which funds shall be placed;
    10. The nonrefundable application fee required by the commissioner; and
    11. Such other information as the commissioner may require.
  2. The commissioner shall require each individual identified in subdivision (a)(1) and (3) to consent to a criminal history records check and provide their fingerprints in a form acceptable to the commissioner. The criminal history records check shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, at the expense of the applicant, and the results of the check shall be forwarded to the commissioner. For any individual who is not a citizen of the United States, the commissioner shall conduct an international background investigation at the expense of the applicant, or require the applicant or individual to provide the results of an international background investigation on the individual, which the commissioner has the discretion to accept or reject.
  3. The applicant shall use the phrase “in organization” after the proposed trust company's name, until the certificate of authority has been issued.
  4. At any time prior to approval of the application for charter, so long as the applicant has provided the address for the principal office, the applicant may request that the commissioner issue the charter or articles of organization by endorsing the document and having it filed with the secretary of state at the expense of the applicant and returning the original to the applicant.
  5. Within thirty (30) calendar days of filing the application, the commissioner shall notify the applicant whether the application for charter is deemed complete, or whether additional information is needed. Once the applicant has been notified that the application is deemed complete, the applicant shall promptly publish public notice of the formation of the trust company in the form and manner that the commissioner specifies. The ninety-day period referenced in § 45-2-2104(a) shall not commence until evidence of publication has been received by the commissioner.
  6. The commissioner may consider an application to be withdrawn if the commissioner has not received all information and fees required to complete the application within twelve (12) months after the date the application is first submitted, unless the commissioner has granted a request for extension. If an application is deemed withdrawn, a new application for charter, including a new application fee, is required to form a state trust company.

Acts 2014, ch. 642, § 3.

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

45-2-2104. Investigation and examination of charter applicants — Determination on application.

  1. Within ninety (90) days after the filing of a complete application for charter, the commissioner shall investigate and examine the application to determine whether:
    1. The character, reputation and financial standing of the incorporators or organizers is such to establish that the trust company is being formed in good faith for a proper purpose;
    2. The character, financial responsibility, and business experience and qualifications of the proposed directors and officers justify the belief that the trust company will be operated lawfully and successfully;
    3. The anticipated volume and nature of business indicates a reasonable probability of success and profitability based on the market sought to be served;
    4. The proposed capital structure is adequate, considering the factors described in § 45-2-2107 and other information in the application; and
    5. The incorporators or organizers have complied with all applicable provisions of this chapter.
  2. The commissioner may extend the ninety-day period if unique or novel issues are presented, or if additional time is needed to complete the investigation and examination.
  3. The commissioner shall consider the results of the investigation and examination, as well as any additional information that is available to the commissioner, and shall approve the application if satisfied that each requirement in subsection (a) has been met. If approval is granted, the commissioner shall issue the charter or articles of organization, if not yet issued, by filing the charter or articles with the secretary of state at the expense of the applicant and returning the original to the applicant.
  4. If the commissioner determines that the applicant does not meet the requirements in this chapter, the commissioner may deny the application by providing written notice to the applicant stating the basis for denial.

Acts 2014, ch. 642, § 3.

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

45-2-2105. Payment of subscriptions — Placement in escrow account — Removal of funds.

After the trust company charter or articles of organization have been issued by the commissioner, the incorporators, or, if directors have been initially appointed, the directors of the proposed state trust company, may call for the payment of the subscriptions. The subscriptions shall be placed into an escrow account. The incorporators or directors, as appropriate, may not remove any funds from the escrow account prior to the issuance of the certificate of authority or upon written approval from the commissioner. In the case of an offering to raise capital to form a state trust company by an entity that will control the company, subscriptions shall also be placed into an escrow account and may not be removed prior to the issuance of the certificate of authority or upon written approval from the commissioner.

Acts 2014, ch. 642, § 3.

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

45-2-2106. Application for certificate of authority — Effect of failure to timely file or full denial — Effect of approval.

  1. In order to obtain a certificate of authority to begin acting as a fiduciary in this state, the applicant shall file an application for a certificate of authority, containing:
    1. Evidence that capital and surplus have been fully paid in;
    2. The name and address of each investor, and the number of shares or membership units purchased by each;
    3. Evidence that adequate fidelity bond coverage on all active officers and employees satisfactory to the commissioner is in force;
    4. Evidence that suitable insurance against burglary, robbery, theft, liability and similar insurable hazards to which the trust company may be exposed has been acquired;
    5. Evidence that the bylaws or operating agreement, as applicable, have been adopted; and
    6. Any other information that the commissioner may require to enable the commissioner to determine whether authority to commence business should be issued.
  2. The commissioner shall approve or deny an application for a certificate of authority within thirty (30) days after it is filed. If no application for a certificate of authority is filed within six (6) months following approval of an application for charter or any additional period allowed by the commissioner, or if a certificate of authority has been finally denied, the charter or articles of organization shall be forfeited and the company shall be liquidated in accordance with the orders of the commissioner.
  3. If the commissioner approves the application for a certificate of authority, the commissioner shall promptly issue a certificate of authority and deliver the same to the applicant. If the commissioner denies the application, the commissioner shall promptly mail a notice of the denial to the applicant stating the reasons for the denial.
  4. As of the date indicated on the certificate of authority, the applicant shall be a state trust company and authorized to act as a fiduciary in this state.

Acts 2014, ch. 642, § 3.

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

45-2-2107. Adequate capital structure — Factors considered.

  1. No state trust company shall be organized with capital of less than five hundred thousand dollars ($500,000), or such greater amount as may be required by the commissioner after considering the factors in this section.
  2. The commissioner may at any time prescribe a capital structure for a state trust company that the commissioner deems adequate for it to operate in a safe and sound manner. The commissioner shall consider the following factors in determining an adequate capital structure:
    1. The nature and type of business conducted or to be conducted;
    2. The nature and liquidity of assets currently held or to be held in the state trust company's own account;
    3. The amount of fiduciary assets currently or projected to be under management or administration;
    4. The type of fiduciary assets currently held or proposed to be held, and the depository of such assets;
    5. The complexity of fiduciary duties and degree of discretion proposed currently or to be undertaken;
    6. The competence and experience of current or proposed management;
    7. The extent and adequacy of internal controls;
    8. The reasonableness of any business plan for retaining or acquiring additional equity capital;
    9. The existence and adequacy of insurance for protecting the state trust company's fiduciary assets; and
    10. Any other factors the commissioner may deem relevant.

Acts 2014, ch. 642, § 3.

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

45-2-2108. Board of directors — Membership — Meetings — Chief executive officer — Fidelity bond and insurance — Audited financial statement.

  1. The business and affairs of a state trust company organized as a corporation shall be managed under a board of directors consisting of a minimum of five (5) and a maximum of twenty-five (25) members, as specified in the charter or bylaws. A trust company organized as a limited liability company shall be managed by a board consisting of a minimum of five (5) and a maximum of twenty-five (25) directors or managers, as specified in the articles of organization or operating agreement.
  2. A majority of the board shall be citizens of the United States.
  3. The board of directors shall meet at least quarterly, and a majority shall constitute a quorum. The commissioner may call a special meeting of the board. The board shall keep minutes of each meeting, including a record of attendance and of all votes cast by each director.
  4. A state trust company shall have only one (1) officer designated as the chief executive officer of the company, who shall also be a member of the board of directors.
  5. A state trust company shall report to the commissioner within twenty-four (24) hours any change in the position of chief executive officer and shall provide such other information as the commissioner may require.
  6. As indicated in § 45-2-2101, § 45-2-402(d) and (e) shall apply to a state trust company.
  7. The directors shall at least annually prescribe the amount or penal sum of the fidelity bond and insurance coverage required by § 45-2-2106(a) and designate the sureties and underwriters of the bond and insurance, after giving due and careful consideration to all known elements and factors constituting a risk or hazard. The action shall be recorded in the minutes of the board of directors and be subject to approval by the commissioner.
  8. At least once in each calendar year, at intervals of not more than fifteen (15) months, a state trust company shall obtain and provide to the commissioner an audited financial statement prepared by an independent certified public accountant licensed to do business in this state. In the case of a trust company that is a subsidiary of a holding company, the commissioner may, in the commissioner's discretion, alternatively accept audited consolidated financial statements of the holding company, after considering the structure and complexity of the consolidated organization; provided, that the consolidated total assets of the trust company comprise seventy-five percent (75%) or more of the consolidated total assets of the holding company.

Acts 2014, ch. 642, § 3.

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

45-2-2109. Change of control in or of controlling person of state trust company.

Section 45-2-103(a), including the requirement to file an application and receive the prior approval of the commissioner, shall apply to a change of control in a state trust company or a controlling person of a state trust company. In the case of a change of control in a controlling person, the commissioner may waive the filing of an application if, in the commissioner's discretion, the change in control does not pose any risk to the public. Along with the change of control application the commissioner may, in the commissioner's discretion, require fingerprints and consent to a criminal history records check, or an international criminal background investigation, as provided in § 45-2-2103(b).

Acts 2014, ch. 642, § 3.

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

45-2-103. Changes affecting bank control.

45-2-211. Indemnification of officers, directors or employees.

45-2-302. Voting of shares.

45-2-616. Preservation of bank records.

45-2-618. Notification at maturity of certificate of deposit — Requirement.

45-2-1313. Merger of bank in financial difficulty.

45-2-1407. Powers.

Chapter 3
Savings and Loan Associations

Part 1
General Provisions

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.

NOTES TO DECISIONS

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

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.
    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. 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.
  1. 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

45-3-201. Application to organize.

Any five (5) or more individuals, referred to as the incorporators, who are residents of this state, may form a capital stock or mutual savings and loan association subject to the commissioner's approval as hereinafter provided, by filing a written application for authority to organize with the commissioner in a form and manner prescribed by the commissioner. The application shall be signed by each of the incorporators and shall include:

  1. Home Office.  The name and the proposed location of the home office of the proposed association;
  2. Incorporators.  The name and address of each incorporator;
  3. Capital.  In the case of a capital stock association, the total amount of capital stock proposed and subscribed, if any has then been subscribed, and in the case of a mutual association, the total amount of subscribed deposit accounts, if any, together with the name and address of each subscriber; and
  4. Other Information.  Detailed financial and biographical information for each incorporator and subscriber that the commissioner may require, and economic data, projections of business volume, income, expense, and other information that the commissioner may require.

Acts 1978, ch. 708, § 1.15; T.C.A., § 45-1315.

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).

Cross-References. Negotiable instruments, title 47, ch. 3.

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

45-3-202. Commissioner's approval of application for certificate of authority — Hearing.

  1. Upon receipt of an application for authority to organize an association, including all supporting data, the commissioner shall promptly give written notice to at least one (1) of the incorporators of the proposed association designated to receive notices, and the incorporators shall cause the notice to be published in a newspaper of general circulation in the county where the home office of the proposed association is to be located. The notice shall state the name of the proposed association, where the incorporators propose to establish the home office of the association, and that the association shall have an opportunity to request a hearing on the application. If so requested, the hearing shall not be held within ten (10) days nor more than thirty (30) days after the publication of the notice. Any interested person may appear at the hearing in person or by agent or attorney, and orally or in writing show cause, upon any relevant ground, why the application should be approved or denied; provided, that any person objecting to the application shall reduce the substance of the objection to writing and file the same with the commissioner and give notice of the objection to the applicant at least five (5) days prior to the date of the hearing. The hearing shall be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  2. The commissioner shall not approve any application before affirmatively finding from all the information furnished with the application, the evidence produced at the hearing, and the commissioner's official records, that the prerequisites of this chapter have been complied with and that as to:
    1. Management.  The character, responsibility, and general fitness of the persons named in the application are such as to command confidence and warrant belief that the business of the proposed association will be honestly and efficiently conducted in accordance with the purposes of this chapter, and that the proposed association will have qualified full-time management;
    2. Public Need.  There is public need for the proposed association in the county stated in the application;
    3. Capital Structure.  The proposed capital structure meets the requirements of this chapter;
    4. Undue Harm.  The operation of the proposed association will not unduly harm any properly conducted federal or state association existing in the county or in a contiguous county in which the home office of the proposed association is to be located;
    5. Name.  The name of the proposed association is not the same as, or deceptively similar to, the name of any other association in the state, and this chapter has been complied with with respect to the use of a name by the proposed association; and
    6. Insurance.  A commitment for insurance of deposit accounts has been obtained by the proposed association that meets the requirements of this chapter.
  3. If the commissioner so finds, the commissioner shall state approval and findings in writing and shall promptly mail one (1) copy of the proposed application and the attached findings to at least one (1) of the incorporators by registered or certified mail. In addition, the incorporators shall cause notice of approval to be promptly published in a newspaper of general circulation in the county where the home office of the proposed association is to be located.

Acts 1978, ch. 708, § 1.16; T.C.A., § 45-1316.

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

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-203. Denial of application.

  1. The commissioner, if unable to make the findings as required by the preceding section, shall endorse upon each copy of the application the word “denied” with the date of the endorsement and attach a written statement of the grounds for the denial.
  2. One (1) copy of the proposed application and attached grounds of refusal shall be promptly mailed to at least one (1) of the incorporators by registered or certified mail.

Acts 1978, ch. 708, § 1.17; T.C.A., § 45-1317.

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

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-204. Subscription to capital and interim organization.

  1. If the commissioner approves the application for authority to organize, the incorporators shall perfect an interim organization by electing a chair, vice chair, and secretary, who shall act as the interim officers of the association until their successors are duly elected and qualified.
  2. The interim officers shall have the following, and only the following, duties during the period after approval of the application by the commissioner and before issuance of a certificate of authority as provided in this chapter:
    1. Subscriptions.  They shall secure subscriptions for payments of the required amount of capital and, as the case may be, the required amount for paid-in surplus or for the expense fund, in the form and manner approved by the commissioner; and
    2. Adoption of Charter and Bylaws.  They shall call a meeting of subscribers, who shall adopt a charter and bylaws for the proposed association and elect directors to serve upon the issuance of the certificates of authority until the first annual meeting of the association and until their successors are elected and qualified.

Acts 1978, ch. 708, § 1.18; T.C.A., § 45-1318.

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.

45-3-205. Requirements for charter and bylaws.

The proposed charter and bylaws of the association adopted at the meeting of subscribers shall contain those provisions required of charters and bylaws under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as well as other information that the commissioner may, by regulation, prescribe, including, but not limited to, a statement in the charter that the association is organized under this chapter.

Acts 1978, ch. 708, § 1.19; T.C.A., § 45-1319; 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.

45-3-206. Certificate of authority.

  1. Filing of Required Information.  After approval by the commissioner of the application for authority to organize, the proposed association shall:
    1. File with the commissioner its charter and bylaws for approval; and
    2. File with the commissioner a statement in a form and with supporting data and proof that the commissioner may require, showing that the entire capital including paid-in surplus or expense fund has been fully paid in lawful money unconditionally and that the funds representing the capital and, as the case may be, paid-in surplus or expense fund less sums spent with the approval of the commissioner for organization are on hand, and that it has acquired a commitment for the insurance of deposit accounts as provided in this chapter.
  2. Issuance of Certificate of Authority.  If the commissioner finds that the proposed association has in good faith complied with all the requirements of law, the commissioner shall approve the issuance of a certificate of authority and shall within thirty (30) days after the filing of the statement specified in this section, issue, in triplicate, a certificate of authority to transact a general savings and loan business. The commissioner shall then transmit a copy of the charter and the certificate of authority, together with all required supporting documents, to the secretary of state for filing as provided under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27. Upon filing by the secretary of state, the existence of the association shall begin. Until that time, and except for the limited activities of incorporators and officers during the period of interim organization under this chapter, any proposed association shall not engage in any savings and loan business.
  3. Opportunity to Answer Objections.  If the commissioner does not approve the issuance of a certificate of authority, the commissioner shall state any objections in writing and give an opportunity to the proposed association to obviate the objections.

Acts 1978, ch. 708, § 1.20; T.C.A., § 45-1320; 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.

45-3-207. Completion of organization.

Upon filing by the secretary of state, the directors elected during the period of interim organization shall proceed to:

  1. Approve and adopt the charter and bylaws;
  2. Elect officers pursuant to the bylaws;
  3. Take action necessary to effect the insurance of the deposit accounts of the association; and
  4. Take other action that may be necessary to complete the organization.

Acts 1978, ch. 708, § 1.21; T.C.A., § 45-1321.

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.

45-3-208. Forfeiture of certificate of authority and charter for nonuse.

  1. Any association that does not commence business within one (1) year after the date upon which its corporate existence begins, or, in the case of any association existing on July 1, 1978, within one (1) year after July 1, 1978, shall forfeit its corporate existence, unless the commissioner, before the expiration of the one-year period, approved in writing the extension of time within which it may commence business, upon a written application stating the reasons for the delay; provided, that the foregoing one-year provision shall not apply to existing associations that are engaged in litigation or that are in the process of having their insurance of accounts finalized.
  2. Upon forfeiture, the certificate of authority and the charter shall expire, and all action taken in connection with the incorporation thereof except the payment of the incorporation fee shall then be void.
  3. Amounts credited on deposit accounts, less expenditures authorized by law, shall be returned pro rata to the respective holders of the accounts.

Acts 1978, ch. 708, § 1.22; T.C.A., § 45-1322.

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

45-3-209. Corporate name — Exclusive use by associations.

  1. The name of every association shall include the words “savings and loan association” and “savings bank.” These words shall be preceded or followed by an appropriate descriptive word or words approved by the commissioner. An ordinal number may not be used as a single descriptive word preceding the words “savings and loan association” unless the words are followed by the name of the town, city, or county in which the association has its home office.
  2. No certificate of authority of a proposed association having the same name as any other financial institution authorized to do business in this state under this chapter or a name so nearly resembling it as to be calculated to deceive shall be issued by the commissioner, except to an association formed by the reincorporation, reorganization, merger, consolidation, or conversion of other associations, or upon the sale of the property or franchise of an association.
  3. Except as otherwise provided by § 45-5-203, no person, either domestic or foreign, unless authorized to do business in this state under this chapter, shall do business under any name or title that indicates or reasonably implies that the business is of the character or kind of business carried on or transacted by an association or that is calculated to lead any person to believe that the business is that of an association.
  4. Upon application by the commissioner or by any association, a court of competent jurisdiction may issue an injunction to restrain an entity violating or continuing to violate any of the provisions of subsections (a)-(c).

Acts 1978, ch. 708, § 1.23; T.C.A., § 45-1323; Acts 1985, ch. 330, § 1.

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

Part 3
Branch or Satellite Offices

45-3-301. Location — Effect of de novo branches.

  1. Any state association, as defined in § 45-3-1402, may establish and maintain branch or satellite offices or other facilities for the conduct of its business at any location in any county in this state.
  2. No branch of an out-of-state savings and loan association or savings bank, or savings institution, may be established through the establishment of a de novo branch, unless the laws of the home state of the out-of-state savings institution permit Tennessee savings institutions to establish and maintain branches in that state through the establishment of de novo branches under substantially the same terms and conditions as set forth in this title.
  3. For purposes of this section, “de novo branch” means a branch of a savings institution that:
    1. Is originally established by the savings institution as a branch; and
    2. Does not become a branch of the savings institution as a result of:
      1. The acquisition by the savings institution of an insured depository institution or a branch of an insured depository institution; or
      2. The conversion, merger, or consolidation of the institution or branch.

Acts 1990, ch. 624, § 1; 2001, ch. 140, § 3.

Compiler's Notes. Former part 3, §§ 45-3-30145-3-308 (Acts 1978, ch. 708, §§ 4.01-4.08; T.C.A., §§ 45-1601 — 45-1608), concerning branch offices, was repealed by Acts 1990, ch. 624, § 1.

Acts 2001, ch. 140, § 4 provided that should any provision of that act or the application thereof to any person or circumstance be held invalid for any reason by a final nonappealable order of any Tennessee or federal court of competent jurisdiction, then such court shall declare the entire act to be null and void in its entirety and shall give no further force or effect to it; provided, however, that any transaction that has been finally consummated in good faith pursuant to that act prior to a determination of invalidity, and which is not the subject of dispute or litigation, shall be unaffected by such determination.

Cross-References. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 8, 66.

Decisions Under Prior Law

1. Federally Chartered Institutions.

Federally chartered savings and loans have engaged in statewide branching in Tennessee because, under the “wild card” statute, they may do as state chartered savings banks may do. Permitting a national bank to branch statewide merely creates a level playing field for nationally chartered banks and further enhances competition in the financial industry. Volunteer State Bank v. National Bank of Commerce, 684 F. Supp. 964, 1988 U.S. Dist. LEXIS 4286 (M.D. Tenn. 1988).

45-3-302. Approval by commissioner.

  1. No branch or satellite office, or other facility at which deposits may be accepted shall be established until approved by the commissioner.
  2. In the event the application to open a branch or satellite office is disapproved and the applicants feel aggrieved, they may have a review by certiorari as provided in title 27, chapter 9.
  3. Should the commissioner fail to approve or disapprove an application to open a branch or satellite office within ninety (90) calendar days after the submission of the application, the application shall be deemed to have been approved by the commissioner.

Acts 1990, ch. 624, § 1.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-301.

45-3-303. Rules and regulations.

With respect to the matters contained in this part, the commissioner has full power and authority to promulgate rules and regulations in accordance with applicable law.

Acts 1990, ch. 624, § 1.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-301.

Part 4
General Powers and Duties

45-3-401. Required liquidity.

No association shall invest in any security, other than in liquid assets, or in any real estate or other loan at any time when its liquid assets are less than a minimum percentage of its deposit liability, which percentage shall be set by the commissioner.

Acts 1978, ch. 708, § 2.22; T.C.A., § 45-1422.

Compiler's Notes. 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. Negotiable instruments, title 47, ch. 3.

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

45-3-402. Regulation of loans and investments.

The commissioner shall, from time to time, promulgate rules and regulations in respect to all loans and investments authorized under this chapter that may be reasonably necessary to assure that the loans and investments are in keeping with sound lending practices and promote the purposes of this chapter.

Acts 1978, ch. 708, § 2.29; T.C.A., § 45-1429.

45-3-403. Right to act to avoid loss.

Nothing in this chapter or in the laws of this state shall be construed as denying to an association the right to invest its funds, operate its business, manage or deal in property, or take any other action over whatever period of time as may reasonably be necessary to avoid loss on a loan or investment theretofore made or an obligation created in good faith.

Acts 1978, ch. 708, § 2.32; T.C.A., § 45-1432.

45-3-404. Computation of net income.

Every association shall close its books on the last business day of its fiscal year, and at other times that its charter or bylaws provide, or as the commissioner requires, for the purpose of determining the gross income of the association for its fiscal year or for the period since the date of the last closing of its books, and from which shall be deducted the expenses of operating the association for that period, the balance remaining being the net income for the period.

Acts 1978, ch. 708, § 2.33; T.C.A., § 45-1433.

45-3-405. Reserves — Liquid assets.

Every association shall set up and maintain reserves for the purpose of absorbing losses and shall maintain such portion of its assets in cash and other liquid assets as required by the commissioner. If an association has obtained insurance of accounts by the federal savings and loan insurance corporation, or by any other insurer approved by the commissioner, any portion of the loss reserves of the association may be considered as constituting a portion of the insurance reserves required by the insurer and may be set up as an insurance reserve account on the books of the association.

Acts 1978, ch. 708, § 2.34; T.C.A., § 45-1434.

Compiler's Notes. 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.

45-3-406. Transfers to loss reserves.

  1. If, at the date of any closing of its books, the loss reserves of an association equal an aggregate amount of a percentage as the commissioner may prescribe, then an amount necessary to increase its loss reserves to the required amount shall be transferred from the net income of the association to its loss reserves.
  2. In the event that any credit to the loss reserves of an association is made following July 1, 1978, in excess of the minimum percentage required herein, the dollar amount of the excess may be carried over as a credit toward the minimum requirement for any subsequent accounting period.

Acts 1978, ch. 708, § 2.35; T.C.A., § 45-1435.

45-3-407. Dividends on capital stock.

In the case of a capital stock association, the balance of net income of the association, if any, after providing for all expenses of operation, allocation to loss reserves, and payment of interest, may be credited to a retained earnings or surplus account, from which the board of directors may, at its discretion, and at such times as it may determine, declare, and pay dividends in cash or additional stock to the holders of record of the stock outstanding at the date the dividends are declared.

Acts 1978, ch. 708, § 2.36; T.C.A., § 45-1436.

Part 5
Accounts

45-3-501. Deposit liability.

  1. The deposit liability of an association shall consist only of the aggregate amount of deposit accounts of its depositors, plus interest credited to the accounts, less redemption and withdrawal payments.
  2. Except as limited by the board of directors from time to time, a depositor may make additions to the depositor's deposit accounts in the amounts and at the times that the depositor may elect.
  3. Deposit accounts shall be open for cash.
  4. Interest shall be declared in accordance with this chapter.
  5. No preference between depositors shall be created with respect to the distribution of assets upon voluntary or involuntary liquidation, dissolution, or winding up of an association.

Acts 1978, ch. 708, § 2.01; T.C.A., § 45-1401.

Compiler's Notes. Former §§ 45-1401 — 45-1411 (Acts 1875, ch. 142, § 14; 1919, ch. 136, §§ 1, 2, 5-7, 10, 13; Shan., § 2139; Shan. Supp., §§ 2179a1, 2179a2, 2179a5-2179a7, 2179a10, 2179a12; Acts 1929, ch. 117, §§ 2, 4; Code 1932, §§ 3900-3902, 3905, 3906, 3908, 3913, 3916, 3918; Acts 1933, ch. 19, §§ 5, 7, 8; 1935, ch. 137, § 1; 1935, ch. 152, §§ 1, 2; 1937, ch. 77, § 1; C. Supp. 1950, §§ 3898.13-3898.22, 3898.30 (Williams, §§ 3898.5, 3898.7, 3898.8, 3900, 3902, 3905.1, 3905.2, 3906)), concerning loans and investments by building and loan associations, were repealed by Acts 1974, ch. 698, § 5 and replaced by Acts 1974, ch. 698, §§ 2, 6-16, codified in §§ 45-1401 — 45-1412, which in turn were repealed by Acts 1978, ch. 708, § 6.01 and the present material substituted therefor.

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. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 11.

45-3-502. Authorization of deposit accounts.

  1. Acceptance of Deposit Accounts.  An association may accept deposit accounts of any type and in any form not prohibited by this chapter or by other applicable law or by rules and regulations of the commissioner. An association shall not accept accounts other than deposit accounts; provided, that in the event of a conversion of a federal association to a state association, savings accounts in the federal association, existing at the time it so converts shall remain savings accounts unless and until they are exchanged for deposit accounts. Exchanges of savings accounts shall be governed by rules and regulations promulgated by the commissioner.
  2. Priority of Deposit Accounts.  In any situation in which the priority of deposit accounts is to be determined or is in controversy, deposit accounts shall be debts of the association having the same priority as the claims of general creditors of the association not having priority, other than any priority arising or resulting from consensual, or, if so determined by a court, equitable, subordination, over other general creditors of the association.

Acts 1978, ch. 708, § 2.02; T.C.A., § 45-1402.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 11.

45-3-503. Nature of deposit accounts.

  1. Ownership.  Deposit accounts may be opened by any person and held solely and absolutely in the person's own right, or jointly by, or in trust or other fiduciary capacity for, any person or persons, including, but not limited to, an adult or minor individual, male, female, single or married, partnership, association, fiduciary, corporation, political subdivision or any governmental, public or quasi-public entity specifically referred to in § 9-1-107.
  2. Transfer of Accounts.  Deposit accounts shall be represented only by the account of each depositor on the books of the association, and the accounts or any interest in the accounts shall be transferable only on the books of the association upon proper application by the transferor or transferee and upon acceptance by the association of the transferee as a depositor upon terms approved by the board of directors. The association may treat the holder of record of a deposit account as the owner of the account for all purposes without being affected by any notice to the contrary unless the association has acknowledged, in writing, notice of a pledge or other transfer of the deposit account.
  3. Deposit Account Contract.  Subject to the prior approval by the commissioner of the form of each type of deposit account contract, each depositor shall execute a deposit account contract setting forth any special terms and provisions applicable to the deposit account and the ownership of the account and the conditions upon which withdrawals may be made. The contracts shall be held by the association as part of its records pertaining to the account, and a copy of the contract shall be furnished to the depositor.
  4. Evidence of Ownership.  An association shall issue evidence of accounts that the commissioner may authorize.
  5. Inducements.  For the opening or increasing of any deposit account, no association shall, directly or indirectly, give, sell, dispose of, or otherwise advertise or permit the giving, selling, or disposition of, for any one (1) opening or increase, anything having a cost or value in excess of amounts permitted with respect to federal associations by applicable federal law and regulation, but inducement shall be allowed to the extent permitted to federal associations under the applicable federal law and regulation.

Acts 1978, ch. 708, § 2.03; T.C.A., § 45-1403.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 11.

45-3-504. Prohibited transactions.

Any other provision of the law to the contrary notwithstanding, no association shall have the authority to receive demand deposit accounts or offer checking accounts, negotiable orders of withdrawal, or share accounts until federal associations in Tennessee are authorized to do so by federal law or regulation.

Acts 1978, ch. 708, § 2.04; T.C.A., § 45-1404.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-505. Contracts for savings programs.

  1. Payroll Savings Programs.  An association may contract with any employer with respect to the solicitations, collection, and receipt of savings by payroll deduction to be credited to a designated account or accounts of the employer's employee or employees who voluntarily may participate.
  2. Other Savings Programs.  Subject to rules and regulations of the commissioner, an association may contract with any other person or persons, including, but not limited to, educational or charitable institutions, for the participation by the association in any savings plan with the person or persons.
  3. Federally Approved Savings Programs.  Any association insured by the federal savings and loan insurance corporation may contract with or enter into any savings program approved by the federal savings and loan insurance corporation.

Acts 1978, ch. 708, § 2.05; T.C.A., § 45-1405.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

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.

45-3-506. Power of attorney on accounts.

  1. Any association may continue to recognize the authority of a power of attorney authorizing in writing as attorney-in-fact to operate, in whole or in part, the account of a depositor, unless and until it receives actual notice of the revocation of authority.
  2. Actual notice of the death, adjudication of incompetency, or adjudication of bankruptcy of the depositor shall constitute actual notice of revocation of the authority of the attorney-in-fact, except where the Uniform Durable Power of Attorney Act, compiled in title 34, chapter 6, is applicable.
  3. No association shall be liable for damages, penalty, or tax by reason of any payment made pursuant to this section.

Acts 1978, ch. 708, § 2.06; T.C.A., § 45-1406; Acts 1983, ch. 299, § 10.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 11.

45-3-507. Accounts of minors.

  1. Any association may accept deposit accounts from any minor as the sole and absolute owner of the account, and receive payments on the accounts by or for the owner, and pay withdrawals, accept pledges to the association, and act in any other manner with respect to the accounts on the order of the minor.
  2. Any payment or delivery of rights to any minor, or a receipt of acquittance signed by a minor who holds an account, shall be a valid and sufficient release and discharge of the association for any payment so made or delivery of rights to the minor. The receipt of acquittance signed by a minor who holds an account shall be a valid and sufficient release and discharge of the association for any payment so made or delivery of rights to the minor. The receipt, acquittance, pledge, or other action required by the association to be taken by a minor shall be binding upon the minor with like effect as if the minor were of full age and legal capacity.
  3. The parent or guardian of the minor shall not, in the person's capacity as parent or guardian, have the power to attach or in any manner to transfer any account issued to or in the name of the minor; provided, that in the event of the death of the minor, the receipt or acquittance of either parent or guardian of the minor shall be a valid and sufficient discharge of the association for any sum or sums not exceeding in the aggregate one thousand dollars ($1,000), unless the minor has given written notice not to accept the signature of the parent or guardian.

Acts 1978, ch. 708, § 2.07; T.C.A, § 45-1407.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-508. Accounts in two or more names.

Deposit accounts and certificates of deposit maintained in any association in the names of two (2) or more persons shall be governed by § 45-2-703.

Acts 1978, ch. 708, § 2.08; T.C.A., § 45-1408; Acts 1988, ch. 926, § 7.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

Textbooks. Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), § 440.

Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 11.

NOTES TO DECISIONS

1. Beneficial Interests.

Although legal title passed to the survivor, the court could impose a resulting trust in favor of a third person; equity infers or assumes that the beneficial interest did not go with the legal title. Wardell v. Dailey, 674 S.W.2d 293, 1983 Tenn. App. LEXIS 662 (Tenn. Ct. App. 1983).

2. Joint Account with Right of Survivorship.

Absent clear and convincing evidence of contrary intent expressed at the time of its execution, a bank signature card containing an agreement in clear and unambiguous language that a joint account with rights of survivorship is intended, creates a joint tenancy enforceable according to its terms; and upon the death of one of the joint tenants, the proceeds pass to the survivor. In re Estate of Roark, 829 S.W.2d 688, 1991 Tenn. App. LEXIS 867 (Tenn. Ct. App. 1991), appeal denied, — S.W.2d —, 1992 Tenn. LEXIS 228 (Tenn. Mar. 9, 1992).

45-3-509. Pledge to association of an account in joint tenancy.

The pledge or hypothecation to any association of all or part of an account in joint tenancy signed by any tenant or tenants whether minor or adult, upon whose signature or signatures withdrawals may be made from the account, shall, unless the terms of the account provide specifically to the contrary, be a valid pledge and transfer to the association of that part of the account pledged or hypothecated, and shall not operate to sever or terminate the joint and survivorship ownership of all or any part of the account.

Acts 1978, ch. 708, § 2.09; T.C.A., § 45-1409.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-510. Incompetency of a joint tenant.

  1. The adjudication of incompetency of any one (1) or more of the joint tenants shall not operate to sever or terminate the joint tenancy ownership of all or any part of the account, and the account may be withdrawn or pledged by any one (1) or more of the joint owners in the same manner as though the adjudication of incompetency had not been made, except that any withdrawal or pledge on behalf of the incompetent joint owner shall be by guardian or conservator.
  2. Payment of any or all of the moneys in the account shall discharge the association from liability with respect to the moneys so paid.

Acts 1978, ch. 708, § 2.10; T.C.A., § 45-1410.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-511. Accounts of administrators, executors, guardians, custodians, trustees, and other fiduciaries.

  1. Any association may accept accounts in the name of any administrator, executor, custodian, conservator, guardian, trustee, or other fiduciary for a named beneficiary or beneficiaries.
    1. A fiduciary shall have power to vote as a member in a mutual association as if the membership were held absolutely, and shall have power to open and to make additions to, and to withdraw the account in whole or in part from, any association governed by this chapter.
    2. The withdrawal value of the account, and interest on the account, or other rights relating to the account may be paid or delivered, in whole or in part, to the fiduciary without regard to any notice to the contrary as long the fiduciary is living.
    3. The payment or delivery to the fiduciary to whom the payment or the delivery of right is made shall be a valid and sufficient release and discharge of an association for the payment or delivery so made.
  2. Whenever a person holding an account in a fiduciary capacity dies and no written or actual notice of the revocation or termination of the fiduciary relationship has been given to an association, and the association has no written or actual notice of any other disposition of the beneficial estate, either to a successor fiduciary or otherwise, the withdrawal value of the account, and interest on the account, or other rights relating to the account may, at the option of an association, be paid or delivered, in whole or in part, to the beneficiary or beneficiaries.
  3. Whenever an account is opened by any person, describing the person in opening the account as trustee for another and no other or further notice of the existence and terms of a legal and valid trust than the description has been given in writing and to the association, in the event of the death of the person so described as trustee, the withdrawal value of the account or any part of the account, together with the interest on the account, may be paid to the person for whom the account was thus described to have been opened.
  4. The payment or delivery to the beneficiary, beneficiaries, or designated person, or a receipt or acquittance signed by the beneficiary, beneficiaries, or designated person for payment or delivery shall be a valid and sufficient release and discharge of an association for the payment or delivery so made.
  5. No association paying the fiduciary, beneficiary, or designated person in accordance with this section shall be liable for any estate, inheritance, or succession taxes that may be due this state.

Acts 1978, ch. 708, § 2.11; T.C.A., § 45-1411.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-512. Accounts of incompetents.

When an account is held in any association by a person who becomes incompetent and an adjudication of incompetency has been made by a court of competent jurisdiction, the association may pay or deliver the withdrawal value of the account and any interest that may have accrued on the account to the guardian or conservator for the person upon proof of the appointment and qualification of the guardian or conservator; provided, that if the association has received no written notice and is not on actual notice that the depositor has been adjudicated incompetent, it may pay or deliver the funds to the depositor in accordance with the account contract, and the receipt or acquittance of the depositor shall be a valid and sufficient release and discharge of the association for the payment or delivery so made.

Acts 1978, ch. 708, § 2.12; T.C.A., § 45-1412.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-501.

45-3-513. Accounts of deceased nonresidents.

  1. When an account is held in any association by a person residing in another state or country, in the event of the death of the depositor, the account, together with additions to the account, or any part of the account, shall be exempt from any taxation otherwise imposed by this state and may be paid to the administrator or executor appointed in the state or country where the holder resided at the time of death; provided, that the administrator or executor has furnished the association with:
    1. Authenticated copies of the letters of the administrator or executor and of the order of the court that issued the letters to the person authorizing the person to collect, receive, and remove the personal estate; and
    2. An affidavit by the administrator or executor that, to the administrator's or executor's knowledge, no letters then are outstanding in this state and no petition for letters by an heir, legatee, devisee, or creditor of the decedent is pending on the estate in this state, and that there are no creditors of the estate in this state.
  2. Upon payment or delivery to the representative after receipt of the affidavit and authenticated copies, the association is released and discharged to the same extent as if the payment or delivery had been made to a legally qualified resident executor or administrator and is not required to see to the application or disposition of the property.
  3. No action at law or in equity shall be maintained against the association for payment made in accordance with this section.

Acts 1978, ch. 708, § 2.13; T.C.A., § 45-1413.

Compiler's Notes. Former § 45-1413 now appears in § 45-3-705.

45-3-514. Payment when no executor or administrator qualifies.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a deceased depositor has qualified and given notice of the person's qualification to the association, it may in its discretion and at any time after thirty (30) days from the death of the depositor pay out of all accounts or contents of safe deposit boxes maintained with it by the depositor in an individual capacity all sums that do not exceed fifteen thousand dollars ($15,000)  in the aggregate:
      1. To the executor named in any will known to the association; or
      2. In the absence of knowledge of any purported will naming a surviving executor to:
        1. A creditor for expenses of the funeral;
        2. A creditor for the expenses of the last illness;
        3. The surviving spouse; and
        4. To the next of kin.(2)  In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1)(B).
  1. The receipt of any guardian, administrator or executor, duly appointed and qualified by the courts of this state or any other state, acknowledging the payment or transfer of funds, standing in the name of the person whose estate the fiduciary represents, in the form of deposits in associations shall be good and sufficient acquittance for the payment or transfer and shall constitute a valid defense in favor of the associations against the demands or claims of all parties.
  2. No association shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 1978, ch. 708, § 2.14; T.C.A., § 45-1414; Acts 1983, ch. 191, § 3; 1988, ch. 926, § 8; 1995, ch. 177, § 13; 1997, ch. 426, § 22; 2016, ch. 804, § 6.

Compiler's Notes. Former § 45-1414 now appears in § 45-3-706.

Acts 1997, ch. 426, § 26 provided that the amendments to this section by that act shall apply to all estates of decedents dying on or after January 1, 1998 and to all wills, other documents and proceedings related thereto.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 11, 12.

45-3-515. Account payable on death.

An association may accept deposits made by any person in trust for another or may contract for deposits that may be made payable on the death of the last surviving owner under the same terms and conditions provided by § 45-2-704.

Acts 1978, ch. 708, § 2.15; T.C.A., § 45-1415; Acts 1993, ch. 39, § 10.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 12.

45-3-516. Accounts as legal investments and as security.

  1. Legal Investments.
    1. In addition to investments in savings and loan associations as authorized by other law, administrators, executors, custodians, conservators, guardians, trustees, and other fiduciaries of every kind and nature, insurance companies, business and manufacturing companies, banks, trust companies, savings and loan associations, credit unions, and other types of similar financial institutions, charitable, educational, eleemosynary corporations, funds and organizations, cemeteries, perpetual care funds, state and local governmental agencies and municipal and other public corporations and bodies, and public officials, including, but not limited to, all officials, boards, agencies, and entities described in §§ 9-1-107 and 35-3-117, and all other legal entities are specifically authorized and empowered to invest or deposit funds held by them, without any order of any court, in accounts of associations covered by this chapter and in accounts of federal associations organized under the laws of the United States and under federal supervision, and the investments shall be deemed and held to be legal investments for the funds.
    2. With respect to investments by custodians, associations are deemed to be “banks” within the meaning of that term as used in [former] § 35-7-102.
    3. The commissioner may by regulation provide that accounts in associations shall be legal investments for any persons, firms, corporations, or entities not herein specifically referred to.
  2. Security.  Whenever, under the laws of this state or otherwise, a deposit of securities is required for any purpose, the accounts made legal investments by this section shall be acceptable for deposits, and whenever under the laws of this state or otherwise, a bond is required with security, the bond may be furnished, and the accounts made legal investments by this section in the amount of the bond, when deposited therewith, shall be acceptable as security for the bond without other security.
  3. Provisions Supplemental.  This section is supplemental to any and all other laws relating to and declaring what shall be legal investments for the persons, fiduciaries, corporations, organizations and officials referred to in this section, and the laws relating to the deposit of securities and the making and filing of bonds for any purpose.

Acts 1978, ch. 708, § 2.16; T.C.A., § 45-1416.

Compiler's Notes. Former § 35-7-102, referred to in this section, was repealed by Acts 1992, ch. 664, § 2.

45-3-517. Lien on accounts.

  1. Any association shall have a lien, without further agreement or pledge, upon all accounts owned by any depositor to whom or on whose behalf the association has made an advance of money by loan or otherwise.
    1. Upon the default in the repayment or satisfaction thereof, the association may, after giving ten (10) days' written notice to the depositor, cancel on its books all or any part of the accounts owned by the depositor and apply the value of the accounts in payment on account of the obligation. After the ten-day notice is given, the depositor may withdraw only the funds that are in excess of the amount of the lien.
    2. The depositor shall have thirty (30) days after receipt of the notice within which to object in writing to the validity of the lien. If the depositor objects within that period, the association must, within sixty (60) days after the date of receipt by the association of the objection, file a legal action to enforce the lien and shall be entitled to collect the reasonable expense of the action, including attorney fees.
  2. An association may by written instrument waive its lien in whole or in part on any account.
  3. Any association may accept a pledge of an account or accounts of the association owned by a depositor other than the borrower as additional security for any loan secured by an account or by real estate, or by both.

Acts 1978, ch. 708, § 2.17; T.C.A., § 45-1417; Acts 1988, ch. 581, § 1.

45-3-518. Interest on accounts.

  1. An association may pay interest on its deposit accounts from sources available for payment of interest at the rate or rates and at the times and for the time that is determined by resolution of its board of directors. Interest shall be declared on the withdrawal value of each account at the beginning of the accounting period, plus additions to the account made during the period, less amounts previously withdrawn and noticed for withdrawal, which for interest purposes shall be deducted from the latest previous additions to the account, computed at the declared rate for the time the funds have been invested, determined as next provided. The date of investment shall be the date of actual receipt by the association of an account or an addition to an account, except that if the board of directors shall so determine, accounts in one (1) or more classifications or additions thereto received by the association on or before a date not later than the fifteenth day of the month, unless the day determined is not a business day, shall receive interest as if invested on the first day of the month in which the payments were received, and the board also may determine that payments received subsequent to the determination date shall either:
    1. Receive interest as if invested on the first day of the next succeeding month; or
    2. Receive interest from the date of actual receipt by the association.
  2. Notwithstanding this section, the board of directors, by resolution, may determine that interest shall not be paid on any account that has a withdrawal value of a specified amount less than ten dollars ($10.00).
  3. The directors shall determine by resolution the method of calculating the amount of any interest on accounts as herein provided, and the time or times when interest is to be declared, paid or credited.
  4. Notwithstanding any of the foregoing provisions of this section, the commissioner is empowered to promulgate rules and regulations with respect to the payment of interest on deposit accounts, including, but not limited to, rules and regulations concerning the types of deposit accounts that may be offered by associations to depositors and the maximum rates of interest that shall be paid to depositors on each type of deposit account.

Acts 1978, ch. 708, § 2.18; T.C.A., § 45-1418.

45-3-519. Withdrawal.

  1. Except for accounts that provide for a specified contractual time or notice before withdrawal or are subject to a pledge, a depositor may at any time present a written order for withdrawal of all or any part of the depositor's account.
  2. Every association shall either pay, or shall number, date, and file in the order of actual receipt every withdrawal order.
  3. Withdrawals shall be made in the order of actual receipt of orders except as otherwise provided by this chapter or by regulation of the commissioner.
  4. Upon order, an association shall pay the amount of the withdrawal order or the withdrawal value of the account; provided, that the association shall not be required to honor any withdrawal order that exceeds the withdrawal value of the account.
  5. The commissioner shall by regulation establish the rules and procedures to apply in the event the association is unable to pay immediately all orders for withdrawal as made, including a rotation plan or any other plan for equitable payment of withdrawals, the payment in full of accounts of less than a specified amount and the application of receipts to withdrawals.
  6. The commissioner may prescribe the circumstances and conditions under which the failure of the association to pay withdrawals as applied for shall be deemed the conduct of its business in an unsound or imprudent manner so as to empower the commissioner to take possession of an association or to take other remedial action as provided by this chapter.

Acts 1978, ch. 708, § 2.19; T.C.A., § 45-1419.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 12.

45-3-520. Redemption of accounts.

  1. At any time funds are on hand for the purpose, the association shall have the right to redeem by lot or otherwise, as the board of directors may determine, all or any part of any of its deposit accounts on an interest date by giving thirty (30) days' notice by registered mail addressed to each affected depositor at the depositor's last address as recorded on the books of the association.
    1. No association shall redeem any of its accounts when the association is in an impaired condition or when it has any delinquent applications for withdrawal on file that have not been paid in full.
    2. The redemption price of an account shall be the withdrawal value of the account redeemed, or such greater price as determined by the board of directors.
    3. If the  notice of redemption has been duly given, and if on or before the redemption date the funds necessary for the redemption has been set aside so as to be and continue to be available therefor, interest upon the accounts called for redemption shall cease to accrue from and after the interest date specified as the redemption date, and all rights with respect to the accounts shall immediately, after the redemption date, terminate, except only any right of depositors of record to receive the redemption price without additional accrual of interest after the redemption date.
  2. All account books or other evidence of deposit accounts that have been validly called for redemption must be tendered for payment within seven (7) years from the date of redemption designated in the redemption notice; otherwise, they shall be cancelled, the funds set aside for the accounts shall become the property of the association, and all claims of the former depositors against the association shall be barred forever.

Acts 1978, ch. 708, § 2.20; T.C.A., § 45-1420.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-521. Statute of limitations on accounts.

  1. All claims shall be barred in this state on any inactive account; provided, that at least sixty (60) days before the claim becomes barred, the association shall mail by registered or certified mail a notice of the imminent barring of all claims to the depositor at the depositor's last known address.
    1. For the purposes of this section, “inactive account” means an account with respect to which there has been an absence for at least seven (7) years of:
      1. Additions to the account other than creditings of interest;
      2. Withdrawals from the account; and
      3. Written communication from the depositor.
    2. In the case of an account that provides for a specified contractual time, the seven (7) years shall commence on the maturity date of the account.

Acts 1978, ch. 708, § 2.21; T.C.A., § 45-1421.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

Uniform Unclaimed Property Act, property held by banking or financial organizations, § 66-29-104.

45-3-522. Final adjustment of statements of account.

    1. When a statement of account has been rendered by an association to a depositor or has been mailed to the depositor's last known address, showing the condition of the depositor's account, the account shall, after the period of six (6) years from the date of the rendition of the statement, in the event no objection to the statement in writing has been theretofore made by the depositor or suit brought to correct same, be deemed finally adjusted and settled and its correctness conclusively presumed, and the depositor shall thereafter be barred from questioning the account for any cause.
    2. Associations shall accordingly not be required to preserve or keep their records or files relating thereto for a longer period than six (6) years.
  1. Nothing in this section shall be construed to relieve the depositor from the duty imposed by law of exercising due diligence in the examination of the account and vouchers, if any, accompanying the statement, when rendered by the association and of immediate notification to the association upon discovery of any error in the statement, nor from the legal consequences of neglect of that duty.
  2. Nothing herein shall be construed as exempting associations from compliance with title 66, chapter 29 to the extent applicable.

Acts 1983, ch. 191, § 1.

Law Reviews.

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

45-3-523. Association deposits and collections.

To the extent that an association accepts demand deposit accounts, or offers checking accounts or negotiable orders of withdrawal, the Uniform Commercial Code setting out the relationship between a payor bank and its customers, compiled in title 47, chapter 4, part 4, shall apply to the association, and all references to “banks” are deemed references to “associations.”

Acts 1983, ch. 191, § 2.

Law Reviews.

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

45-3-524. Payment and negotiation of check when no estate has been opened or the estate has been closed.

    1. Notwithstanding § 30-2-317, where no executor or administrator of a decedent has qualified and given notice of the person's qualifications to the savings institution, or where the qualified executor or administrator of a decedent has been discharged and a check or checks made payable to the decedent or the decedent's estate is presented to the savings institution for payment or collection, the savings institution may, in its discretion, and at any time after ninety (90) days from the death of the deceased, negotiate or send for collection and pay out the proceeds of one or more checks made payable to the decedent or the decedent's estate, whether written or electronic, all sums that do not exceed ten thousand dollars ($10,000) in the aggregate:
      1. To the executor named in any will known to the savings institution whether probated or not;
      2. To any personal representative appointed by a court whether active or discharged; or
      3. In the absence of knowledge of a purported will naming a surviving executor or an administrator to the:
        1. Surviving spouse; or
        2. Next of kin.
    2. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(1).
  1. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state, or any other state, or of any spouse or next of kin acknowledging the negotiation, payment or transfer of funds of a check, standing in the name of the person whose estate the fiduciary represents, shall be a good and sufficient acquittance for payment or transfer and shall constitute a valid defense in favor of the savings institution against the demands or claims of all parties.
  2. The negotiation or payment of a check under this section without an endorsement of the payee or with the endorsement of a person authorized by this section to negotiate the check shall not be a violation of or give rise to any claim under title 47, chapter 3 or 4.
  3. No savings institution shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 2014, ch. 597, § 3; 2016, ch. 804, §§ 7-9.

45-3-525. Acknowledgement or affidavit — Guaranty.

  1. A savings institution shall require any persons seeking to cash checks payable to a decedent as provided in § 45-2-711 to deliver to the savings institution an affidavit, given under the penalty of perjury, in a form acceptable to the savings institution or in a form that, at the minimum, contains the following:
    1. The name of the decedent;
    2. The decedent's date of death;
    3. The amount and payor of any checks, if the funds are from checks or electronic payments;
    4. The identity of the creditor or creditors to whom the funds are to be paid, if the funds are to be paid directly to a creditor of the decedent or the decedent's estate; and
    5. If the funds are to be paid other than to a creditor of the decedent or the decedent's estate, the affiant shall:
      1. Identify the decedent's surviving spouse and heirs at law, and provide their residence addresses; and
      2. Affirmatively state that:
        1. There are no unpaid creditors of the decedent;
        2. There are no unpaid income, gift, estate, inheritance or other transfer taxes owed by the decedent or the estate of the decedent; and
        3. The funds distributed to the affiant will be distributed by the affiant as provided in any will or testamentary document or in appropriate shares to the decedent's heirs at law.
  2. A savings institution may, in its discretion, require any persons seeking to collect monies from a deceased depositor's account or accounts, as provided in § 45-2-708, to deliver to the savings institution an affidavit, given under penalty of perjury in a form acceptable to the savings institution as provided in subsection (a).
  3. A savings institution may require any person who obtains funds from a deposit account pursuant to § 45-2-708 or to negotiate checks pursuant to § 45-2-711 to provide an indemnity and guarantee to the savings institution in the amount of the funds obtained.

Acts 2014, ch. 597, § 3.

Part 6
Investments

45-3-601. Investment in securities.

  1. Every association has the power to invest in securities as set forth in this section.
    1. No Percent-of-Asset Limitation.  The following investments shall not be subject to a percent-of-assets limitation:
      1. Obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or any state;
      2. Stock or obligations of any federal home loan bank;
      3. Stock or obligations of the federal savings and loan insurance corporation;
      4. Obligations of the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or any successor or successors thereto;
      5. Obligations of any agencies or instrumentalities created pursuant to the Tennessee Valley Authority Act of 1933, as may be amended from time to time;
      6. Obligations of, or guaranteed as to principal and interest by, the Dominion of Canada or any province of the Dominion of Canada; provided, that the principal of and interest on the obligations are payable in United States currency or funds;
      7. Obligations of, or guaranteed as to principal and interest by, the International Bank of Reconstruction and Development, the Inter-American Development Bank or the African Development Bank;
      8. Demand, time, or savings deposits, shares or accounts, or other obligations of any financial institution, the accounts of which are insured by a federal agency;
      9. Bankers' acceptances that are eligible for purchase by federal reserve banks; and
      10. Other investments approved in writing by the commissioner, subject to the conditions that the commissioner may impose.(2)  Twenty-Five Percent-of-Asset Limitation.  The following investments, either separately or in the aggregate, shall be subject to a limitation of twenty-five percent (25%) of an association's total assets:
      11. Bonds, notes, or other evidence of indebtedness that are general obligations of, or guaranteed as to principal and interest by, any agency or instrumentality of the United States not specified in subdivision (1);
      12. General obligations, not specified in subdivision (1), of any state or of any city, county, school district, or other municipal corporation or political subdivision of any state;
      13. Corporate obligations, exclusive of common stock, of any corporation that does not own or control, directly or indirectly, more than ten percent (10%) of the capital stock of any kind or class of the investing association, or of any corporation, no more than ten percent (10%) of whose capital stock of any kind or class, is owned or controlled, directly or indirectly by the investing association; provided, that the corporation is listed on an exchange registered under the Securities Exchange Act of 1934;
      14. Adjustable rate preferred stock of any publicly held corporation created or existing under the laws of the United States or any state, district, or territory of the United States that is rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved by the commissioner for rating the investments;
      15. Shares or certificates in any open-end management investment company that is registered with the securities and exchange commission under the Investment Company Act of 1940, and the portfolio of which is restricted by the management company's investment policy, changeable only if authorized by shareholder vote, solely to any investments in which an association by law or regulation may invest; and
      16. Other securities and obligations that the commissioner approves and places on a list to be published and distributed to every association at least once each year, and the commissioner is directed to publish and make distribution of the list. An association holding investments that are listed by the commissioner shall not be required to dispose of the investments if, at a later time, the commissioner removes any investments from the list.(3)  Investment Rating.  Notwithstanding any of the above provisions of this section, none of the securities or obligations described hereinabove, except for investments set forth in subdivision (b)(1)(J), shall be eligible for investment in any amount, unless rated in one (1) of the four (4) highest investment grades by one (1) or more recognized investment rating services approved in writing by the commissioner, or unless otherwise approved for investment in writing by the commissioner as constituting a safe and prudent investment.(4)  Percent-of-Asset Limitation Set by Commissioner.  The following investments, either separately or in the aggregate, shall be subject to a limitation of one percent (1%) of an association's total assets or of a greater percent that may be set by the commissioner:
      17. Capital stock, obligations, or other securities of service organizations that assist in furthering or facilitating the association's purposes, powers, or community responsibilities; and
      18. Other investments that may be approved in writing by the commissioner.(5)  Valuation.  No security owned by an association shall be carried on its books at more than the actual cost thereof unless a different treatment is approved by the commissioner in writing.

Acts 1978, ch. 708, § 2.23; T.C.A., § 45-1423; Acts 1981, ch. 520, §§ 1, 2; 1986, ch. 602, § 2; 1988, ch. 819, § 2.

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

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 Investment Company Act of 1940, referred to in this section, is compiled in 15 U.S.C. § 80a-1 et seq.

The Securities Exchange Act of 1934, referred to in this section, is compiled in 15 U.S.C. § 78.

The Tennessee Valley Authority Act of 1933, referred to in this section, is compiled in 16 U.S.C. § 831.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-3-602. Investments in real estate.

  1. Business Property.  Every association has the power to invest in real property or interests in real property that the board of directors may deem necessary for the conduct of the business of the association, which, for the purposes of this chapter, shall be deemed to include the ownership of stock of a wholly owned subsidiary corporation having as its exclusive activity the ownership and management of the property or interests, but the amount so invested shall not exceed the net worth of the association; provided, that the commissioner may authorize a greater amount to be so invested.
  2. Purchase of Real Estate.  Every association has the power to invest an amount not exceeding the lesser of its net worth or five percent (5%) of its assets in the purchase of real estate in its primary lending area for the purpose of producing income or for inventory and sale or for improvement, including the erection of buildings on the real estate, for sale or rental purposes, and the association may hold, sell, lease, operate, or otherwise exercise the rights of an owner as to the property. Marketable title to all real estate acquired under this subsection (b) shall be taken and held in the name of the association, and the title shall immediately be recorded in accordance with the laws of this state.

Acts 1978, ch. 708, § 2.28; T.C.A., § 45-1428.

45-3-603. Dealing with successors in interest.

In the case of any investment made by an association in a real estate or other loan, in the event the ownership of the real estate or other collateral security, or any part of the real estate or other collateral security, becomes vested in a person other than the party or parties originally executing the security instrument, and if there is not an agreement in writing to the contrary, an association may, without notice to the party or parties, deal with the successor or successors in interest with reference to the mortgage and the debt thereby secured  in the same manner as with the party or parties, and may forebear to sue or may extend time for payment of or otherwise modify the terms of the debt secured thereunder, without discharging or in any way affecting the original liability of the party or parties thereunder or upon the debt thereby secured.

Acts 1978, ch. 708, § 2.31; T.C.A., § 45-1431.

Part 7
Loans

45-3-701. Real estate loans.

  1. Original Real Estate Loans.  Subject to this chapter and to rules and regulations promulgated by the commissioner, every association has the power to originate real estate loans of the following types:
    1. Real estate loans on real estate that constitutes home property or primarily residential property and upon which has been constructed an existing and completed home or homes or other structure or structures designed or used primarily for residential purposes; provided, that the amount of the loans shall not exceed one hundred percent (100%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe;
    2. Real estate loans to finance the acquisition and development of real estate as home property or primarily residential property; provided, that the amount of the loan shall not exceed seventy-five percent (75%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe, as of the completion of the development of the real estate into building lots or sites ready for construction;
    3. Real estate loans to finance the construction of a home or homes or other structure or structures designed or used primarily for residential purposes on real estate that constitutes home property or primarily residential property, which loans may be inclusive or exclusive of loans to finance the acquisition and development of the real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans as of the completion of the construction of the homes or other structures, or other percentage that the commissioner may prescribe; and
    4. Real estate loans on other improved real estate; provided, that the amount of the loan shall not exceed eighty percent (80%) of the value of the real estate security for the loans, or another percentage that the commissioner may prescribe.
  2. Restrictions on Real Estate Loans.  No association shall make a real estate loan to one (1) borrower if the sum of the amount of the loan and the total balance of all outstanding real estate loans owed to the association by the borrower exceeds an amount equal to ten percent (10%) of the association’s deposit liability, or an amount equal to the sum of the association’s net worth, whichever amount is less.
  3. Methods or Plans of Repayment and Variations in Interest.
    1. An association shall agree in writing with its borrowers as to the method or plan by which indebtedness shall be repaid. Repayments may be, but are not required to be, in level periodic installments. The agreements may provide for variations in the interest rates payable in connection with the indebtedness; provided, that the variations are in proportion to variations in the weighted average cost of savings, borrowings, and Federal Home Loan Bank advances as to Tennessee members of the Federal Home Loan Bank of Cincinnati as computed from statistics tabulated by the Federal Home Loan Bank of Cincinnati, or in proportion to another standard that the commissioner may approve. Where the term of a loan is for no more than three (3) years, and the loan is not set up with a monthly amortization, then the association and its borrower may agree in writing to utilize any other index for the variations.
      1. An association, in exercising its rights pursuant to a variable interest rate clause, may:
        1. Change the amount of the periodic installment payments of an amortized loan;
        2. Reduce or extend the maturity date; or
        3. A combination of both subdivisions (c)(2)(A)(i) and (ii).
      2. An association, at least thirty (30) days prior to the effective date of any change pursuant to subdivision (c)(2)(A), shall notify the borrower in writing of the change and its effects on the amount of periodic installment payments and/or on the maturity date of the installments. Notice shall be deemed given when it is deposited in the United States mail, postage prepaid, addressed to the persons personally liable to pay the indebtedness, as those persons' names and addresses appear on the association's records at the time of the giving of notice.
  4. Power to Deal in Real Estate Loans.  Every association may purchase real estate loans upon security of the same character and amount against which an association may make an original loan.
  5. Participation in Real Estate Loans.  Every association may participate with other lenders in real estate loans, whether by purchase, sale or joint origination, of any type that the association could originate.

Acts 1978, ch. 708, § 2.24; T.C.A., § 45-1424; Acts 1981, ch. 115, § 1.

Compiler's Notes. 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. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, § 66; 22 Tenn. Juris., Savings and Loan Associations, § 13.

45-3-702. Insured or guaranteed loans.

Every association may make, without regard to any loan limitations or restrictions otherwise imposed by this chapter, but nevertheless subject to any rules or regulations of the commissioner, any loan, secured or unsecured, that is insured or guaranteed in any manner and in any amount by the United States or any instrumentality thereof.

Acts 1978, ch. 708, § 2.25; T.C.A., § 45-1425.

45-3-703. Other loans.

  1. Loans Secured by Deposit Accounts or Capital Stock.  Every association has the power to make loans secured by deposit accounts with the association to the extent of the withdrawal value thereof. Unless approved in writing by the commissioner, no association shall make a loan to any person if the loan is secured in whole or in part by issued and outstanding shares of capital stock of any kind or class of the association.
  2. Improvement Loans.  Every association has the power to make property improvement loans made pursuant to any title of the National Housing Act, as the act may be amended from time to time, and to make other loans, secured or unsecured, to homeowners and other property owners for the maintenance, repair, alteration, modernization, landscaping, improvement, including new construction, furnishing or equipping of their properties, subject to limitations, terms, and conditions that may be established by rules and regulations of the commissioner.
  3. Mobile Home Loans.  Every association has the power to make loans made for the purpose of mobile home financing, subject to limitations and conditions prescribed by the commissioner, including, but not limited to, any limitations as to the maximum amount of all the loans by each association.
  4. Loans Secured by Loans.  Every association has the power to make loans secured by the pledge of loans or investments of a type in which the association is authorized to invest; provided, that the loans or investments so pledged shall be subject to all requirements that would be applicable were the association to originate the loans or investments.
  5. Other Loans.  Every association has the power to invest in other loans not specifically referred to in this section if the powers are granted to federal associations in Tennessee, in the manner that the commissioner may by rule permit.
  6. Participation — Power to Hold and Sell Loans.  The power granted to every association to make loans pursuant to this chapter also includes the power to participate with other lenders in the making of the loans, and includes the power to hold and sell the loans at the times and upon the terms and conditions that the board of directors of each association determines.

Acts 1978, ch. 708, § 2.26; T.C.A., § 45-1426.

45-3-704. Construction lenders liability.

An association that makes a loan, the proceeds of which are used or may be used by the borrower to finance the design, manufacture, construction, repair, modification, or improvement of real property for sale or lease to others, shall not be held liable to third persons for any loss or damage occasioned by any defect in the real property so designed, manufactured, constructed, repaired, modified, or improved, or for any loss or damage resulting from the failure of the borrower to use due care in the design, manufacture, construction, repair, modification, or improvement of the real property, unless the loss or damage is a result of an act of the association outside the scope of the activities of a lender of money that is tantamount to assuming direct and active responsibility for, or assuring the structural integrity of, the design, manufacture, construction, repair, modification, or improvement of the property or unless the association has been a party to misrepresentation with respect to the real property.

Acts 1978, ch. 708, § 2.27; T.C.A., § 45-1427.

45-3-705. Installment loans and loans for purchase of mobile homes — Interest and charges — Statement of transaction.

As to home improvement installment loans or loans for the purchase of mobile homes or other installment loans that associations now or hereafter have the power to make, with repayment in equal, or substantially equal, monthly or other periodic installments over the term of the loan subdivisions (1)-(3) shall apply:

  1. Interest computed on the principal amount of the loan for the entire term of the loan at a rate not to exceed six percent (6%) per annum may be either deducted in advance or added to the principal; or in the alternative, interest may be determined and charged in accordance with the actuarial method; provided, that in any event, that the maximum effective rate of interest on the loan shall not exceed eighteen percent (18%) per annum; and provided further, that if the unpaid balance of the loan is either paid or renewed prior to its maturity date, the borrower or other person paying or renewing the loan shall be refunded or credited with unearned interest in an amount that represents at least as great a proportion of the original charge as the sum of the periodical time balances after the date of prepayment bears to the sum of all the periodical time balances under the schedule of payments in the original installment loan; provided, that associations shall not be required to refund or credit any unearned interest where it would result in less than the minimum charge provided in subdivision (2)(E) nor to make a refund or credit where the amount thereof would be less than one dollar ($1.00) for each loan;
  2. When interest is charged as provided in subdivision (1), associations shall not make additional charges, either directly or indirectly, except for the following, which charges when so made and collected shall not be deemed interest for any purpose of law:
    1. Delinquency charges not to exceed five percent (5%) of any one (1) installment more than fifteen (15) days in arrears;
    2. Premiums for insurance required or obtained as security for or by reason of the installment loan;
    3. Fees and taxes paid to public officials for filing, recording or releasing any instrument or lien;
    4. Reasonable expenses of investigating title or titles to real property securing the loans, if any, including the cost of title insurance and costs of closing the loan;
    5. Reimbursement of necessary expenses incurred in securing and collecting the loan, not to exceed four percent (4%) of the gross amount of the loan. The cost of legal process or proceedings and reasonable attorneys' fees may be charges in addition to the above; provided, that any association may make a minimum charge on each loan for interest and charges made pursuant to this subdivision (2)(E) of ten dollars ($10.00) per loan or one dollar ($1.00) per monthly installment, whichever is greater;
  3. When an installment loan is made and interest is charged as provided in subdivision (1), any association shall, at the time of closing the loan, provide the borrower with a written statement of the transaction or a copy of the note containing the following information:
    1. The original principal amount of the loan;
    2. The insurance premium for each type of coverage provided;
    3. The amount of fees and taxes paid or to be paid public officials, if any;
    4. The total amount of interest and all charges made at or prior to closing pursuant to subdivision (2)(E) and the approximate rate expressed in dollars per one hundred dollars ($100) per year;
    5. Other charges, if any;
    6. The amount of unpaid balance; and
    7. The number, amount and due dates of installment payments scheduled to repay the indebtedness.

Acts 1968, ch. 590, §§ 1, 2; 1969, ch. 227, § 1; 1974, ch. 698, § 5; T.C.A., § 45-1413; Acts 1978, ch. 708, § 6.01; 1979, ch. 206, § 1; T.C.A., §§ 45-1437, 45-3-513; Acts 1981, ch. 210, §§ 1-3.

Cross-References. Manufactured homes and recreational vehicles, title 68, ch. 126.

45-3-706. Insurance protection for home improvement installment loans.

  1. An association in making an installment loan in excess of three hundred dollars ($300) may require a borrower to insure tangible personal property offered as security for the loan against any substantial risk of loss, damage or destruction for any amount not to exceed the actual value of the property or the approximate amount of the loan, whichever is lesser, and for a term and upon conditions that are reasonable and appropriate considering the nature of the property and maturity and other circumstances of the loan; provided, that the insurance is sold by a licensed agent, broker or solicitor, and the borrower may furnish the borrower's own insurance policy.
  2. The association may also request as security for any loan obligation in excess of three hundred dollars ($300) insurance on the life of the borrower or one (1) of them, if there are two (2) or more. The initial amount of credit life insurance shall not exceed the total amount repayable under the total amount of the indebtedness. Not more than one (1) policy of life insurance may be written in connection with any installment loan transaction unless requested by the borrower, comaker or endorser.
  3. In accepting any insurance provided for in this section as security for a loan, the association may deduct the premiums for the insurance from the proceeds of the loan, and remit the premiums to the insurance company writing the insurance and any gain or advantage to the association or any employee, officer, director, agent, affiliate, or associate from the insurance or its sale shall not be considered an additional or further charge or interest in connection with any loan made hereunder.
  4. Every insurance policy or certificate written in connection with a loan transaction pursuant to of this section shall provide for cancellation of coverage and a refund of the premium unearned upon the discharge of the loan obligation for which the insurance is security without prejudice to any claim existing at the time of discharge. Whenever insurance is written in connection with a loan transaction, the association shall deliver, or cause to be delivered, to the borrower a policy, certificate or other memorandum that shows the coverages and the costs of coverage, if any, to the borrower within thirty (30) days from the date of the loan.

Acts 1968, ch. 590, § 2; 1974, ch. 698, § 5; T.C.A., § 45-1414; Acts 1978, ch. 708, § 6.01; T.C.A., §§ 45-1438, 45-3-514.

45-3-707. Department to service loans — Service charge.

    1. Associations are authorized, directed, and required to provide for and maintain a department to service the loans and properties securing the loans, including among other things:
      1. Services in reference to investigating the financial standing of applicants for loans;
      2. The enforcement of all contractual requirements of borrowers, including insurance, maintenance, repairs, delinquencies, defaults, and continuing security; and
      3. Taxes, assessments and other governmental levies;
      1. In their contracts with borrowers, the associations are authorized to provide for and collect a service fee, the amount of which shall in no event exceed two and one-half percent (2½%) per annum of the unpaid balance of the loan, to be used in defraying the expense of providing and maintaining the service department, including the portion of the association's overhead expense that is fairly incurred by and in connection with the maintenance of the department; provided, that the service fee shall be in addition to legal interest and the actual expenses incurred in making, securing, and closing the loan, and shall not be collected as interest or compensation for the use of the money loaned, but shall be used in defraying the expense of maintaining the department and in servicing the loans, as contemplated herein; and provided further, that the service fee shall not be collected from borrowers who make deposit account loans.
      2. The service fee may be made payable in periodic installments running throughout the life of the loan or at the initial closing of the loan. Any service charge collected at the time the loan is closed may be retained regardless of when the loan is paid.
      3. The service fee payable in periodic installments may be retained in the following manner:
        1. If the loan is paid within one (1) year from the date same is made, the service fee may be retained or collected for the full year; or
        2. Where the loan is paid after the period of one (1) year, the service fee shall be retained or collected only to the date of payment.
  1. It is the duty of the commissioner, at the time of making annual examinations of associations making real estate loans, to determine whether associations making real estate loans, as herein authorized, are charging fees in excess of the amount reasonably required to defray the expense of servicing loans and in maintaining the service department contemplated herein; and, in the event it is found that the provisions herein are being violated, it shall be the duty of the commissioner to take necessary action, under the law, to prevent the associations from continuing the illegal acts.

Acts 1978, ch. 708, § 2.30; T.C.A., § 45-1430.

Part 8
Regulations

45-3-801. Supervision of associations.

Every person doing a savings and loan business under the laws of this state shall be subject to supervision by the commissioner and the regulations promulgated by the commissioner. However, any regulation promulgated by the commissioner that has not been revised or amended in more than five (5) years may be waived by the commissioner, in the commissioner's discretion, as the commissioner deems necessary or appropriate to maintain a competitive balance among state chartered savings and loan associations, state chartered savings banks, federally chartered savings and loan associations and federally chartered savings banks.

Acts 1978, ch. 708, § 3.01; T.C.A., § 45-1508; Acts 1996, ch. 768, § 27.

Compiler's Notes. Former §§ 45-3-80145-3-819 (Acts 1974, ch. 698, §§ 18-36; 1977, ch. 113, § 1) concerning taxation and regulation of savings and loan associations, were repealed by Acts 1978, ch. 708, § 6.01 and the present provisions substituted therefor.

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).

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

Cross-References. Conversion of financial institutions, title 45, ch. 11.

Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 5.

45-3-802. Books and records.

Every association shall keep at the home office correct and complete books of account and minutes of the proceedings of stockholders or members, as the case may be, and of directors. Complete records of all business transacted at the home office shall be maintained at the home office. Records of business transacted at any branch office may be kept at the branch office; provided, that control records of all business transacted at each branch office or agency shall be maintained at the home office.

Acts 1978, ch. 708, § 3.02; T.C.A., § 45-1509.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 5.

45-3-803. Forms — Records — Accounting practices.

Every association shall use forms, and keep other records, including, but not limited to, those of its stockholders or members, that the commissioner may from time to time require. Subject to any rules or regulations promulgated by the commissioner, every association shall observe accounting principles and practices that are in accordance with generally accepted accounting principles and practices.

Acts 1978, ch. 708, § 3.03; T.C.A., § 45-1510.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-804. Misdescription of assets.

No association by any system of accounting or any device of bookkeeping shall, either directly or indirectly, enter any of its assets upon its books in the name of any other person or under any title or designation that is not truly descriptive of the assets.

Acts 1978, ch. 708, § 3.04; T.C.A., § 45-1511.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-805. Charging off or setting up reserves against bad assets.

The commissioner, after a determination of value, may order that assets, individually or in the aggregate, to the extent that the assets are overvalued on an association's books, be charged off, or that a special reserve or reserves equal to the overvaluation be set up by transfers from surplus, undivided profits or reserves.

Acts 1978, ch. 708, § 3.05; T.C.A., § 45-1512.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-806. Reproduction and destruction of records.

Any association may cause any or all records kept by the association to be copied or reproduced by any photostatic, photographic, or microfilming process that correctly and permanently copies, reproduces, or forms a medium for copying or reproducing the original record on a film or other durable material. In the event of the loss or destruction of the original record, the copy or reproduction shall be deemed to be an original record for all purposes and shall be treated as an original record in all courts or administrative agencies for the purpose of its admissibility in evidence. A facsimile, exemplification, or certified copy shall, for all purposes, be deemed a facsimile, exemplification or certified copy of the original record.

Acts 1978, ch. 708, § 3.06; T.C.A., § 45-1513.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-807. Confidentiality of records.

  1. An association may decline to disclose its books, papers and other records, except:
    1. Pursuant to court order or subpoena;
    2. To the commissioner and any authorized examiners, attorneys, or other employees of the department;
    3. To the members of the board of directors of the association; or
    4. To the holder of a deposit account, or a member or a stockholder to the extent of records concerning the deposit holder's, member's, or stockholder's respective account only.
  2. A stockholder may make written request for access to other books, papers, and records of the association for any proper purpose, in which event the association may request a determination from the commissioner as to whether a proper purpose exists, and the determination of the commissioner shall be conclusive.
  3. A stockholder may include in the stockholder's written request that a communication be transmitted to the stockholders of the association, and upon payment of reasonable costs therefor, the association shall cause the communication to be transmitted to the stockholders immediately, subject to regulation by the commissioner.

Acts 1978, ch. 708, § 3.07; T.C.A., § 45-1514.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

Cross-References. Confidential records, § 10-7-504.

45-3-808. Annual audit.

Each association shall at least once in each year cause its books and accounts to be audited at its own expense by a certified public accountant or firm of certified public accountants selected by the association and approved by the commissioner. The annual audit shall cover the twelve (12) months ending on the last day of its fiscal year, unless the commissioner prescribes a different period for any association.

Acts 1978, ch. 708, § 3.08; T.C.A., § 45-1515.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-809. Annual report.

  1. Each association shall furnish the commissioner, annually, within ninety (90) days after the end of the period covered by the audit, or a shorter time that is prescribed by the commissioner, an annual written report, in the form prescribed by the commissioner, of its affairs and operations, which shall include a complete statement of its financial condition, certified by the president or a vice president and attested by the secretary or an assistant secretary, including two (2) signed copies of the report of the auditor showing the result of the audit, and including a balance sheet of the association as of the date of the audit and a statement of the income and expenses of the association during the year ending with the date of the audit.
  2. The balance sheet and statement of income and expenses shall be certified by the auditor making the audit.
  3. The commissioner may require other information in the annual report that the commissioner deems necessary to provide the commissioner with information as to all aspects of the financial condition of the association and may prescribe the scope of the annual audit, and require the auditor to furnish the commissioner with information additional to that contained in the report of the auditor.
  4. The commissioner may also require that copies of the annual report be mailed to stockholders or members in the form and manner that the commissioner prescribes.

Acts 1978, ch. 708, § 3.09; T.C.A., § 45-1516.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-810. Additional and special reports.

  1. Monthly Reports.  Every association shall, within ten (10) days after each calendar month, furnish the commissioner with a monthly report of the operations and financial condition of the association, in the form and containing the information that the commissioner prescribes.
  2. Special Reports.  The commissioner may call for a special report from any association, in the form and containing the information that the commissioner prescribes.

Acts 1978, ch. 708, § 3.10; T.C.A., § 45-1517.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-811. Financial statements.

  1. Publication.  Every association shall prepare and publish annually, on or before a date prescribed by the commissioner in a newspaper of general circulation in the county in which the home office of the association is located, a statement of its financial condition, in the form and containing the information prescribed by the commissioner as of the last business day of its previous fiscal year. It is the duty of the commissioner to see that each association has published its statement in accordance with the form prescribed, and to check the published statement, using the newspaper clipping furnished the commissioner by the association, with the annual report of the association filed with the commissioner. If the statement is not published by the association, the commissioner shall, at the expense of the association, publish the statement.
  2. Discrepancies; Republication; Penalties.  In the event there are discrepancies in the published statement of the association and the annual report furnished to the commissioner, and if, in the opinion of the commissioner, the discrepancies are due to clerical errors, it shall be the duty of the commissioner to notify the association to publish its statement so as to conform with the annual report filed with the commissioner, and it shall be the duty of the association to make the republication. If, in the opinion of the commissioner, the discrepancies in the published statement and annual report are not due to clerical errors, it shall be the duty of the commissioner forthwith to publish a true and correct statement as shown by the annual report filed with the commissioner, stating in the publication that the published statement of the association did not conform to the annual report on file with the commissioner, and it shall be the duty of the association to pay the cost and expenses of the publication by the commissioner. Any association that fails or refuses to pay the cost and expenses of the publication by the commissioner of any statement of the association made pursuant to the requirements of this section, shall forfeit to the state one hundred dollars ($100), in addition to the costs and expenses of the publication, which sum the commissioner shall sue for and recover in the name of the state in any court having jurisdiction.

Acts 1978, ch. 708, § 3.11; T.C.A., § 45-1518.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-812. Examination of associations.

  1. Duty to Examine.  The commissioner shall, either personally or by competent examiner or examiners appointed by the commissioner, visit and examine every association subject to the commissioner's supervision on a regular basis.
  2. Requirements of Examination.  On every examination, inquiry shall be made as to the condition and resources of the association, the mode of conducting and managing the affairs of the association, the actions of its directors, the making of loans and other investment of funds of the association, the safety and prudence of the management of the association, and whether the requirements of its charter and bylaws have been complied with in the administration of the affairs of the association, and as to such other matters that the commissioner prescribes.
  3. Other Examinations.  In addition, the commissioner has the power, and it is the commissioner's duty, to examine or cause to be examined the affairs of every association whenever, in the judgment of the commissioner, the management and condition of the association is such as to render an examination of its affairs necessary or expedient, or whenever, in the opinion of the commissioner, the interest of the depositors, other creditors, stockholders, or members demands an examination.
  4. Examination of Service Organizations.  The commissioner also has the power to examine or cause to be examined any service organization, twenty-five percent (25%) or more of the voting capital stock of which is owned or controlled, directly or indirectly, by any association subject to this chapter.
  5. Oaths; Examinations; Appearances.  The commissioner, and every examiner acting under or appointed by the commissioner, has the power and authority to administer oaths and to examine under oath any person whose testimony may be required on the examination of any association, or on the examination of any service organization, and may compel by court order the appearance and attendance of the person for the purpose of the examination, if the appearance and attendance is not voluntarily offered.
  6. Request for Examinations.  Any director, officer, stockholder, or member of an association, or any depositor or other creditor of an association, may call upon the commissioner at any time, to make an examination of the association in which the person is interested, which examination the commissioner, either in person or by an examiner, may or may not make, in the exercise of the commissioner's or examiner's discretion; provided, that, unless the commissioner deems an examination necessary under this section, the commissioner shall not make the examination unless and until the one making the request has deposited with the department, in advance, a sum sufficient to cover the cost of the examination.
  7. Duties of Examiners.
    1. Each examiner shall act under the direction of the commissioner, and shall forthwith examine fully into the books, papers, and affairs of the association that the examiner may be directed by the commissioner to examine.
    2. The commissioner shall furnish to each examiner a commission under the signature of the commissioner and official seal of the department, which commission the examiner shall exhibit to the officer or officers of the association proposed to be examined as the examiner's authority for making the examination.
    3. Each examiner shall report on oath to the commissioner the result of each examination made by the examiner, which report the commissioner shall keep on file in the commissioner's office; and when the commissioner in person makes an examination of the affairs of any association, the commissioner shall in like manner make out a report under oath of the result of the examination, and the same shall be kept on file in the office of the commissioner. A duplicate copy of the report shall be furnished to the association examined.
  8. Examinations Made by Other Agencies; Joint Examinations.  In lieu of examination by the commissioner, the commissioner may accept any examination made by the federal home loan bank board, the federal savings and loan insurance corporation, any other insuring agency approved by the commissioner, or by certified public accountants approved by the commissioner. The commissioner may examine or cause to be examined any association in conjunction with an examination by the federal home loan bank board, the federal savings and loan insurance corporation, or any other insuring agency approved by the commissioner, and shall accept any audit made or accepted by any of the agencies during the course of any examination of an association. Two (2) copies of the audit, signed and certified by the auditor making the audit, shall be filed promptly with the commissioner.

Acts 1978, ch. 708, § 3.12; T.C.A., § 45-1519.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

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.

45-3-813. Commissioner authorized to have appraisals made at expense of association.

The commissioner is authorized, in connection with any examination or audit of any association, to cause to be made appraisals of real estate owned or held by the association as security or otherwise when specific facts or information with respect to the real estate, or when in the commissioner's opinion the association's policies, practices, operating results, and trends, give evidence that an association's appraisals may be excessive, that lending or investment may be of a marginal nature, that appraisal policies and practices may not conform with generally accepted and established professional standards, or that real estate held by the association for any purpose is overvalued. In lieu of causing the appraisals to be made, the commissioner may accept any appraisal caused to be made by the federal home loan bank board, or by the federal savings and loan insurance corporation or other insuring agency approved by the commissioner under this chapter. Unless otherwise ordered by the commissioner, appraisal of real estate in connection with any examination or audit pursuant to this section shall be made by a professional appraiser or appraisers selected by the commissioner, and the cost of the appraisal shall be paid promptly by the association directly to the appraiser or appraisers upon receipt by the association of a statement of the cost bearing the written approval of the commissioner. A copy of the report of each appraisal caused to be made by the commissioner pursuant to this section shall be furnished to the association within a reasonable time, not to exceed sixty (60) days following the completion of the appraisals, and may be furnished to the insuring agency.

Acts 1978, ch. 708, § 3.13; T.C.A., § 45-1520.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

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.

Cross-References. Confidential records, § 10-7-504.

45-3-814. Disclosure of information — Reports as evidence.

  1. Disclosure of Information.  The information obtained by the commissioner or any examiner in making an examination into the affairs of the association shall be for the purpose of ascertaining the true condition of the affairs of the association, and shall not be disclosed by the party making the examination to any person, except that the examiner shall make a report of the condition of the affairs of the association ascertained from the examination to the commissioner and except that the commissioner may take action as a result of the report as provided by this chapter. The commissioner may in the commissioner's discretion disclose reports of examination to other state financial institutions regulatory agencies.
  2. Unlawful Disclosure.  It is unlawful for the commissioner or any examiner, attorney or other employee of the department to make or report to any person any list of names of the depositors, debtors, or stockholders of any association, or to disclose to any person information as to who are the depositors, debtors, or stockholders or the amounts of the several deposits, debts or shares of stock owned by any stockholder, except as provided by this chapter.
  3. Reports as Evidence.  In the event the commissioner takes possession of the business and affairs of any association as authorized by this chapter, the report of the commissioner, or examiner relating to the association on file in the office of the commissioner, may be used in any court, either by the commissioner or examiner or by the association, as evidence to the extent that the same is competent as evidence, or as an aid in arriving at the true condition of the association.

Acts 1978, ch. 708, § 3.14; T.C.A., § 45-1521; Acts 1986, ch. 556, § 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

Cross-References. Confidential records, § 10-7-504.

45-3-815. Access to records — Summons — Oaths and examination of witnesses.

The commissioner and any authorized examiners, attorneys, or other employees of the department shall have free access to all books, papers, and other records of an association, and to all books, papers, and other records kept by any officer, agent, or employee, relating to or upon which any records of its business were kept, and may summon witnesses and administer oaths or affirmations in the examination of the directors, officers, agents, or employees of the association, service organization, or any other person in relation to its affairs, transactions, and condition, and may require and compel the production of records, books, papers, contracts, or other documents by court order, if not voluntarily produced.

Acts 1978, ch. 708, § 3.15; T.C.A., § 45-1522.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-816. Additional supervisory powers.

In addition to other powers conferred upon the commissioner by this chapter, the commissioner has the power to require associations subject to the commissioner's supervision to:

  1. Charge Off Assets.  Charge off the whole or part of an asset that at the time of its acquisition could not lawfully have been acquired and that could not lawfully be retained at the time of the commissioner's action; provided, that the commissioner's action is within two (2) years of the aforementioned acquisition;
  2. Recordation.  Record liens and security in property;
  3. Financial Statement.  Obtain a financial statement from each borrower before making any loan to the extent that the association can do so;
  4. Title Search, etc.  Search, or obtain insurance as to, the title to real estate taken as security, or both; and
  5. Other Insurance.  Maintain adequate insurance against other risks that the commissioner determines to be necessary and appropriate for the protection of depositors, other creditors, and stockholders.

Acts 1978, ch. 708, § 3.16; T.C.A., § 45-1523.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-817. Commissioner's power to act in certain instances.

  1. Insufficient Reserves.  If the reserves of an association fall below the level specified by this chapter or by the rules and regulations of the commissioner, the commissioner shall require the association to increase its reserves, within the time and manner prescribed by the commissioner, so as to bring the sum of the reserves to the level so required, and shall, in addition and to the extent that the commissioner deems it necessary to protect the association and the public, require the association to take any one (1) or more of the actions set forth in subsection (c).
  2. Unsound Business Practices.  In addition to the powers conferred upon the commissioner by any other provision of this chapter, if the commissioner determines that the association is engaging or has engaged in unsound and imprudent business practices that have caused or may cause the association to be in an impaired condition, the commissioner shall have the power to take any one (1) or more of the actions set forth in subsection (c).
  3. Powers of Commissioner.  In the event that subsections (a) or (b) are applicable to any association, the commissioner may require the association to do any one (1) or more of the following:
    1. Increase its liquid assets and maintain the increased liquid assets at a level prescribed by the commissioner;
    2. Cease accepting all deposit accounts, cease accepting particular classes or categories of deposit accounts or limit the amounts of particular classes or categories of deposit accounts to be accepted;
    3. Cease all lending, lending in a particular area, or making a particular type or category of loan;
    4. Cease or limit the purchase of loans or other investments;
    5. Cease or limit promotional expenditures;
    6. Convene a meeting of the board of directors of the association with the commissioner or the commissioner's delegate in attendance to accomplish the purpose of this section; and
    7. Take other steps the commissioner deems necessary to safeguard the interests of the association and the public.

Acts 1978, ch. 708, § 3.17; T.C.A., § 45-1524.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

45-3-818. Commissioner may order any association to discontinue any illegal practice.

If the commissioner, as a result of any examination or from any report made to the commissioner, or otherwise, finds that any association or any director, officer, or employee of any association is violating its charter or bylaws, this chapter, the laws of this state or of the United States or any lawful order or regulation of the commissioner, the commissioner shall deliver to the board of directors of the association a formal written order, in which are set forth the facts known to the commissioner, demanding the immediate discontinuance of the violation and conformance with all applicable requirements of this chapter, and any rules or regulations promulgated under this chapter. The order shall be delivered in person to the home office of the association in question by the commissioner or by the commissioner's agent or shall be sent by registered or certified mail, return receipt requested, addressed to the home office of the association in question. The order shall be effective from the time of receipt of the order by the association at its home office, and shall include a notice that the person or persons affected shall have the opportunity to request a hearing. If a hearing is so requested and held, the commissioner, on the basis of the evidence presented and any matters of record in the commissioner's office, shall either continue the order in effect, modify the same, or set it aside.

Acts 1978, ch. 708, § 3.18; T.C.A., § 45-1525.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-819. Removal of directors, officers, and employees participating in violations.

The commissioner may require that any director, officer, or employee of an association, who has participated in a violation described herein, be removed from the person's position or office in the association if the action of the person or persons concerned was knowingly and willfully taken. Prior to entering an order of removal, the commissioner shall deliver a full statement of the facts and conduct to which the commissioner objects to the board of directors of the association and to the person or persons concerned, stating the commissioner's intention to enter a removal order. The statement shall be delivered in person to the home office of the association served by the director, officer, or employee by the commissioner or by the commissioner's agent or shall be sent by registered or certified mail, return receipt requested, addressed to the home office of the association. The statement shall include a notice that the person or persons affected shall have the opportunity to request a hearing. If a hearing is so requested and held, the commissioner, on the basis of the evidence presented at the hearing, may proceed to enter an order for the immediate removal of the director, officer, or employee affected, or may reprimand the individuals and/or association concerned, or may dismiss the entire matter. If no hearing is requested within the time specified, the commissioner may proceed to enter an order of removal on the basis of the facts set forth in the commissioner's original statement.

Acts 1978, ch. 708, § 3.19; T.C.A., § 45-1526.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-801.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-3-820. Reliance upon action by commissioner.

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 interpretation of the commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation, or interpretation.

Acts 1978, ch. 708, § 3.20; T.C.A., § 45-1527.

Part 9
Taxation

45-3-901. Applicable taxes and exemptions.

Associations shall be subject to the franchise and excise taxes as set forth in title 67, chapter 4, parts 8 and 9 respectively, and the taxes shall be in lieu of and substitution for any and all other taxes previously levied against or on the associations; except ad valorem taxes upon real estate and tangible personal property owned by the associations and, for taxable periods beginning on and after midnight June 30, 1977, the franchise and excise taxes as set forth in title 67, chapter 4, parts 8 and 9 respectively. Members' savings accounts shall not be treated as capital stock in the franchise tax base set forth in title 67, chapter 4, part 9. The exemption from other taxes shall include taxes upon or for the use of the capital, notes, reserves, surplus, loans, accounts, and other income and profits of the associations, including income tax upon members, shareholders or account-holders, who receive dividends from the associations, and all privilege taxes of every kind imposed by the state of Tennessee. Nothing in this section shall be construed as relieving state associations of the expense of examinations as provided by § 45-3-1003(f).

Acts 1939, ch. 60, § 4; C. Supp. 1950, § 3898.61 (Williams, § 3918.12); Acts 1977, ch. 85, § 4; impl. am. Acts 1978, ch. 708, §§ 1.23, 3.12; T.C.A. (orig. ed.), § 45-1504; Acts 1984, ch. 558, § 2; T.C.A., § 45-3-904.

Code Commission Notes.

This section was renumbered from § 45-3-904 to § 45-3-901 by the authority of the Code Commission in 2020.

Cross-References. Excise tax, imposition upon savings and loan associations, § 67-4-2007.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 10.

Part 10
Fees

45-3-1001. Organization fees.

Each application for authority to organize an association under this chapter shall be accompanied by an application fee of one thousand five hundred dollars ($1,500), and a fee of five hundred dollars ($500) for investigation of the application, as well as any necessary travel and other expenses connected with the investigation.

Acts 1978, ch. 708, § 5.19; T.C.A., § 45-1719.

Compiler's Notes. 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. Negotiable instruments, title 47, ch. 3.

45-3-1002. Fees for establishment of branch office.

Each application for authority to establish a branch office by an association other than a satellite office shall be accompanied by an application fee of five hundred dollars ($500) and a fee of three hundred dollars ($300) for investigation of the application, as well as any necessary travel and other expenses connected with the investigation. Each application for authority to establish a satellite office shall be accompanied by an application fee of three hundred dollars ($300) and a fee of two hundred dollars ($200) for investigation of the application, as well as any necessary travel and other expenses connected with the investigation.

Acts 1978, ch. 708, § 5.20; T.C.A., § 45-1720.

45-3-1003. Other fees and expenses.

  1. Change of Location of Office or Change of Name.  The application to change the location of the home or a branch office of an association or to change the name of an association shall be accompanied by a fee of fifty dollars ($50.00).
  2. Amendments to Charter.  Each application for approval of an amendment to the charter of any association shall be accompanied by a fee of fifty dollars ($50.00).
  3. Mergers and Consolidations.  Each application for the merger or consolidation of two (2) or more associations shall be accompanied by a fee of three hundred dollars ($300), which fee shall be paid in equal parts by the associations proposing to merge or consolidate.
  4. Reorganizations; Transfers of Assets; Dissolution.  Each proposed plan of reorganization, proposal for the sale of all or substantially all of the assets of an association, and each proposal of liquidation and dissolution shall be accompanied by a fee of one hundred twenty-five dollars ($125).
  5. Conversion.  Each application for conversion of an association subject to this chapter or of a federal association shall be accompanied by a fee of five hundred dollars ($500).
  6. Examinations.  Each association shall pay a minimum examination fee of one hundred twenty-five dollars ($125) for any examination conducted by the commissioner or the commissioner's designated representative; provided, that in the event the examination fee does not adequately cover all reasonable costs and expenses of any examination, the commissioner shall assess any association being examined all additional expenses of the examination in excess of the one hundred twenty-five dollar ($125) fee, which expenses shall include travel and other expenses and the cost to the department of the working time of its examiners or other department employees involved in the examination. The fees provided herein shall be retained by the department as expendable receipts for the division of loans.
  7. Commissioner's Approval.  In addition to all other fees required by this chapter, the commissioner is authorized, in the commissioner's discretion, to charge a fee not exceeding ten dollars ($10.00) upon each application for the commissioner's approval, submitted pursuant to any provision of this chapter.
  8. Other Expenses.  The commissioner is authorized to assess an association for all other reasonable costs and expenses, not otherwise set forth, incurred by the department in performing any acts in the course of its official duties and, in furtherance of its supervisory responsibilities, the acts that may pertain to the regulation and supervision of the association.

Acts 1978, ch. 708, § 5.21; T.C.A., § 45-1721; Acts 1981, ch. 416, § 4.

45-3-1004. Commissioner's power to modify fees.

The commissioner is authorized, in the commissioner's discretion, uniformly to prescribe fees in lower amounts than specified in this chapter, if the commissioner determines that the lower fees are adequate to cover the necessary and related expenses of the department.

Acts 1978, ch. 708, § 5.22; T.C.A., § 45-1722.

Part 11
Voluntary Corporate Changes

45-3-1101. Amendment of charters.

Every association may amend its charter in the manner set forth herein. Each proposed amendment, together with a certified copy of the authorizing resolution, shall be submitted to the commissioner for approval. If the commissioner finds that the proposed amendment is in conformity with the law, the commissioner shall, in writing, approve the amendment and shall send notice of approval of the amendment by registered or certified mail to the home office of the association not less than thirty (30) days after its receipt by the commissioner. Should the commissioner disapprove any amendment within the time specified, the commissioner shall state the disapproval, together with the written reasons therefor, and send the same by registered or certified mail to the home office of the association, giving the association, if appropriate under the circumstances, the opportunity to modify or change and resubmit the proposed amendment so as to obviate the commissioner's objections. In the event that the commissioner disapproves the amendment after the resubmission by the association, the commissioner shall send written notice of the final disapproval by registered or certified mail to the home office of the association. Failure to send notice of approval or disapproval within the time specified shall be deemed to constitute approval of the proposed amendment by the commissioner.

Acts 1978, ch. 708, § 4.09; T.C.A., § 45-1609.

Compiler's Notes. 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. Certified mail instead of registered mail, § 1-3-111.

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

Negotiable instruments, title 47, ch. 3.

45-3-1102. Merger and consolidation.

  1. Merger.  Any two (2) or more associations may merge into one (1) of the associations in the manner set forth herein. The board of directors of each association shall, by resolution adopted by a majority of the existing members of each board, approve a plan of merger setting forth:
    1. The names and locations of the home offices of the associations proposing to merge, and the name and location of the home office of the association into which they propose to merge, which is designated as the surviving association;
    2. The names and addresses of each director and officer of the surviving association;
    3. The terms and conditions of the proposed merger and the mode of carrying it into effect;
    4. The manner and basis of converting the deposit accounts of each merging association into deposit accounts of the surviving association;
    5. In the case of capital stock associations, the manner and basis of converting shares of stock of each merging association into shares of stock of the surviving association;
    6. A statement of any changes in the charter or bylaws of the surviving association to be effected by the merger;
    7. A statement in the form that the commissioner requires, that the surviving association has received a firm commitment for the insurance of deposit accounts by an insurer qualified under this chapter and that no lapse in the insurance of deposit accounts of each merging association shall at any time occur;
    8. A statement that the plan of merger is subject to approval by the commissioner and by the stockholders or members of each merging association;
    9. Provisions for terminating any activities and disposing of any assets that do not conform to the requirements of the surviving association; and
    10. Other provisions with respect to the proposed merger that are deemed necessary or desirable by the boards of directors of the merging associations, and that the commissioner by rule or regulation requires to effect the purposes of this chapter.
  2. Consolidation.  Any two (2) or more associations may consolidate into a new association in the manner set forth herein. The board of directors of each association shall, by resolution adopted by the majority of the existing members of each board, approve a plan of consolidation setting forth:
    1. The names and locations of the home offices of the associations proposing to consolidate and the name and location of the home office of the association into which they propose to consolidate, which is designated as the new association;
    2. The names and addresses of each director and officer of the new association;
    3. The terms and conditions of the proposed consolidation and the mode of carrying it into effect;
    4. The manner and basis of converting the deposit accounts of each association into deposit accounts of the new association;
    5. In the case of capital stock associations, the manner and basis of converting shares of stock of each association into shares of stock of the new association;
    6. With respect to the new association, all of the provisions required to be set forth in the charter and bylaws of an association organized under this chapter;
    7. A statement in the form that the commissioner requires, that the new association has received a firm commitment for the insurance of deposit accounts by an insurer qualified under this chapter and that no lapse in the insurance of deposit accounts of each association proposing to consolidate shall at any time occur;
    8. A statement that the plan of consolidation is subject to approval by the commissioner and by the stockholders or members of each consolidating association;
    9. When the merger involves a bank, provisions for terminating any activities and disposing of any assets that do not conform to the requirements of the surviving association; and
    10. Other provisions with respect to the proposed consolidation that are deemed necessary or desirable by the boards of directors of the consolidating associations, and that the commissioner by rule or regulation requires to effect the purposes of this chapter.
  3. Approval by Commissioner.
    1. After approval by the board of directors of each merging or consolidating association, the plan of merger or consolidation shall be submitted to the commissioner for approval, together with certified copies of the authorizing resolutions of each board of directors showing approval by a majority of the existing board.
    2. The commissioner shall approve the plan of merger or consolidation if it appears that:
      1. The surviving or new association meets the requirements of this chapter as to the formation of an association;
      2. The plan of merger or consolidation provides an adequate capital structure in relation to deposit liabilities of the surviving or new association;
      3. The plan is fair and equitable;
      4. The merger or consolidation is not contrary to the public interest; and
      5. When the merger or consolidation involves a bank, the schedule for termination of any nonconforming activities and disposition of any nonconforming assets is timely, and the plan for termination and disposition does not include any unsafe and unsound practices.
    3. Approval by the commissioner shall be in writing, and notice of approval shall be sent by certified mail to the home offices of the merging associations.
    4. If the commissioner disapproves a plan of merger or consolidation, the commissioner shall send the commissioner's objections in writing by certified mail to the home offices of the merging or consolidating associations and give an opportunity to the merging or consolidating associations to amend and resubmit the plan so as to obviate the objections. In the event that the commissioner disapproves the plan after resubmission, the commissioner shall send written notice of the final disapproval by certified mail to the home offices of the merging or consolidating associations.
  4. Approval by Stockholders or Members.  Upon receipt of approval by the commissioner of the plan of merger or consolidation, the plan shall be submitted to a vote at an annual or special meeting of stockholders or members. The plan of merger or consolidation shall be approved upon receiving the affirmative vote, in person or by proxy, of at least two-thirds (2/3) of the outstanding voting stock or votes of members of each of the associations.
  5. Procedure After Approval.
    1. Upon approval, articles of merger or consolidation shall be prepared and executed, and shall set forth:
      1. The plan of merger or the plan of consolidation;
      2. As to each association, the number of votes present at the meeting in person or by proxy; and
      3. As to each association, the number of votes for and against the plan, respectively.
    2. The articles of merger or articles of consolidation shall be filed with the secretary of state in accordance with law, and a certified copy shall be filed with the commissioner. Upon filing by the secretary of state, the merger or consolidation shall be effective.
  6. Banks.  Subject to the provision set forth in this section, a state or national bank may merge or consolidate with an association so that the surviving institution is an association. If the association is a federal association, the action to be taken by the merging or consolidating financial institution shall be the same as those prescribed for federal associations at the time of the action by the laws of the United States and not by the laws of this state, except that a vote of two-thirds (2/3) of each class of voting stock of a state bank shall be required for a merger or consolidation.

Acts 1978, ch. 708, § 4.10; T.C.A., § 45-1610; Acts 1985, ch. 174, § 8.

45-3-1103. Sale of assets.

An association, in one (1) transaction not in the ordinary course of its business, may sell all or substantially all of its assets, with or without its name and good will, to another association or to a federal association, in consideration of money, stock, or obligations of the purchasing association.

Acts 1978, ch. 708, § 4.11; T.C.A., § 45-1611.

45-3-1104. Procedure to effect sale of assets.

The procedure to effect a sale of all or substantially all of the assets of an association shall be as follows:

  1. Resolution by Board of Directors.  The board of directors shall, by resolution adopted by a majority of the existing members of the board, approve the sale and set forth in the resolution the terms and conditions of the sale;
  2. Approval by Commissioner.  The resolution approving and setting forth the terms of the proposed sale shall be submitted to the commissioner for the commissioner's approval and shall be supplemented by additional information that the commissioner may require. If the commissioner finds that the proposed sale is fair to all depositors, other creditors, and stockholders or members of the association and to any other persons concerned, and that provision has been made for the disposition of the remaining assets, if any, of the association as provided in this chapter for voluntary liquidation, then the commissioner shall, in writing, approve the sale and shall send notice of approval by certified mail to the home office of the association not less than thirty (30) days after its receipt by the commissioner. Should the commissioner disapprove all or any part of the sale, the commissioner shall state the disapproval, together with the written objections therefor, and send the same by certified mail to the home office of the association, giving an opportunity to the association to amend the terms or conditions of the sale and resubmit the resolution so as to obviate the objections. In the event that the commissioner disapproves the proposed sale after the resubmission, the commissioner shall send written notice of the final disapproval by certified mail to the home office of the association. Failure to send notice of approval or disapproval within the time specified shall be deemed to constitute approval of the proposed sale by the commissioner; and
  3. Approval by Stockholders or Members.  Upon approval of the proposed sale by the commissioner, the same shall be submitted to a vote at any annual or special meeting of the stockholders or members. The proposed sale shall be approved upon receiving the affirmative vote, in person or by proxy, of at least two-thirds (2/3) of the outstanding voting stock or votes of members. A proposal for the voluntary liquidation of the association shall be submitted to the stockholders at the same meeting or at any adjournment thereof, or at any later meeting called for that purpose in accordance with this chapter concerning voluntary liquidation. A certified report of the proceedings setting forth the terms of the proposed sale, the number of votes present in person or by proxy and the number of votes for and against any proposal, respectively, shall be filed with the commissioner.

Acts 1978, ch. 708, § 4.12; T.C.A., § 45-1612.

45-3-1105. Conversion of state mutual or federal association to state capital stock association.

Any state mutual association or any federal association, if otherwise permitted by federal law and regulations, may become a capital stock association operating under this chapter by following the procedures set forth as follows:

  1. Approval by Board of Directors.  The board of directors of the state mutual association or federal association shall approve a plan of conversion by resolution adopted by a majority vote of the existing members of the board;
  2. Approval by Commissioner.  Upon approval of the plan of conversion by the board of directors, the plan and the resolution approving it shall be submitted to the commissioner. If the commissioner, after appropriate examination, finds that the converting association complies sufficiently with the requirements of this chapter to entitle it to become a capital stock association operating under this chapter, and if the commissioner finds that the plan of conversion is fair and equitable and that the interests of the association and the public are adequately protected, the commissioner shall approve the plan of conversion. However, the commissioner may prescribe terms and conditions, to be fulfilled either prior to or after the conversion, to cause the association to conform with the requirements of this chapter. If the commissioner disapproves the plan of conversion, the commissioner shall state the commissioner's objections in writing and send the same by certified mail to the home office of the converting association, and afford the association an opportunity to amend and resubmit the plan so as to obviate the objections. In the event that the commissioner disapproves the plan after the resubmission, the commissioner shall send written notice of the final disapproval by certified mail to the home office of the association;
  3. Submission to Members.  After receipt of the commissioner's approval, the plan of conversion shall be submitted to an annual or special meeting of the members of the converting state mutual association or federal association. The plan of conversion shall be approved upon receiving the affirmative vote, in person or by proxy, of at least two-thirds (2/3) of the outstanding votes of members. Thereupon, action shall be taken to adopt a charter and bylaws, to elect directors and officers and take other action as is prescribed for a capital stock association under this chapter and by rules and regulations of the commissioner. A certified report of the proceedings at the meeting shall be filed promptly with the commissioner; and
  4. Certificate of Conversion.  If the commissioner finds that the proceedings have been in accordance with this section, the commissioner shall issue a certificate of conversion, attaching, as a part of this certificate, a copy of the charter and the report of proceedings filed pursuant to subdivision (3), and the commissioner shall forward the requisite number of copies of the materials to the secretary of state, who shall, when all required procedures have been met and taxes or fees have been paid, file the same. The conversion shall become effective upon the filing of the charter and other materials by the secretary of state in accordance with law.

Acts 1978, ch. 708, § 4.13; T.C.A., § 45-1613.

45-3-1106. Conversion of state capital stock association or federal association to state mutual association.

Any state capital stock association or any federal association, if otherwise permitted by federal law and regulations, may become a state mutual association by following the procedures set forth in § 45-3-1105 and any rules and regulations promulgated by the commissioner.

Acts 1978, ch. 708, § 4.14; T.C.A., § 45-1614.

45-3-1107. Conversion from state to federal association.

Any association subject to this chapter may become a federal association pursuant to the laws and regulations of the United States and in accordance with the following procedure:

  1. Approval by Board of Directors.  The board of directors of the state association shall approve a plan of conversion by resolutions adopted by majority vote of the existing members of the board;
  2. Approval by Commissioner.  The plan of conversion shall not be submitted to the stockholders or members until approved in writing by the commissioner. The commissioner shall approve or disapprove the plan subject to the same requirements and in the same manner as is provided by § 45-3-1105 and any rules or regulations of the commissioner;
  3. Submission to Stockholders or Members.  In the event the commissioner does approve the plan of conversion, the plan shall be submitted to an annual or special meeting of the stockholders or members. The plan of conversion shall be approved upon receiving the affirmative vote, in person or by proxy, of at least two-thirds (2/3) of the outstanding voting stock or votes of members. A certified report of the proceedings of the meeting shall be filed promptly with the commissioner; and
  4. Further Action.  Within three (3) months after the date of the meeting, the association shall take further action, in the manner prescribed and authorized by the laws and regulations of the United States, that makes it a federal association. Three (3) copies of the charter issued by the federal home loan bank or three (3) copies of a certificate showing the organization of the association as a federal association certified by the secretary or an assistant secretary of the federal home loan bank board shall be filed with the commissioner. A failure to file the documents with the commissioner shall not affect the validity of the conversion. Upon the grant to any association of a charter by the federal home loan bank board, the association shall no longer be subject to the supervision and control of the commissioner as provided by this chapter.

Acts 1978, ch. 708, § 4.15; T.C.A., § 45-1615.

45-3-1108. Plan of conversion — Mandatory and permissive requirements.

  1. Mandatory Provisions.  The plan of conversion shall provide as follows:
    1. Each depositor shall receive a deposit account in the converted association equal in amount to the depositor's account in the converting association; provided, that if the conversion contemplates a purchase of capital stock by deposit account holders in the converting association, then the plan may provide that all or a proportionate part of each deposit account, if the deposit account holder so elects, shall be credited or otherwise applied to the purchase of stock in the capital stock association;
    2. In the event of a conversion from a state mutual association or federal association to a state capital stock association, no capital stock shall be issued to any deposit account holder free of charge, and each deposit account holder shall be entitled to receive rights to purchase the capital stock;
    3. In the event of a conversion from a state capital stock association to a state mutual association or federal association, the plan of conversion shall show how the rights of the stockholders to a return of capital shall be effected;
    4. The plan of conversion shall show with particularity the business purpose to be accomplished by the conversion; and
    5. The plan of conversion shall contain other information and be in the form required by the commissioner to enable the commissioner to determine whether the plan is fair and equitable and that the interests of deposit account holders, creditors, stockholders, or members and the public are adequately protected.
  2. Permissive Provisions.  A plan of conversion shall not be considered unfair or inequitable merely because it contains provisions that provide that:
    1. Deposit account holders shall have a right to purchase shares of capital stock at the fair market value thereof;
    2. Deposit account holders shall or shall not have preemptive rights to all stock proposed to be issued;
    3. Stockholders shall have the option of accepting a redemption of their shares of stock in return for cash or other property or that the value of the shares of stock may be converted into one (1) or more deposit accounts in the name of the stockholder;
    4. Employment contracts are provided for officers and employees of the converted association; or
    5. Not more than fifteen percent (15%) of the capital stock proposed to be issued pursuant to the plan of conversion is reserved by the association for stock options for officers and employees.

Acts 1978, ch. 708, § 4.16; T.C.A., § 45-1616.

45-3-1109. Effect of conversion.

When an association subject to this chapter or a federal association effects a conversion in accordance with this chapter, the corporate existence of the association shall not be interrupted, but the identity of the association shall continue, together with all of the obligations and liabilities of the association, and all of its rights, franchises, and interests in and to every kind of property shall continue without the necessity of a deed or other transfer. Any reference to the association before conversion, contained in writing, whether executed or effective before or after the conversion, shall be deemed a reference also to the association after conversion, if not inconsistent with the other provisions of the writing. No pending action or other judicial or administrative proceeding to which the association is a party shall be abated or discontinued by reason of the conversion, but the same may be prosecuted to final judgment, order, or decree in the same manner as if the conversion had not occurred.

Acts 1978, ch. 708, § 4.17; T.C.A., § 45-1617.

45-3-1110. Voluntary liquidation and dissolution.

    1. Approval by Commissioner.  With the written approval of the commissioner, an association may voluntarily liquidate and dissolve. The commissioner shall grant approval if, from a written application submitted to the commissioner in the form that the commissioner requires, it appears that:
      1. A resolution proposing a voluntary liquidation and dissolution has been adopted by a majority of the existing members of the board of directors of the association; and
      2. The association is not in an impaired condition and has or will have sufficient liquid assets to pay off all depositors and other creditors immediately.(2)  Approval by the commissioner shall be in writing, and notice of approval shall be sent by certified mail to the home office of the association within thirty (30) days after receipt of the application to liquidate and dissolve by the commissioner. If the commissioner disapproves the application within the time specified, the commissioner shall state the commissioner's disapproval and objections in writing and send the same by certified mail to the home office of the association, giving the association an opportunity to make changes and resubmit the application so as to obviate the objections. In the event that the commissioner disapproves the liquidation and dissolution after the resubmission, the commissioner shall send written notice of the final disapproval by certified mail to the home office of the association. Failure to send notice of approval or disapproval within the time specified shall be deemed to constitute approval of the voluntary liquidation and dissolution by the commissioner.
  1. Submission to Stockholders or Members.  In the event the commissioner does approve the liquidation and dissolution, it shall be submitted to an annual or special meeting of stockholders or members. The liquidation and dissolution shall be adopted upon receiving the affirmative vote, in person or by proxy, of at least two-thirds (2/3) of the outstanding voting stock or votes of members. A certified report of the proceedings of the meeting shall be filed promptly with the commissioner.
  2. Cessation of Business.
    1. Upon approval by the commissioner and adoption by the stockholders or members, the association shall forthwith cease to do business, shall have only the powers necessary to effect an orderly liquidation and shall proceed to pay its depositors and creditors and stockholders or members and to wind up its affairs; and
    2. Within thirty (30) days after receipt of notice of approval, the association shall send a notice of liquidation by mail to each depositor, other creditor, person interested in funds held as a fiduciary, stockholder or member or other interested person. The notice shall be posted conspicuously on the premises of the association and shall be given publication that the commissioner may require. The association shall send with the notice a statement of the amount on its books shown to be the claim of the depositor or other creditor. The notice shall demand that the property held by the association as bailee be withdrawn by the person entitled thereto and that claims of depositors and other creditors, if the amount claimed differs from that stated in the notice to be due, be filed with the association before a specified date not earlier than sixty (60) days thereafter in accordance with the procedure prescribed in the notice.
  3. Claims of Depositors and Other Creditors.  The approval of an application for liquidation and dissolution shall not impair any right of a depositor, or other creditor to payment in full, and all lawful claims of depositors and other creditors shall promptly be paid.
  4. Distribution of Assets.  Any assets remaining after the discharge of all obligations shall be distributed to the stockholders or members in accordance with their respective interests. Distribution shall not be made before:
    1. All claims of depositors and creditors have been paid or, in the case of any disputed claims, the association has transmitted to the commissioner a sum adequate to meet any liability that may be judicially determined; and
    2. Any funds payable to a depositor or creditor or any property held as bailee and unclaimed have been transmitted to the commissioner. Any unclaimed distribution to a stockholder or member or property held as bailee shall be held until ninety (90) days after the final distribution and then transmitted to the commissioner. Any unclaimed property so held by the commissioner shall be treated as property held in the course of dissolution and reported to the treasurer in accordance with title 66, chapter 29, part 1.
  5. Possession by Commissioner.  If the commissioner finds, during the course of the liquidation and dissolution, that the assets will be insufficient for the full discharge of all obligations or that completion of the liquidation has been unduly delayed, the commissioner may take possession and complete the liquidation in the manner provided in this chapter.
  6. Reports; Final Order.  The commissioner may require reports of the progress of liquidation, and whenever the commissioner is satisfied that the liquidation has been properly completed, the commissioner shall cancel the certificate of authority and the charter and enter an order of dissolution.

Acts 1978, ch. 708, § 4.18; T.C.A., § 45-1618; Acts 1983, ch. 78, § 12.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 16-18.

Part 12
Reorganization and Liquidation

45-3-1201. Commissioner's authority to take possession.

  1. Requirements for Possession.
    1. The commissioner in the commissioner's discretion may take possession of the books, records, and assets of every kind and character of any association subject to this chapter for any of the purposes enumerated in subsection (b) if it appears from reports or other information received by the commissioner or from any examination conducted pursuant to this chapter that:
      1. The association is in an impaired condition;
      2. The business of the association is being conducted in a fraudulent, unlawful, or unsafe manner;
      3. The association is unable to continue normal operation;
      4. Any examination conducted pursuant to this chapter is being or has been obstructed or impeded; or
      5. The insurance of deposit accounts of the association has been or will be cancelled.
    2. Unless the commissioner finds that an emergency exists that may result in loss to depositors or other creditors and that requires that the commissioner take immediate possession, the commissioner first shall send written notice by certified mail to the home office of the association, specifying the conditions criticized and stating a reasonable time within which correction shall be made. The notice shall also provide that the association shall have the opportunity to request a hearing in accordance with this chapter.
  2. Purposes of Taking Possession.  The purposes of taking possession of an association may be examination, further examination, conserving of its assets, restoration of impaired condition, reorganization, or liquidation.
  3. Procedures for Possession; Power of Commissioner.
    1. The commissioner shall take possession by posting upon the premises of the association a notice reciting that the commissioner is assuming possession pursuant to this section and the time, not earlier than the posting of the notice, when the commissioner's possession shall be deemed to commence. A copy of the notice shall be filed in a court of general jurisdiction in the county in which the home office is located. The commissioner shall notify the insurer insuring the deposit accounts of the association immediately upon commencing any action to assume possession.
    2. When the commissioner has taken possession of an association, the commissioner shall be vested with the full and exclusive powers of management and control, including the power to continue or to discontinue the business, to stop or to limit the payment of its obligations, to employ any necessary assistants, to execute any instrument in the name of the association to commence, defend, and conduct in its name any action or proceeding in which it may be a party, to terminate the commissioner's possession by restoring the association to its board of directors and to reorganize or liquidate the association in accordance with this chapter. The commissioner may borrow money on behalf of and in the name of the association and may pledge, transfer, or otherwise utilize its assets to secure the loan. As soon as practicable after taking possession, the commissioner shall make an inventory of the assets and file a copy thereof with the court in which the notice of possession was filed.
    3. When the commissioner has taken possession, there shall be a postponement until six (6) months after the commencement of possession of the date upon which any period of limitation fixed by a statute or agreement would otherwise expire on a claim or right of action of the association or upon which an appeal must be taken or a pleading or other document must be filed by the association in any pending action or proceeding.
  4. Powers of Commissioner in Emergencies.
    1. If, in the opinion of the commissioner, an emergency exists that will result in loss to depositors or other creditors, the commissioner may take immediate possession of an association without a prior hearing. Any person aggrieved by this action of the commissioner may seek review of the action by proceedings in accordance with title 27, chapter 9.
    2. If the commissioner determines to liquidate the association, the commissioner shall send written notice of the determination to the association and to the directors, officers, stockholders, or members, depositors, and other known creditors thereof, together with a notice of the opportunity for any of them to request a hearing in accordance with chapter.
    3. If the commissioner shall determine to reorganize the association, the commissioner shall be required to afford a hearing to all interested parties, which hearing shall be conducted pursuant to the applicable provisions of this chapter. After the hearing, the commissioner shall enter an order proposing a reorganization plan. A copy of the plan shall be sent to each depositor and other creditor who will not receive payment of claim in full under the plan, together with notice that, unless within sixty (60) days the plan is disapproved in writing by persons holding one-third (1/3) or more of the aggregate amount of the claims, the commissioner will proceed to effect the reorganization in accordance with the plan. A department, agency, or political subdivision of this state holding a claim that will not be paid in full is authorized to participate as any other creditor.
  5. Judgments; Liens; Preferences.  No judgment, lien, garnishment, or attachment shall be executed upon any asset of the association while it is in the possession of the commissioner. Upon the election of the commissioner in connection with the liquidation or reorganization:
    1. Any lien, garnishment, or attachment, other than an attorney's or mechanic's lien, obtained upon any asset of the association during the commissioner's possession or within four (4) months prior to commencement thereof shall be vacated, except liens created by the commissioner while in possession; and
    2. Any transfer of an asset of the association made after or in contemplation of its impaired condition with intent to effect a preference shall be voided.
  6. Expenses of Possession.  All necessary and reasonable expenses of the commissioner's possession of an association and of its reorganization or liquidation shall be defrayed from the assets of the association.

Acts 1978, ch. 708, § 5.01; T.C.A., § 45-1701.

Compiler's Notes. The former chapter, §§ 45-1701—45-1713 (Acts 1933, ch. 19, §§ 12-14; 1935 (1st E.S.), ch. 18, §§ 1, 2; 1943, ch. 134, § 1; C. Supp. 1950, §§ 3898.34-3898.45 (Williams, §§ 3898.12- 3898.14); Acts 1976, ch. 582, §§ 3(d),(4), concerning insolvency and liquidation of building and loan associations, was repealed by Acts 1978, ch. 708, § 6.01.

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. Negotiable instruments, title 47, ch. 3.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, § 17.

45-3-1202. Requirements of reorganization plan.

  1. Plan of Reorganization.  A plan of reorganization shall not be approved by the commissioner unless:
    1. The plan is feasible and fair to all classes of depositors, other creditors and stockholders, or members;
    2. The plan assures the removal of any director, officer, or employee responsible for any unsound or unlawful action or the existence of an impaired condition; and
    3. Any merger or consolidation provided by the plan conforms to the requirements of this chapter.
  2. Modification of Plan.  Whenever, in the course of reorganization, supervening conditions render the plan unfair or its execution impractical, the commissioner may modify the plan or liquidate the association. The action shall be taken by order upon appropriate notice of opportunity to request a hearing as provided in this chapter.

Acts 1978, ch. 708, § 5.02; T.C.A., § 45-1702.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

45-3-1203. Liquidation by commissioner.

  1. Powers of Commissioner.  In liquidating an association, the commissioner may exercise any power of the association, but shall not, without the approval of the court in which notice of possession has been filed:
    1. Sell any asset of the association having a value in excess of five hundred dollars ($500);
    2. Compromise or release any claim if the amount of the claim exceeds five hundred dollars ($500), exclusive of interest; or
    3. Make any payment on any claim, other than a claim upon an obligation incurred by the commissioner, before preparing and filing a schedule of the commissioner's determination.
  2. Termination of Contracts.  Within six (6) months after the commencement of liquidation, and thereafter during the course of liquidation, the commissioner may by the commissioner's election terminate any executory contract under which the association has contracted either to receive or to provide services, or any obligation of the association as a lessee. A lessor shall receive sixty (60) days' notice of the commissioner's election to terminate the lease, and the lessor shall have no claim for rent or other damages due to the termination other than rent accrued to the date of termination.
  3. Notice of Liquidation.  As soon after the commencement of liquidation as practicable, the commissioner shall send notice of the liquidation to each known depositor, other creditor, and lessee of a safe deposit box or bailor of property held by the association at the address shown on the books of the association. The notice shall also be published in a newspaper of general circulation in each county in which the home office or any branch office is located once a week for three (3) successive weeks. The commissioner shall send with the notice a statement of the amount shown on the books of the association to be the claim of the depositor or other creditor. The notice shall demand that property held by the association as bailee or in a safe deposit box be withdrawn by the person entitled thereto and that claims of depositors and other creditors, if the amount claimed differs from that stated in the notice to be due, or if any claim has not otherwise been recognized in whole or in part by the association, be filed with the commissioner before a specified date not earlier than sixty (60) days thereafter in accordance with the procedures prescribed in the notice.
  4. Safe Deposit Boxes.  Safe deposit boxes, the contents of which have not been removed before the date specified, shall be opened by the commissioner and the sealed packages containing the contents and the certificates, together with any unclaimed property held by the association as bailee and certified inventories thereof shall be reported to the state treasurer who shall deal with them in accordance with the Uniform Unclaimed Property Act, compiled in title 66, chapter 29, part 1.
  5. Claims of Depositors, etc.  Within six (6) months after the last day specified in the notice for the filing of claims or a longer period that may be allowed by the court in which notice of possession has been filed, the commissioner shall:
    1. Reject any claim if the commissioner doubts the validity of the claim;
    2. Determine the amount, if any, owing to each depositor or other known creditor and the priority of the depositor's or creditor's claim;
    3. Prepare a schedule of the commissioner's determinations for filing in the court in which notice of possession was filed; and
    4. Send written notice by certified mail to each person whose claim has not been allowed in full of the time when and the place where the schedule of determinations will be available for inspection and the date, not sooner than thirty (30) days thereafter, when the commissioner will file the commissioner's schedule in the court in which notice of possession was filed.
  6. Objections to Commissioner's Determinations.  Within twenty (20) days after the filing of the commissioner's schedule, any depositor, other creditor, or stockholder or member may file an objection to any determination made. Any objections so filed shall be heard and determined by the court, upon such notice to the commissioner and interested claimants as the court may prescribe. If the objection is sustained, the court shall direct an appropriate modification of the schedule. After filing the schedule, the commissioner may, from time to time, make partial distribution to the holders of claims that are undisputed or have been allowed by the court, if a proper reserve is established for the payment of disputed claims. As soon as is practicable after the determination of all objections, the commissioner shall make final distribution.
  7. Priorities.
    1. The following claims shall have priority:
      1. Administrative expenses;
      2. Obligations incurred by the commissioner while in possession of an association;
      3. Wages and salaries of officers and employees earned during the three-month period preceding the commissioner's possession in an amount not exceeding six hundred dollars ($600) for any one (1) person;
      4. Fees and assessments due to the department; and
      5. Deposit accounts to the extent of two hundred dollars ($200) for each depositor.
    2. After the payment of all other claims with interest at the maximum rate permitted on the deposits, the commissioner shall pay claims otherwise proper that were not filed within the time prescribed. If the sum available for any class is insufficient to provide payment in full, the sum shall be distributed to the claimants in the class pro rata.
  8. Distribution of Excess.  Any assets remaining after all claims have been paid shall be distributed to the stockholders or members in accordance with their respective interests.
  9. Unclaimed Funds.  Unclaimed funds remaining after completion of the liquidation shall be treated as property held in the course of dissolution and reported to the state treasurer in accordance with title 66, chapter 29, part 1.
  10. Final Account.  When the assets have been distributed in accordance with this section, the commissioner shall file an account with the court. Upon approval thereof, the commissioner shall be relieved of liability in connection with the liquidation and the certificate of authority and the charter shall be cancelled.

Acts 1978, ch. 708, § 5.03; T.C.A., § 45-1703; Acts 1983, ch. 78, §§ 13, 14; 2017, ch. 457, § 2.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 16, 18.

45-3-1204. Appointment of receiver.

  1. The commissioner, after taking possession of an association for any of the purposes set forth, may, upon application to and approval by the court in which the notice of possession was filed, place the possession of the association in a receiver.
  2. Without limitation to the scope of the powers and responsibilities of a receiver under any law of this state, the receiver shall have all the rights, powers, duties, and obligations granted to the commissioner in possession.

Acts 1978, ch. 708, § 5.04; T.C.A., § 45-1704.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

Part 13
Prohibited Acts

45-3-1301. Unauthorized conduct of savings and loan business.

  1. It is unlawful for any person not authorized pursuant to this chapter, directly or indirectly, to carry on a savings and loan business within this state, or falsely and with intent to defraud, to act as a savings and loan association, or to represent that the person is acting for an association, or to use an artificial or corporate name that is the name of an existing association.
  2. A violation of this section is a Class B misdemeanor.

Acts 1978, ch. 708, § 5.05; T.C.A., § 45-1705; Acts 1989, ch. 591, § 112.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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. Negotiable instruments, title 47, ch. 3.

Penalty for Class B misdemeanor, § 40-35-111.

Textbooks. Tennessee Jurisprudence, 22 Tenn. Juris., Savings and Loan Associations, §§ 5, 8.

45-3-1302. Receipt of deposits while in an impaired condition.

  1. It is unlawful for an association, directly or indirectly, to receive any deposit while in an impaired condition, except with the express written consent of the commissioner, or for an officer, director, agent, or employee of an association who knows, or in the proper performance of the person's duties should know, of the impaired condition, directly or indirectly, to receive or authorize the receipt of the deposits.
  2. A violation of this section is a Class B misdemeanor.

Acts 1978, ch. 708, § 5.06; T.C.A., § 45-1706; Acts 1989, ch. 591, § 112.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1303. Unlawful concealment of transactions.

  1. It is unlawful for a director, officer, agent, or employee of an association, directly or indirectly, to conceal or endeavor to conceal any transaction of the association from any officer, director, agent, or employee of the association or from the commissioner, any examiner, or other employee of the department to whom it should properly be disclosed.
  2. A violation of this section is a Class C misdemeanor.

Acts 1978, ch. 708, § 5.07; T.C.A., § 45-1707; Acts 1989, ch. 591, § 113.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1304. Improper maintenance of accounts — False or deceptive entries and statements.

  1. It is unlawful for any director, officer, agent, or employee of an association, directly or indirectly, to:
    1. Maintenance of Accounts.  Maintain or authorize the maintenance of any account of the association in a manner that, to the person's knowledge, does not conform to the requirements prescribed by this chapter;
    2. False Entries, etc.  With intent to deceive, make any false or misleading statement or entry or omit any statement or entry that should be made in any book, account, report, or statement of the association; or
    3. Obstruction of Examination.  Obstruct or endeavor to obstruct a lawful examination of the association by the commissioner, an examiner, or other employee of the department.
  2. A violation of this section is a Class B misdemeanor.

Acts 1978, ch. 708, § 5.08; T.C.A., § 45-1708.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1305. Unlawful payments of penalties and judgments.

Except as otherwise expressly permitted by this chapter, it is a Class B misdemeanor for an association, directly or indirectly, to pay a fine or penalty imposed by law upon any other person or any judgment against the person, or to reimburse, directly or indirectly, any person by whom the fine, penalty, or judgment has been paid, except in settlement of its own liability or in connection with the acquisition of property against which the judgment is a lien.

Acts 1978, ch. 708, § 5.09; T.C.A., § 45-1709.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1306. False reports.

It is a Class B misdemeanor for any official, examiner, or other employee of the department to knowingly and willingly make on oath a false report as to the result of any examination.

Acts 1978, ch. 708, § 5.10; T.C.A., § 45-1710.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1307. False swearing.

It is a Class C misdemeanor for any person to willfully and knowingly swear or affirm falsely when being examined under oath by any examiner or by the commissioner, or a hearing examiner in regard to any matter.

Acts 1978, ch. 708, § 5.11; T.C.A., § 45-1711.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1308. Unlawful disclosure of information.

It is a Class C misdemeanor for any official, examiner, or other employee of the department to disclose any information concerning an association or any director, officer, agent, or of the association, obtained in the course or as a result of the performance of official duties, other than disclosure that is required by this chapter.

Acts 1978, ch. 708, § 5.12; T.C.A., § 45-1712.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

Cross-References. Confidential records, § 10-7-504.

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

45-3-1309. Director acting to detriment of association.

It is a Class B misdemeanor for any director of an association to concur in any vote or act of the directors of the association if the director knows or has reason to know that the vote or act is intended to:

  1. Place the association in an impaired condition;
  2. Cause the association to pay dividends on its outstanding capital stock in violation of law;
  3. Cause a reduction of the capital stock of an association in violation of law;
  4. Cause the association to receive or discount any note or other evidence of debt in payment of capital stock required to be paid; or
  5. Apply any of the funds of the association, except as permitted by law, directly or indirectly, to the purchase of shares of its own capital stock.

Acts 1978, ch. 708, § 5.13; T.C.A., § 45-1713.

Compiler's Notes. For repeal of the former section, see Compiler's Notes to § 45-3-1201.

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

45-3-1310. Appropriation of property and false entries.

It is a Class B misdemeanor for any officer, director, agent, or employee of an association to, directly or indirectly:

  1. Knowingly, or with intent to defraud, receive or possess any of its property otherwise than in payment of a just demand, and omit to make, or cause the omission of, a full and true entry thereof in the books and accounts of the association;
  2. Knowingly concur in the omission of any material entry in its books or accounts; or
  3. Knowingly cause to be published a false representation that the association is in a better financial condition than it actually is.

Acts 1978, ch. 708, § 5.14; T.C.A., § 45-1714.

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

45-3-1311. Defamation of business reputation.

It is a Class B misdemeanor for any person to knowingly make, utter, circulate, or transmit to any other person or persons, any statement untrue in fact, derogatory to the financial condition of any association subject to this chapter, or any federal association in this state, with intent to injure the financial institution, or who shall counsel, aid, procure, or induce another to originate, make, utter, transmit, or circulate the untrue statement, with like intent.

Acts 1978, ch. 708, § 5.15; T.C.A., § 45-1715.

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

45-3-1312. Commissioner to submit violations to district attorney general.

The commissioner shall submit to the district attorneys general for the respective counties of this state any criminal violation of any provisions of this chapter known by the commissioner to have occurred in the county.

Acts 1978, ch. 708, § 5.16; modified; T.C.A., § 45-1716.

45-3-1313. Criminal sanctions for violations.

  1. Except as otherwise specifically provided in this chapter, any person responsible for an act or omission expressly declared to be a criminal offense by any provision of this chapter commits:
    1. A Class C misdemeanor; or
    2. If the act or omission was intended to defraud, a Class E felony.
  2. Any director, officer, agent, or employee of an association is deemed responsible for an act or omission of the association declared by this chapter to be a criminal offense whenever, knowing that the act or omission is unlawful, the director, officer, agent or employee participates in authorizing, executing, ratifying or concealing the act or omission.
  3. Unless otherwise provided by this chapter, it is no defense to a criminal prosecution under this chapter that the defendant did not know the facts establishing the criminal character of the act or omission charged if the defendant reasonably could and should have known the facts in the proper performance of the defendant's duties.

Acts 1978, ch. 708, § 5.17; T.C.A., § 45-1717; Acts 1989, ch. 591, §§ 39, 113.

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

45-3-1314. Injunction.

Whenever a violation of any provision of this chapter by any association or any director, officer, agent, or employee of the association is threatened or impending such that immediate and substantial injury to the association or to its depositors or stockholders will ensue, a court of competent jurisdiction shall, upon suit of the commissioner, issue an injunction restraining the violation.

Acts 1978, ch. 708, § 5.18; T.C.A., § 45-1718.

Part 14
Reciprocal Savings Institution Act

45-3-1401. Short title.

This part shall be known and may be cited as the “Tennessee Reciprocal Savings Institution Act.”

Acts 1985, ch. 268, § 1; 1990, ch. 650, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

Tennessee Reciprocal Banking Act, title 45, ch. 12.

45-3-1402. Part definitions.

Notwithstanding other provisions of this title, as used in this part, unless the context otherwise requires:

  1. “Acquire” means:
    1. The merger or consolidation of one (1) association with another association, or a savings and loan holding company with another savings and loan holding company;
    2. The acquisition of the direct or indirect ownership or control of voting shares of an association or savings and loan holding company if, after the acquisition, the acquiring association or savings and loan holding company will directly or indirectly own or control more than five percent (5%) of any class of voting shares of the acquired association or savings and loan holding company;
    3. The direct or indirect acquisition of all or substantially all of the assets of an association or savings and loan holding company; and
    4. The taking of any other action that would result in the direct or indirect control of an association or savings and loan holding company;
  2. “Association” means a mutual or capital stock savings and loan association, building and loan association or savings bank chartered under the laws of any one (1) of the states or by the federal home loan bank board, pursuant to the Home Owners' Loan Act of 1933 (12 U.S.C. § 1464);
  3. “Branch office” means any office at which an association accepts deposits. “Branch office” does not include:
    1. Unmanned automatic teller machines, point-of-sale terminals or similar unmanned electronic banking facilities at which deposits may be accepted;
    2. Offices located outside the United States; and
    3. Loan production offices, representative offices, service corporation offices, or other offices at which deposits are not accepted;
  4. “Commissioner” means the commissioner of financial institutions;
  5. “Company” means that which is set forth in the Federal Savings and Loan Holding Company Act (12 U.S.C. § 1730a(a)(1)(C) [repealed]);
  6. “Control” means that which is set forth in the Federal Savings and Loan Holding Company Act (12 U.S.C. § 1730a(a)(2) [repealed]);
  7. “Deposits” means all demand, time and savings deposits, without regard to the location of the depositor; provided, that “deposits” does not include any deposits by associations. For purposes of this part, determination of deposits shall be made with reference to regulatory reports of condition or similar reports made by or to state and federal regulatory authorities;
  8. “Federal association” means an association chartered by the federal home loan bank board pursuant to the Home Owners' Loan Act of 1933;
  9. “Out-of-state savings and loan holding company” means a savings and loan holding company that has its principal place of business in a state other than Tennessee and that is not controlled by any other savings and loan holding company;
  10. “Principal place of business” of an association means the state in which the aggregate deposits of the association are the largest. For the purposes of this part, the principal place of business of a savings and loan holding company is the state where the aggregate deposits of the association subsidiaries of the holding company are the largest;
  11. “Savings and loan holding company” means any company that directly or indirectly controls an association or controls any other company that is a savings and loan holding company;
  12. “Service corporation” means any corporation, the majority of the capital stock of which is owned by one (1) or more associations and that engages, directly or indirectly, in any activities that may be engaged in by a service corporation in which an association may invest under the laws of one (1) of the states or under the laws of the United States;
  13. “State” means any state of the United States and the District of Columbia;
  14. “State association” means an association organized under the laws of one (1) of the states;
  15. “Subsidiary” means that which is set forth in the Federal Savings and Loan Holding Company Act (12 U.S.C. § 1730a(a)(1)(H) [repealed]);
  16. “Tennessee association” means an association organized under the laws of the state of Tennessee or under the laws of the United States and that:
    1. Has its principal place of business in the state of Tennessee;
    2. Which if controlled by an organization, the organization is either a Tennessee association, southern region association, Tennessee savings and loan holding company, or a southern region savings and loan holding company; and
    3. More than eighty percent (80%) of its total deposits, other than deposits located in branch offices acquired pursuant to § 123 of the Garn-St. Germain Depository Institutions Act of 1982 (12 U.S.C. § 1730a(m) [repealed]), or comparable state law, are in its branch offices located in one (1) or more of the southern region states; and
  17. “Tennessee savings and loan holding company” means a savings and loan holding company that has its principal place of business in Tennessee and that is not controlled by any other savings and loan holding company.

Acts 1985, ch. 268, § 1; 1989, ch. 413, § 1; 1990, ch. 650, § 2.

45-3-1403. Acquisitions by out-of-state savings and loan holding companies or out-of-state associations.

  1. An out-of-state savings and loan holding company or out-of-state association that does not have a Tennessee association subsidiary (other than a Tennessee association subsidiary that was acquired either pursuant to § 123 of the Garn-St. Germain Depository Institutions Act of 1982 (12 U.S.C. § 1730a(m)) [repealed], or comparable provisions in state law, or in the regular course of securing or collecting a debt previously contracted in good faith) may acquire a Tennessee savings and loan holding company or a Tennessee association with the approval of the commissioner.
  2. The out-of-state savings and loan holding company or out-of-state association shall submit to the commissioner an application for approval of the acquisition, which application shall be approved only if:
    1. The commissioner determines that the laws of the state in which the out-of-state savings and loan holding company or out-of-state association making the acquisition has its principal place of business permit Tennessee savings and loan holding companies and Tennessee associations to acquire associations and savings and loan holding companies in that state; and
    2. The commissioner determines that the laws of the state in which the out-of-state savings and loan holding company or out-of-state association making the acquisition has its principal place of business permit the out-of-state savings and loan holding company or out-of-state association to be acquired by the Tennessee savings and loan holding company or Tennessee association sought to be acquired.

Acts 1985, ch. 268, § 1; 1990, ch. 650, § 3.

45-3-1404. Branch banks and subsidiaries.

Notwithstanding any other provision of law to the contrary, a resulting institution may create and operate branch banks or subsidiaries in any county where the merging or converting association had branch offices or subsidiaries in existence or had applications for branches filed pending approval by the appropriate authority on April 23, 1985.

Acts 1985, ch. 268, § 3.

Part 15
Mutual Savings and Loan Holding Company Act

45-3-1501. Short title.

This part shall be known and may be cited as the “Tennessee Mutual Savings and Loan Holding Company Act.”

Acts 1989, ch. 354, § 1.

Cross-References. Negotiable instruments, title 47, ch. 3.

45-3-1502. Part definitions.

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

  1. “Commissioner” means the commissioner of financial institutions;
  2. “Principal place of business” of a mutual savings and loan holding company means the state in which the total deposits of all offices of all subsidiaries are the largest as shown by the most recent reports of condition filed with state or federal regulatory authorities;
  3. “Savings and loan mutual holding company” means any company that, directly or indirectly, or acting in concert with one (1) or more other persons or through one (1) or more subsidiaries, owns, controls, or holds with power to vote, or holds proxies representing more than twenty-five percent (25%) of the voting shares or rights of any association or savings bank or savings and loan holding company or controls in any manner, whether by holding of proxies or otherwise, the election of a majority of the directors of the institution. Notwithstanding the foregoing, no holding company shall be deemed to have control of or over a savings institution or holding company:
    1. By virtue of its ownership or control of shares in a fiduciary capacity arising in the ordinary course of its business;
    2. By virtue of its ownership or control of shares acquired by it in connection with its underwriting of securities that are held only for a period of time that will permit the sale of the shares upon a reasonable basis;
    3. By virtue of its holding any shares as collateral taken in the ordinary course of securing a debt or other obligation;
    4. By virtue of its ownership or control of shares acquired in the ordinary course of collecting a debt or other obligation previously contracted in good faith, until five (5) years after the date acquired; or
    5. By virtue of its voting rights with respect to shares of any savings institution or holding company acquired in the course of a proxy solicitation in the case of a company formed and operated for the sole purpose of participating in a proxy solicitation;
  4. “Subsidiary,” whether of an individual or a company, means any company that is controlled by the person or by a company that is a subsidiary of the person by virtue of this part; and
  5. “Tennessee mutual holding company” means a savings and loan holding company whose principal place of business is in Tennessee and that is not controlled, directly or indirectly, by another savings and loan holding company whose principal place of business is outside Tennessee.

Acts 1989, ch. 354, § 2.

45-3-1503. Savings and loan holding companies and their subsidiaries — Registration requirements.

Each savings and loan holding company and each subsidiary of the holding company shall register with the commissioner within one hundred eighty (180) days after July 3, 1989, or within ninety (90) days after becoming a mutual savings and loan holding company, whichever is later. Each mutual savings and loan holding company and each subsidiary of the holding company shall register on forms prescribed by the commissioner, which shall include information with respect to the financial condition, ownership, management, and inter-company relations of the mutual holding company and its subsidiaries and related matters that the commissioner deems necessary or appropriate to carry out the purposes of this part.

Acts 1989, ch. 354, § 3.

45-3-1504. Mutual savings and loan holding companies and their subsidiaries — Reports — Examination — Fees.

With respect to each mutual savings and loan holding company and each subsidiary of the holding company, the following shall apply:

  1. Each mutual savings and loan holding company and each subsidiary of the holding company shall file with the commissioner reports required by the commissioner. The reports shall be in the form that the commissioner prescribes. Each report shall contain information concerning the operations of each mutual savings and loan holding company and subsidiary that the commissioner may require;
  2. Each mutual savings and loan holding company shall maintain books and records prescribed by the commissioner;
  3. Each mutual savings and loan holding company and each subsidiary of the holding company shall be subject to examination that the commissioner prescribes;
  4. Each mutual savings and loan holding company under this part may engage in activities that the commissioner by regulation may establish not inconsistent with any applicable federal law;
  5. Each mutual savings and loan holding company operating under this part shall pay and be assessed by the commissioner fees and charges as may be necessary to cover the cost of its examination and supervision under this part; and
  6. The commissioner is empowered to promulgate reasonable rules and regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the purpose of establishing fees to support the registration, examination, and supervision of companies under this part, including fees for the costs of application and issuance of a charter.

Acts 1989, ch. 354, § 4.

45-3-1505. Acquisitions — Application — Approval required.

A mutual savings and loan holding company may acquire control of a subsidiary, association, or mutual savings and loan holding company upon application to and the prior written approval of the commissioner. The application shall be in the form prescribed by the commissioner and shall contain information that enables the commissioner to determine if the acquisition is consistent with the public interest of maintaining a sound financial system.

Acts 1989, ch. 354, § 5.

45-3-1506. Ownership limitations — Statutory compliance.

No mutual savings and loan holding company other than a Tennessee mutual savings and loan holding company may control or own more than five percent (5%) of the voting shares or rights of any Tennessee association or Tennessee savings and loan holding company unless the mutual savings and loan holding company meets the requirements of a southern region savings and loan holding company as defined in § 45-3-1402. Any acquisition of a Tennessee association (mutual or stock) or Tennessee savings and loan mutual holding company shall be governed by and meet the requirements of part 14 of this chapter.

Acts 1989, ch. 354, § 6.

Compiler's Notes. Section 45-3-1402(9), referred to in this section, no longer defines a “southern region savings and loan holding company.” Section 45-3-1402(9) was rewritten by Acts 1990, ch. 650, § 2; it now refers to an “out-of-state savings and loan holding company”.

45-3-1507. Appointment of personnel — Bonding requirements.

The commissioner shall appoint, subject to any applicable provisions of law, a supervisor, such examiners, employees, experts and special assistants as may be necessary to effectively carry out this part. The commissioner shall require each supervisor, examiner, expert, and special assistant employed or appointed by the commissioner to give bond, with security to be approved by the commissioner, in an amount set by the commissioner, conditioned for the faithful discharge of the person's duties. Premium on the bond shall be paid by the commissioner from funds appropriated for that purpose. The bond, together with verification of payment of the premium on the bond, shall be on file in the office of the commissioner and subject to public inspection.

Acts 1989, ch. 354, § 7.

45-3-1508. Commissioner — Duties and powers.

The commissioner has the duty and power to:

  1. Exercise the rights, powers and duties set forth in this part or in any other related or applicable act;
  2. Promulgate, in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, regulations that are reasonable or necessary to accomplish the purposes of this part;
  3. Direct and supervise the administrative and technical activities incident to mutual savings and loan holding companies and to create if, in the exercise of discretion, the commissioner deems the creation desirable, an advisory committee that upon request will make recommendations to the commissioner;
  4. Make an annual report with respect to mutual savings and loan holding companies and their operation under this part that the commissioner deems desirable, or that the governor requests;
  5. Cause suit to be filed in the commissioner's name to enforce any law of this state that applies to an association, subsidiary of an association, or mutual holding company operating under this part;
  6. Prescribe a uniform manner in which the books and records of every mutual holding company is to be maintained;
  7. Establish reasonable and rationally based fee structures for each mutual holding company operating under this part; and
  8. Approve an application for a charter, if the commissioner affirmatively finds from all the information furnished with the application and any official records that there has been compliance with the prerequisites of this part. The commissioner, if so finding, shall state the approval and findings in writing.

Acts 1989, ch. 354, § 7.

Chapter 4
Credit Unions

Part 1
Formation

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

45-4-201. Election of directors — Terms.

  1. At an annual meeting, the members shall elect a board of directors. The directors shall be members of the credit union. All members of the board of directors and all officers shall hold their several offices for the terms that may be provided in the bylaws.
  2. Upon their election, the names of the members of the board of directors shall be entered in the minutes of the meeting at which they are elected, and filed in the permanent records of the credit union.

Acts 1923, ch. 68, § 11; Shan. Supp., § 2198a16; Code 1932, § 3844; Acts 1937, ch. 264, § 7; C. Supp. 1950, § 3844; T.C.A. (orig. ed.), § 45-1812; Acts 1980, ch. 559, § 2; 1985, ch. 17, § 1; 1989, ch. 223, § 2.

45-4-202. Board of directors — General management — Special duties.

The board of directors has the duty of general management of the affairs, funds and records of the corporation, and shall meet as often as may be necessary, but in no event less than monthly. Unless the bylaws shall specifically reserve any or all of the duties to members, it is the special duty of the directors to:

  1. Act upon all applications for membership and on the expulsion of members; however, the board of directors may appoint a membership officer from among the members of the credit union, other than the treasurer, assistant treasurer or loan officer, who may approve applications for membership under the conditions that the board may prescribe, except that this membership officer shall submit to the board at each regular meeting a list of approved or pending applications for membership received since the previous regular meeting;
  2. Inspect or cause to be inspected the securities, cash, and accounts, and to review the acts of all committees and the officers of the credit union at frequent intervals, but in no event less than annually. The board of directors shall make or cause to be made, at least annually, a thorough review or audit of the receipts, disbursements, income, assets and liabilities of the credit union for the year and shall make a full report thereon to the membership, which report shall be read or provided at the annual meeting and shall be filed and preserved with the records of the credit union. The board of directors shall determine whether to appoint a supervisory committee to carry out these duties and functions and to report its findings to the board in accordance with its directives;
  3. Determine, from time to time, rates of interest that will be allowed on members' special accounts and charged on loans;
  4. Determine the amount of the blanket surety bond that is required for all officials and employees, which amount shall be as follows:
    1. For one (1) year from the charter date, the bond shall be not less than one thousand dollars ($1,000);
    2. Thereafter, the bond shall not be less than thirty percent (30%) of the true assets of the credit union, or, if the bond contains a deductible clause:
      1. The bond shall exceed the deductible amount provided in the clause by not less than thirty percent (30%) of the true assets of the credit union;
      2. The amount of the bond shall be adjusted annually subject to a maximum bond requirement in any case of one million dollars ($1,000,000), or a greater amount required by the credit union share insuror; and
      3. The blanket surety bond does not include a deductible clause without the written approval of the commissioner of financial institutions, upon terms and conditions that the commissioner may establish by rule, and unless the credit union maintains all statutory and insuror reserves, including a reserve for the deductible equal to the amount of the deductible;
  5. Fix, if it deems necessary, the maximum number of shares that may be held by and the maximum amount that may be loaned to any one (1) member;
  6. Declare dividends;
  7. Fill vacancies on the board of directors until the election and qualification of successors;
  8. Have charge of the investment of funds of the corporation, other than loans to members and to perform other duties that the members may, from time to time, authorize;
  9. Review the acts of all committees and the officers and to remove by two-thirds (2/3) vote of the entire board of directors any or all members of the committees or the officers for cause, including the failure to discharge assigned responsibilities, any acts involving dishonesty or breach of trust, any act, omission or practice that constitutes a breach of fiduciary duty to the credit union or that is a violation of the credit union's bylaws, policies, or the laws or regulations of the state; and
  10. On January 1, 1990, all credit committees and supervisory committees existing by virtue of prior legislation shall be dissolved. Resolutions or other actions taken by a board of directors prior to January 1, 1990, for the purpose of establishing committees or procedures consistent with its provisions and so stating, shall be valid, and shall be effective as of January 1, 1990.

Acts 1923, ch. 68, § 12; Shan. Supp., § 2198a18; Code 1932, § 3845; Acts 1963, ch. 30, § 3; 1979, ch. 86, § 3; T.C.A. (orig. ed.), § 45-1813; Acts 1985, ch. 17, § 2; 1989, ch. 223, §§ 3-6; 1992, ch. 584, §§ 1, 2.

45-4-203. Choice between credit committee or loan officers — Duties — Loans — Applications and security.

  1. The board of directors shall determine whether the credit union shall have a credit committee. If the board determines that the credit union shall not have a credit committee, the board of directors shall appoint one (1) or more loan officers, and the loan officer or officers shall approve or disapprove every loan or advance made by the corporation to members. If the board of directors determines that the credit union shall have a credit committee, the credit committee shall be appointed by the board of directors, report to the board of directors, serve under the terms and conditions determined by the board of directors and approve or disapprove every loan or advance made by the corporation to members, except as herein provided. The credit committee may appoint one (1) or more loan officers and delegate to the loan officer or officers the power to approve or disapprove loans. Each loan officer shall furnish to the credit committee, or, in the absence of the committee, to the board of directors, a record of each loan approved or not approved by the officer within thirty (30) days of the date of the filing of the application for the loan. No individual shall have authority to disburse funds of the credit union for any loan that has been approved by that person in capacity as a loan officer.
  2. Every application for a loan shall be in writing, on a form prepared by the board of directors, and shall state the purpose for which the loan is desired and the security, if any, offered.
  3. The board of directors shall establish the maximum limits for unsecured loans, subject, however, to the other provisions of this section. Endorsement of a note or assignment of shares in any credit union may be considered security in the meaning of this section. When a loan is considered by the credit committee, no loan shall be made unless it has received the unanimous approval of the members of the committee present when the loan was considered, which number shall constitute at least a majority of the committee. No loan shall be made to any member that causes the member to become indebted to the credit union in the aggregate, upon loans made to the member, in excess of ten percent (10%) of the credit union's assets, or three hundred dollars ($300), whichever is greater.
  4. An applicant for a loan may appeal to:
    1. The directors if the initial decision to disapprove the loan is made by the credit committee or by a loan officer in the absence of a credit committee; or
    2. The credit committee if the initial decision to disapprove the loan is made by a loan officer.

Acts 1923, ch. 68, § 13; Shan. Supp., § 2198a20; Code 1932, § 3847; Acts 1947, ch. 125, § 1; C. Supp. 1950, § 3847; Acts 1957, ch. 69, § 1; 1959, ch. 199, § 1; 1963, ch. 30, § 4; 1967, ch. 227, § 4; 1970, ch. 409, § 1; 1979, ch. 86, § 4; T.C.A. (orig. ed.), § 45-1815; Acts 1981, ch. 53, §§ 1-3; 1985, ch. 17, § 3; 1989, ch. 223, § 7.

45-4-204. [Reserved.]

  1. No member of the credit or supervisory committee shall receive any compensation for services as a member of the committee.
  2. As an alternative to the reimbursement for members of the board of directors in subsection (c), each member of the board of directors may be compensated subject to the following conditions:
    1. The board shall adopt a resolution stating that the credit union requires expertise among board members for the prudent general management of the affairs, funds and records of the credit union;
    2. Such compensation shall be payable to board members elected after the adoption of the resolution in subdivision (b)(1);
    3. The credit union shall adopt a policy governing the participation and attendance that a board member shall comply with in order to receive compensation; and
    4. The annual report of the credit union's income and expenses shall include board member compensation as a specific expense item.
  3. Notwithstanding subsection (a), the board of directors may provide that the credit union shall reimburse any member of the board of directors or the credit or supervisory committee for any loss of earnings caused by time spent in the service of the credit union, in an amount that the board of directors may determine, not to exceed the amount of the lost earnings.

Acts 1923, ch. 68, § 12; Shan. Supp., § 2198a19; Code 1932, § 3846; T.C.A. (orig. ed.), § 45-1814; Acts 1985, ch. 17, § 4; 2013, ch. 59, § 1.

45-4-206. Restriction on withdrawal of shares or accounts — Stop orders — Removal of officers or employees — Taking possession — Hearing.

  1. In addition to other powers conferred by this chapter, the commissioner may:
    1. Restrict the withdrawal of shares or accounts from any state credit union when the commissioner finds circumstances make the restriction necessary for the proper protection of the members' interest in the shares or accounts;
    2. Order any person to cease violating any provision of the credit union laws of this state or any lawful rule issued under those laws, or to cease engaging in any unsound practice when the practice is likely to cause financial loss to the credit union or otherwise seriously prejudice the interests of its members;
    3. Remove a director, officer, committee member or employee of a credit union who, after receipt of an order to cease under subdivision (a)(2), violates the credit union laws of this state or a lawful rule or order under those laws, or who has committed any act, omission or practice that constitutes a breach of the person's fiduciary duty to the credit union or that is a violation of the credit union laws or regulations of the state, and the act, omission or practice has caused or probably will cause substantial financial loss to the credit union. A removal order shall specify the grounds therefor, and a copy shall be sent to the credit union concerned. It is a Class A misdemeanor for any person, after receipt of a removal order, to perform any duty or exercise any power in the credit union concerned until such time as the removal order is modified or terminated by the commissioner or a reviewing court;
    4. Suspend by written order any officer, director, employee, or committee member of a credit union who has been charged with the commission of, or participation in, a felony involving dishonesty or breach of trust. The order of suspension shall remain in effect until the disposition of the charge and the indictment is final, unless the order is sooner terminated by the commissioner. In the event that a conviction with respect to the offense is entered against a director, officer, employee, or committee member and the conviction is not subject to further appellate review, the commissioner may issue an order removing the director, officer, employee, or committee member from office or employment with the credit union. A finding of not guilty shall not prohibit the commissioner from thereafter instituting proceedings against the director, officer, committee member or employee pursuant to subdivision (a)(3). It is a Class A misdemeanor for any person to perform any duty or exercise any power in the credit union concerned while the order of suspension or removal remains in effect; and
      1. Take possession of the business and property of a credit union if the commissioner finds that:
        1. The credit union is insolvent or it is otherwise in an unsound condition;
        2. Its business is being conducted in an unlawful or unsound manner;
        3. It is unable to continue normal operations;
        4. Its examination has been obstructed or impeded; or
        5. The credit union has failed to comply with a lawful order of the commissioner within a reasonable time.
      2. The commissioner may retain possession until such time as the commissioner permits the credit union to resume business, order the merger of the credit union with another credit union without the approval of the members of the credit union to be merged as required under § 45-4-903, or order the liquidation of the credit union.
  2. Notice and opportunity for hearing shall be provided in advance of any of the foregoing actions in this section taken by the commissioner. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take the action without advance notice but shall promptly afford a subsequent hearing upon application to rescind the action taken.

Acts 1923, ch. 68, § 8; Shan. Supp., § 2198a13; Code 1932, § 3841; Acts 1973, ch. 294, § 6; 1977, ch. 117, § 2; 1979, ch. 86, § 2; T.C.A. (orig. ed.), § 45-1810; Acts 1989, ch. 591, § 1; 1993, ch. 56, § 1.

Code Commission Notes.

The misdemeanor provision in (a)(4) formerly read: “It is a misdemeanor punishable under § 39-1-202 [repealed] for any person to perform any duty or exercise any power in the credit union concerned while the order of suspension or removal remains in effect.” The Code Commission deems this offense to be a Class A misdemeanor, in light of the repeal of § 39-1-202 and the language of § 40-35-110 designating unclassified misdemeanors as Class A misdemeanors.

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

45-4-207. Unlawful actions.

  1. It is unlawful for an officer, director, employee or agent of a credit union to:
    1. Maintain or authorize the maintenance of any account of the credit union in a manner that, to the person's knowledge, does not conform to the requirements prescribed by chapter 4 of this title, or by the commissioner;
    2. With intent to deceive, make any false or misleading statement or entry or omit any statement or entry that should be made in any book, account, report or statement of the credit union; or
    3. Obstruct or endeavor to obstruct a lawful examination of the credit union by an officer or employee of the department of financial institutions.
  2. A violation of this section is punishable as provided in § 45-4-208.

Acts 1988, ch. 550, § 3.

45-4-208. Penalty — Liability of officers.

  1. Any person responsible for an act or omission expressly declared to be a criminal offense by chapter 4 of this title commits:
    1. A Class A misdemeanor; and
    2. If the act or omission was intended to defraud, a Class E felony.
  2. An officer, director or employee of a credit union shall be responsible for an act or omission of the credit union declared to be a criminal offense pursuant to this chapter, whenever, knowing that the act or omission is unlawful, the officer, director or employee participates in authorizing or ratifying the omission or, having the duty to take the required action, omits to do so.
  3. Unless otherwise provided in this chapter, it shall be no defense to a criminal prosecution hereunder that the defendant did not know the facts establishing the criminal character of the act or omission charged if the defendant could and should have known the facts in the proper performance of the defendant's duty.

Acts 1988, ch. 550, § 4; 1989, ch. 591, § 1.

Cross-References. Penalties for Class A misdemeanor and Class E felony, § 40-35-111.

Part 3
Membership

45-4-301. Membership — Qualifications — Entrance fee.

  1. The membership shall consist of incorporators and persons, societies, associations, copartnerships and corporations that have been duly elected to membership and have subscribed to one (1) or more shares and have paid for the same in whole or in part, with the entrance fee as required by the bylaws, and have complied with other requirements that the certificate of organization may contain; except that a credit union shall be limited to groups having a common bond of occupation or association or to groups within a well-defined neighborhood, community, or rural district.
  2. A credit union may charge an entrance fee as may be provided in the bylaws.

Acts 1923, ch. 68, §§ 7, 15; Shan. Supp., §§ 2198a10, 2198a22; Code 1932, §§ 3838, 3849; Acts 1931, ch. 67, § 1; 1937, ch. 264, § 5; C. Supp. 1950, §§ 3838, 3849; Acts 1951, ch. 192, § 1; 1979, ch. 86, § 1; T.C.A. (orig. ed.), § 45-1807.

Law Reviews.

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

NOTES TO DECISIONS

1. Bank Customers as Members.

Where bylaws of credit union designated as including within membership customers of a certain bank and trust company, a sufficient common bond existed both as amongst the customers and between the customers and the bank as to make designation permissible. League Cent. Credit Union v. Mottern, 660 S.W.2d 787, 1983 Tenn. App. LEXIS 623 (Tenn. Ct. App. 1983).

45-4-302. Expulsion or withdrawal of members — Settlement thereon.

  1. At any regularly called meeting, the members, by a two-thirds (2/3) vote of those present, may expel from the corporation any member. A member may withdraw from a credit union or a nonmember may withdraw members' special accounts, as provided in this section, by filing a written notice of intention.
  2. All amounts paid in on shares of an expelled or withdrawing member with any dividends credited to the member's shares to the date of expulsion or withdrawal shall be paid to the member, but only after funds become available and after deducting any amounts due to the corporation by the member.
  3. All members' special accounts of an expelled or withdrawing member, with any interest accrued, shall be paid to the member, subject to sixty (60) days' notice, and after deducting any amount due to the corporation by the member.
  4. The member, when withdrawing shares or members' special accounts, shall have no further right in the credit union or to any of its benefits, but expulsion or withdrawal shall not operate to relieve the member from any remaining liability to the corporation.

Acts 1923, ch. 68, § 22; Shan. Supp., § 2198a29; Code 1932, § 3856; Acts 1963, ch. 30, § 7; T.C.A. (orig. ed.), § 45-1827.

Part 4
Shares

45-4-401. Premiums for shares prohibited.

Credit union shares shall in no event be sold at a premium by any credit union to its members.

Acts 1931, ch. 67, § 1; C. Supp. 1950, § 3849; Acts 1979, ch. 86, § 6; T.C.A. (orig. ed.), § 45-1817.

45-4-402. Shares and deposits of minors.

Shares may be issued in the name of a minor and in trust in a way and manner that the bylaws may provide.

Acts 1923, ch. 68, § 16; Shan. Supp., § 2198a23; Code 1932, § 3850; Acts 1937, ch. 264, § 8; C. Supp. 1950, § 3850; T.C.A. (orig. ed.), § 45-1818.

45-4-403. Transfer of shares.

Fully paid-up shares of a credit union may be transferred to any person upon election to membership, upon terms that the bylaws may provide.

Acts 1923, ch. 68, § 15; Shan. Supp., § 2168a22; Code 1932, § 3849; C. Supp. 1950, § 3849; Acts 1979, ch. 86, § 7; T.C.A. (orig. ed.), § 45-1819.

45-4-404. Accounts in two or more names.

Investment or other deposit accounts maintained in any credit union in the names of two (2) or more persons shall be governed by § 45-2-703.

Acts 1970, ch. 409, § 4; T.C.A., § 45-1834; Acts 1988, ch. 926, § 9.

45-4-405. Decedent shareholders or depositors.

  1. Notwithstanding § 30-2-317, where no executor or administrator of a deceased shareholder or depositor has qualified and given notice of the qualifications of the executor or administrator to the credit union, it may, in its discretion and at any time after thirty (30) days from the death of the shareholder or depositor, pay out of all accounts or contents of safe deposit boxes maintained with it by the shareholder in an individual capacity all sums that do not exceed fifteen thousand dollars ($15,000) in the aggregate:
    1. To the executor named in any will known to the credit union; or
    2. In the absence of knowledge of a purported will naming a surviving executor to:
      1. A creditor for expenses of the funeral;
      2. A creditor for the expenses of the last illness;
      3. The surviving spouse; and
      4. The next of kin; and
    3. In the case of conflicting claims, the order of priority shall be that set out in subdivision (a)(2).
  2. The receipt of any guardian, administrator or executor, duly appointed or qualified by the courts of this state or any other state, acknowledging the payment or transfer of funds, standing in the name of the person whose estate the fiduciary represents, in the form of shares or deposits in credit unions, shall be a good and sufficient acquittance for the payment or transfer and shall constitute a valid defense in favor of the credit unions against the demands or claims of all parties.
  3. No credit union shall be liable for damages, penalty or tax by reason of any payment made pursuant to this section.

Acts 1986, ch. 558, § 3; 1988, ch. 926, § 10; 1995, ch. 177, § 14; 1997, ch. 426, § 22; 2017, ch. 190, § 1.

Compiler's Notes. Acts 1997, ch. 426, § 26 provided that the amendments to this section by that act shall apply to all estates of decedents dying on or after January 1, 1998 and to all wills, other documents and proceedings related thereto.

45-4-406. “Payable-on-death” share accounts and share deposits in trust — Powers of attorney.

The following provisions of chapter 2 of this title are applicable to credit unions:

  1. Section 45-2-704 relating to contracts for “payable-on-death” share accounts and share deposits in trust;
  2. Section 45-2-707 relating to powers of attorney; and
  3. Sections 45-2-711 and 45-2-712 relating to payment of checks.

Acts 1991, ch. 118, § 1; 2014, ch. 597, § 4.

Part 5
Powers and Duties

45-4-501. Powers generally.

A credit union has the following powers:

  1. It may receive the savings of its members through the purchase of various classes of share accounts, including general or regular shares, share certificates, special accounts, share draft accounts or members' special accounts, savings accounts, certificates and notes;
  2. It may make loans to members, through the credit committee or loan officers;
  3. It may invest, through its board of directors, any of its capital, undivided profits, reserve funds, and other assets not required for loans to members as provided by this chapter, in any of the following ways:
    1. In any legally chartered bank or trust company;
    2. In any state or federal savings and loan association;
    3. In credit unions, with state or federal charters, in an amount not to exceed ten percent (10%) of the shares, members' special accounts and reserve funds of the investing credit union or of the credit union in which the investment is made, whichever amount is the smaller; and in any central credit union, state or federal, approved for the investments by the commissioner of financial institutions, in an amount not to exceed twenty-five percent (25%) of the shares, members' special accounts and reserve funds of the investing credit union or of the credit union in which the investment is made, whichever amount is smaller;
    4. In any agency or association organized either as a stock company, mutual association, or membership corporation; provided, that the membership or stockholders, as the case may be, of the agency or association are restricted to credit unions or organizations of credit unions; and provided further, that the purposes for which the agency or association is organized are designed to service or otherwise assist credit union operations in an aggregate amount not to exceed twenty-five percent (25%) of the allocations to the reserve fund of the investing credit union. Investment in the foregoing stock company, mutual association or membership corporation shall not be legal if the company or association is authorized or empowered to make loans to any person or corporation who is not a member of the credit union organization;
    5. In obligations of or securities fully guaranteed as to principal and interest by the government of the United States or of the state of Tennessee;
    6. In any bonds or other obligations issued by the Tennessee valley authority pursuant to the Tennessee Valley Authority Act of 1933, and any amendment thereto;
    7. In investments authorized under § 35-3-120, and in any investment that is lawful for federal credit unions chartered under title 12 of the United States Code;
    8. In any bonds of the state of Tennessee or any of its political subdivisions;
    9. In addition to the powers otherwise conferred upon credit unions by this chapter, central credit unions, as defined in § 45-4-101(c) and (d), have the power to invest in the obligations as are permitted for state banks under § 45-2-607(a)(4) and (a)(5); and
    10. In the volunteer corporate credit union;
  4. It may undertake other activities, not inconsistent with  this chapter, that the bylaws may provide;
  5. To provide at the sole option of the borrower, as collateral at the expense of the borrower, insurance against the hazards of death or disability, or both, of the borrower. The insurance shall be written by an agent and with a company authorized to do business in Tennessee, or under a group policy issued by a company authorized to do business in Tennessee, at rates approved by the commissioner of commerce and insurance. The credit union may have the insurance written by an agent who is an employee, servant, or agent of the credit union or the insurance may be effected under a group policy issued to the credit union. The amount and type of insurance that may be accepted under this subdivision (5) shall bear a reasonable relation to the existing hazard and risk of loss and shall be subject to the following terms and conditions:
    1. Life insurance shall be in an amount that does not at any time during the term of the loan exceed the original face amount of the note and shall be for a period that does not exceed the term of the loan;
    2. Insurance against the hazard of disability of the borrower shall provide equal benefits, the total of all of which shall not exceed the face amount of the note and shall not be payable beyond the maturity of the loan;
    3. A credit union that obtains a group policy for the purpose of perfecting any insurance that may be required or accepted hereunder, or that obtains any life or disability insurance described in subdivisions (5)(A) and (5)(B), at the request of the borrower, shall contract with the insurance company for a provision therein that the coverage effected as to each individual insured debtor or borrower shall terminate automatically on prepayment in full of the note by refinancing, renewal or otherwise, and the unearned premium refunded to the credit union. The credit union shall pay the unearned premium refund to the borrower;
    4. At the time the loan is made, the lender shall give the borrower a memorandum, showing the name of the insurance company, the types of insurance issued, a description of the coverages, the date of the policy, which shall be the date on which the loan is made, the premium charged for each type of insurance and, if issued under a group policy, the number of the master policy; and
    5. If the premiums for insurance are deducted from the proceeds of the loan, the amount so deducted shall not exceed the premiums charged by the insurer for the insurance;
  6. It may permit its members to withdraw either shares or funds in members' special accounts through a remote withdrawal system utilizing drafts drawn against the members' credit union and payable through a bank, and may engage in any and all other share or fund withdrawal activities heretofore or hereafter authorized by law or regulation for federally chartered credit unions; provided, that no credit union shall allow any person who is not a member of the credit union to maintain an account with the credit union permitting the withdrawal; and provided further, that any credit union utilizing the remote withdrawal of shares and members' special accounts shall be required to establish a reserve against the accounts in an amount not less than the reserve against demand deposits that is required for state chartered banks. The authority conferred by this subdivision (6) shall exist so long as federally chartered credit unions are authorized to engage in the activities;
  7. It may receive United States department of the treasury tax and loan accounts, and pledge collateral to secure treasury tax and loan funds;
  8. It may do all those things permitted to nonprofit corporations generally by title 48, chapter 58, part 5, relative to the indemnification of officers and directors. For the purpose of this subdivision (8), members of the supervisory committee and of the credit committee shall be treated as members of the board of directors; and
  9. It may exercise any power or engage in any activity that it could exercise or engage in if it were a federally chartered credit union, subject to the regulation by the commissioner of financial institutions for the purpose of maintaining the credit union's safety and soundness.

Acts 1923, ch. 68, § 6; Shan. Supp., § 2198a9; Code 1932, § 3837; Acts 1937, ch. 264, § 4; mod. C. Supp. 1950, § 3837; Acts 1963, ch. 30, § 2; 1967, ch. 227, § 3; 1972, ch. 677, § 1; 1974, ch. 557, § 1; 1976, ch. 525, § 1; 1977, ch. 115, § 1; 1978, ch. 552, §§ 2, 3; T.C.A. (orig. ed.), § 45-1806; Acts 1985, ch. 17, §§ 5, 6; 1986, ch. 558, §§ 1, 5; 1987, ch. 100, §§ 2, 3; 1988, ch. 550, § 1; 1993, ch. 55, § 1.

Compiler's Notes. The Tennessee Valley Authority Act of 1933, referred to in this section, is compiled in 16 U.S.C. § 831.

Cross-References. Loans and investments utilizing federal housing administration, Federal National Mortgage Association, and veterans' administration authorized, § 35-3-120.

Membership in Volunteer State Corporate Central Credit Union, § 45-4-1207.

Tennessee Valley Authority, investment in bonds and obligations of, § 35-3-119.

Law Reviews.

Selected Tennessee Legislation of 1986, 54 Tenn. L. Rev. 457 (1987).

45-4-502. Credit union may borrow.

  1. A credit union has the power to borrow from any source, but the total of borrowing shall at no time exceed fifty percent (50%) of the member accounts and surplus of the borrowing credit union.
  2. A central credit union, as defined in § 45-4-101, has the power to borrow from any source, and is not subject to the limitations of subsection (a).

Acts 1923, ch. 68, § 18; Shan. Supp., § 2198a25; Code 1932, § 3852; Acts 1978, ch. 552, § 5; T.C.A. (orig. ed.), § 45-1823; Acts 1982, ch. 722, § 1.

45-4-503. Dividends.

    1. Subject to the limitations contained in subsection (e), a credit union may declare dividends at rates it deems appropriate for periods and classes of accounts that the board of directors may establish.
    2. A credit union may establish higher dividend rates for shares held in excess of specified minimum amounts.
  1. Shares that become fully paid during the preceding dividend period shall be entitled to a proportional part of the dividend.
  2. Dividend credit for a month may be accrued on shares that are or become fully paid during the first ten (10) days of that month.
  3. A credit union may provide for the payment of dividends from the date of deposit or the date when shares become fully paid to the date of withdrawal of the deposits or shares, if the bylaws so provide.
  4. No dividends shall be authorized or paid that will total more than the current earnings of the credit union after the required reserve transfer, undivided profits, and the amount held in regular reserves in excess of legal requirements unless the commissioner of financial institutions shall have granted written approval in advance of the payment of the dividends.
  5. Notwithstanding subsection (e), central credit unions, as defined in § 45-4-101, may declare and pay dividends from net earnings at the times and for the periods that the bylaws of the central credit unions may provide.

Acts 1923, ch. 68, § 21; Shan. Supp., § 2198a28; Code 1932, § 3855; Acts 1957, ch. 69, § 2; 1963, ch. 30, § 6; 1967, ch. 227, § 6; 1973, ch. 374, § 1; 1974, ch. 557, § 2; 1978, ch. 552, § 6; T.C.A. (orig. ed.), § 45-1826; Acts 1982, ch. 722, §§ 2, 3; 1986, ch. 558, § 5.

45-4-504. Change of chief place of business upon giving notice.

A credit union may change its chief place of business on written notice to the commissioner of financial institutions.

Acts 1923, ch. 68, § 24; Shan. Supp., § 2198a31; Code 1932, § 3858; Acts 1973, ch. 294, § 6; T.C.A. (orig. ed.), § 45-1829; Acts 1986, ch. 558, § 5.

45-4-505. Application for insurance — Time limit — Failure — Effect.

  1. Any new credit union organized under this chapter shall, prior to commencing its operations, obtain and thereafter maintain insurance of its share and deposit balances by membership in either the state credit union share insurance corporation or the National Credit Union Association.
  2. If it appears at any time that any credit union within this section has failed to maintain the insurance, the commissioner shall, after hearing, or opportunity for hearing, order the credit union to correct the condition and shall grant it not less than thirty (30) days to comply. Upon failure to do so, the commissioner may suspend or revoke the charter, place the credit union in involuntary liquidation and appoint a liquidating agent for the credit union under part 9 of this chapter.

Acts 1976, ch. 428, § 1; T.C.A., § 45-1850; Acts 1986, ch. 558, § 5.

Code Commission Notes.

Former subsection (a), concerning credit unions organized and operating under the provisions of title 45, chapter 4 on February 20, 1976, being required prior to December 31, 1976, to make application for insurance, was deemed obsolete by the code commission in 2007.

Cross-References. Volunteer State Corporate Central Credit Union exempt from share and deposit insurance requirements, § 45-4-1212.

Part 6
Loans

45-4-601. Part definitions.

  1. As used in this part, unless the context otherwise requires:
    1. “Installment loan” means a loan repayable in installments, whether the payments are regular or irregular, whether the payments are in substantially equal amounts or otherwise, whether the payments are made on closed-end loans or open-end loans, and whether or not interest on the loan has been precomputed; and
    2. “Loans” are transactions involving the transfer, or the crediting, by a lender to, or for the benefit of, a borrower or another, of any amount of money, with a promise of repayment.
  2. Other terms used in this part, not defined in this part, have the same meanings given to them by the general statute pertaining to interest and other charges by lenders or creditors.

Acts 1923, ch. 68, § 17; Shan. Supp., § 2198a24; Code 1932, § 3851; Acts 1951, ch. 192, § 2; 1976, ch. 525, § 2; 1979, ch. 207, § 1; T.C.A. (orig. ed.), § 45-1820.

45-4-602. Interest.

  1. A credit union may lend to its members at a maximum effective rate of interest, which shall not be in excess of the greater of:
    1. The applicable formula rate; or
    2. The rate of interest permitted to be charged by credit unions chartered by the federal government.
  2. For installment loans, the maximum effective rate of interest shall:
    1. Be determined in accordance with the actuarial method;
    2. Be calculated, in the case of a precomputed loan, on the assumption that all scheduled payments will be made as contracted; and
    3. Not be affected by the prepayment of the loan, in whole or in part.

Acts 1923, ch. 68, § 17; Shan. Supp., § 2198a24; Code 1932, § 3851; Acts 1951, ch. 192, § 2; 1976, ch. 525, § 2; 1979, ch. 207, § 1; T.C.A. (orig. ed.), § 45-1820; Acts 1986, ch. 558, § 2.

Textbooks. Tennessee Jurisprudence, 24 Tenn. Juris., Usury, § 14.

Law Reviews.

Selected Tennessee Legislation of 1986, 54 Tenn. L. Rev. 457 (1987).

45-4-603. Loan charges.

In addition to the charging and collecting of interest as provided in § 45-4-602, a credit union shall be entitled to charge and collect from its members loan charges that are fair and reasonable compensation for some expense incurred or to be suffered by the credit union, or some service rendered or to be rendered, in connection with a particular loan; and in any event, the loan or contract shall not include, except as part of interest, charges for costs indirectly related to that loan or contract, including, but not limited to, overhead of the credit union, loan losses, and charges for services performed by officers or employees of the credit union unless the services are rendered directly for the inspection of collateral, the servicing of the loan after it is made, or the collection thereof.

Acts 1923, ch. 68, § 17; Shan. Supp., § 2198a24; Code 1932, § 3851; Acts 1951, ch. 192, § 2; 1976, ch. 525, § 2; 1979, ch. 207, § 1; T.C.A. (orig. ed.), § 45-1820.

Textbooks. Tennessee Jurisprudence, 24 Tenn. Juris., Usury, § 14.

45-4-604. Priority of loans.

  1. The funds of credit unions shall be used first for loans to members.
  2. Funds of credit unions not required for loans to members may be invested as otherwise provided by law.
  3. If available funds do not permit all loans to be made that have been approved by the credit committee or loan officer, preference shall be given to the smaller loans that have been approved.

Acts 1923, ch. 68, § 17; Shan. Supp., § 2198a24; Code 1932, § 3851; Acts 1951, ch. 192, § 2; 1976, ch. 525, § 2; 1979, ch. 207, § 1; T.C.A. (orig. ed.), § 45-1820.

Cross-References. Investment in obligations of federal housing administration, Federal National Mortgage Association and veterans' administration, § 35-3-120.

Law Reviews.

Creditors' Rights and Security Transactions — 1962 Tennessee Survey (Forrest W. Lacey), 16 Vand. L. Rev. 706.

NOTES TO DECISIONS

1. In General.

Charge of one percent (1%) on unpaid balance of loan by credit union that included all charges of making loan and interest was not usurious. Miller v. State, 195 Tenn. 181, 258 S.W.2d 751, 1953 Tenn. LEXIS 319 (1953).

2. Presumption of Application of Statute.

In action commenced on note due federal credit union commenced in general sessions court of Shelby County by warrant and appealed to circuit court, the pleadings being ore tenus the Court of Appeals could indulge in the presumption that evidence was offered to bring the note within the provisions of this section so as to refute prima facie indication of usury where no bill of exceptions was filed on appeal. Van Pelt v. P. & L. Fed. Credit Union, 39 Tenn. App. 363, 282 S.W.2d 794, 1955 Tenn. App. LEXIS 74 (1955).

3. Usury.

Loan by credit union with interest specified at rate of one percent per month on unpaid balance was usurious under former § 47-1604 (now § 47-14) even though this section permitted credit unions to make loans with total of interest and all other charges not to exceed one percent per month on unpaid balance. Rush v. Chattanooga Du Pont Employees' Credit Union, 210 Tenn. 344, 358 S.W.2d 333, 1962 Tenn. LEXIS 445 (1962).

45-4-605. Conditions of lending.

A credit union may loan to its members, as provided, for the purposes and upon the security that the bylaws may provide and the credit committee shall approve.

Acts 1923, ch. 68, § 19; Shan. Supp., § 2198a26; Code 1932, § 3853; Acts 1937, ch. 264, § 9; C. Supp. 1950, § 3853; Acts 1963, ch. 30, § 5; 1970, ch. 409, § 3; 1975, ch. 225, § 1; 1978, ch. 552, § 4; 1979, ch. 86, § 8; T.C.A. (orig. ed.), § 45-1821.

45-4-606. Agricultural loans.

A member who needs funds with which to purchase necessary supplies for growing crops may receive a loan in fixed monthly installments instead of one (1) sum.

Acts 1923, ch. 68, § 19; Shan. Supp., § 2198a26; Code 1932, § 3853; Acts 1937, ch. 264, § 9; C. Supp. 1950, § 3853; Acts 1963, ch. 30, § 5; 1970, ch. 409, § 3; 1975, ch. 225, § 1; 1978, ch. 552, § 4; 1979, ch. 86, § 8; T.C.A. (orig. ed.), § 45-1821.

45-4-607. Repayment on any business day.

A borrower may repay the whole or any part of the loan on any day on which the office of the corporation is open for the transaction of business.

Acts 1923, ch. 68, § 19; Shan. Supp., § 2198a26; Code 1932, § 3853; Acts 1937, ch. 264, § 9; C. Supp. 1950, § 3853; Acts 1963, ch. 30, § 5; 1970, ch. 409, § 3; 1975, ch. 225, § 1; 1978, ch. 552, § 4; 1979, ch. 86, § 8; T.C.A. (orig. ed.), § 45-1821.

45-4-608. Loans to directors and committee members.

Subject to the limitations on loans contained in § 45-4-203 and as specified in written loan policies established by the board of directors, a director or member of the credit or supervisory committee shall be allowed to borrow from the corporation.

Acts 1923, ch. 68, § 19; Shan. Supp., § 2198a26; Code 1932, § 3853; Acts 1937, ch. 264, § 9; C. Supp. 1950, § 3853; Acts 1963, ch. 30, § 5; 1970, ch. 409, § 3; 1975, ch. 225, § 1; 1978, ch. 552, § 4; 1979, ch. 86, § 8; T.C.A. (orig. ed.), § 45-1821; Acts 1982, ch. 722, § 4.

NOTES TO DECISIONS

1. Bankruptcy of Borrower.

Note to credit union did not lose its status as a secured claim because of fact that a new note was substituted within four months of bankruptcy. In re Crawford, 151 F. Supp. 148, 1957 U.S. Dist. LEXIS 3520 (E.D. Tenn. 1957).

Note to credit union was a secured claim in bankruptcy proceeding of member, notwithstanding part of note was received in cash and remainder was used to pay off prior note. In re Crawford, 151 F. Supp. 148, 1957 U.S. Dist. LEXIS 3520 (E.D. Tenn. 1957).

45-4-609. Lien on stock and dividends for debts — Cancellation and liquidation upon withdrawal.

  1. A credit union shall have a lien on the shares of any member and on the dividends payable thereon for and to the extent of any loan made to the member and of any dues and fines payable by the member.
  2. A credit union may, upon the resignation or expulsion of a member, cancel the shares of the member and apply the withdrawal value of the shares toward the liquidation of the member's indebtedness.

Acts 1923, ch. 68, § 15; Shan. Supp., § 2198a22; Code 1932, § 3849; C. Supp. 1950, § 3849; T.C.A. (orig. ed.), § 45-1822.

45-4-610. State chartered credit unions — Power to make loans — Interest rate.

Subject to the limitations on maximum effective rates of interest and service charges contained in §§ 45-4-60145-4-604, a credit union chartered by the state of Tennessee has the power to make loans upon the same terms and conditions as permitted credit unions chartered by the federal government.

Acts 1976, ch. 278, § 1; 1979, ch. 207, § 2; T.C.A., § 45-1849.

Part 7
Capital and Reserves

45-4-701. Capital.

The capital of the credit union shall consist of the payments that have been made to it by the several members thereof on shares.

Acts 1923, ch. 68, § 15; Shan. Supp., § 2198a22; Code 1932, § 3849; C. Supp. 1950, § 3849; T.C.A. (orig. ed.), § 45-1824.

45-4-702. Reserve income.

All entrance fees, transfer fees and charges shall, after the payment of the organization expenses, be known as reserve income and shall be added to the reserve fund of the credit union.

Acts 1923, ch. 68, § 20; Shan. Supp., § 2198a27; Code 1932, § 3854; Acts 1947, ch. 125, § 1; C. Supp. 1950, § 3854; Acts 1967, ch. 227, § 5; 1974, ch. 557, § 16; T.C.A. (orig. ed.), § 45-1825.

45-4-703. Reserve fund for contingencies — Capital contributions — Special assessments — Administrative fees.

    1. A regular reserve fund, belonging to the credit union, shall be maintained for contingencies. It shall not be distributed to the members except upon dissolution of the credit union. This fund shall be built up to and held at one thousand dollars ($1,000) or five percent (5%) of the outstanding loans (excluding unearned interest), whichever is greater. Transfers in an amount as hereinafter provided shall be made to the regular reserve fund at the close of each dividend period and at the close of each fiscal year for the period since the close of its last fiscal year or the close of the last dividend payment period, whichever last occurred. Each credit union shall transfer seven and one-half percent (7½%) of the gross income of the credit union to the regular reserve fund until the regular reserve fund shall equal two percent (2%) of outstanding loans; then five percent (5%) of gross income until the regular reserve fund shall equal three percent (3%) of outstanding loans; then two and one-half percent (2½%) of gross income until the regular reserve fund shall equal five percent (5%) of outstanding loans. Whenever the regular reserve fund falls below the stated percent of outstanding loans, transfer shall be made in amounts that may be needed to maintain the stated reserve levels.
    2. The commissioner may either waive in whole or in part the reserve requirement pursuant to subdivision (a)(1) or increase the reserve requirement as deemed necessary for the protection of the interests of the credit union and its members.
    1. In addition to the regular reserve fund requirement stated in subsection (a), a credit union shall maintain in or transfer to contingency reserves an additional amount so that the sum held in reserve satisfies the requirements of the credit union's share insuror.
    2. The commissioner may increase the reserve requirement as deemed necessary for the protection of the interests of the credit union and its members.
  1. Transfers out of the fund may be made to profit and loss of the amounts that are in excess of the level specified at the end of any fiscal year.
  2. Capital contributions paid to the state credit union share insurance corporation pursuant to § 45-4-1108(a) and special assessments to the capital fund paid thereto pursuant to § 45-4-1108(d) shall constitute the credit union's only equity interest in the state credit union share insurance corporation. Capital contributions paid pursuant to § 45-4-1108(a) and special assessments to the capital fund paid pursuant to § 45-4-1108(d) shall be included as a part of the credit union's assets and shall be valued:
    1. At the full value of the capital contributions paid pursuant to § 45-4-1108(a), or special assessments to the capital fund paid pursuant to § 45-4-1108(d);
    2. At the value of the capital contributions or special assessments to the capital fund recoverable by the credit union should it voluntarily withdraw from membership in the state credit union share insurance corporation; or
    3. At an eventual value of zero ($0) after amortizing the capital contributions or special assessments to the capital fund over a specified period of time.
  3. Administrative fees paid by a credit union to the state credit union share insurance corporation pursuant to § 45-4-1109(a) shall be treated as annual expenses of the credit union. Any credit union that has capitalized any prior administrative fees shall be required to amortize the amount against reserves established under subsection (a) within a period not exceeding ten (10) years as approved by the commissioner.

Acts 1923, ch. 68, § 20; Shan. Supp., § 2198a27; Code 1932, § 3854; Acts 1947, ch. 125, § 1; C. Supp. 1950, § 3854; Acts 1967, ch. 227, § 5; 1974, ch. 577, § 16; T.C.A. (orig. ed.), § 45-1825; Acts 1981, ch. 89, § 1; 1982, ch. 722, § 5; 1984, ch. 715, § 1.

45-4-704. Transfer of dormant account to regular reserve.

  1. A credit union may transfer a dormant account to the regular reserve within thirty (30) days after written notice to the credit union member, at the credit union member's last known address as shown upon the records of the credit union, stating the credit union's intention to make the transfer, and giving the member the opportunity to request the deferral of the action or to withdraw the account prior to the transfer.
  2. For the purposes of this section, “dormant account” means an account in an amount less than twenty-five dollars ($25.00) and to which the member has neither made a deposit nor withdrawal for a period of one (1) year preceding the date of the notice provided for herein.

Acts 1967, ch. 227, § 7; 1979, ch. 86, § 11; T.C.A., § 45-1833.

Part 8
Taxes and Fees

45-4-801. [Reserved.]

At the time of incorporation, every credit union shall pay the secretary of state a fee of ten dollars ($10.00).

Acts 1923, ch. 68, § 25; Shan. Supp., § 2198a32; Code 1932, § 3859; Acts 1931, ch. 67, § 1; mod. C. Supp. 1950, § 3859; T.C.A. (orig. ed.), § 45-1830; Acts 1985, ch. 17, § 8.

45-4-803. State and federal credit unions to be equally subject to taxation.

Except for taxes on property and the credit union 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 credit union chartered under the laws of this state unless and until the same tax may be legally levied upon and be applicable to federally chartered credit unions in this state, in which case the tax shall be levied upon and be applicable to the state and federally chartered credit unions.

Acts 1980, ch. 559, § 3.

Part 9
Dissolution, Liquidation and Merger

45-4-901. Dissolution.

  1. A majority of the entire membership of any credit union may vote to dissolve the credit union at a regular or special meeting called for that expressly stated purpose.
  2. Any member, within twenty (20) days of the date of the mailing of notice of the meeting, may vote on the question of dissolution by signing a statement in a form approved by the commissioner, and the vote shall have the same force and effect as any other vote.
  3. The credit union shall, upon a vote for dissolution, immediately cease to do all business except for the purpose of liquidation, and the president and secretary shall, within fifteen (15) days following the meeting, notify the commissioner in writing of its intention to liquidate, and shall include in the notice a list of the names of directors and officers of the credit union together with their addresses.

Acts 1923, ch. 68, § 23; Shan. Supp., § 2198a30; Code 1932, § 3857; Acts 1973, ch. 294, § 6; 1974, ch. 557, § 3; T.C.A. (orig. ed.), § 45-1828; Acts 1986, ch. 558, § 5.

45-4-902. Liquidation.

  1. A credit union under order to liquidate or in the course of dissolution or liquidation shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets, and doing all acts required in order to wind up its business, and may sue and be sued for the purpose of enforcing the debts and obligations until its affairs are fully adjusted. The board of directors of the credit union, or, in the case of involuntary dissolution or liquidation by order of the commissioner, the liquidating agent, shall use the assets of the credit union to pay:
    1. All expenses incidental to liquidation, including, but not limited to, any surety bond that may be required;
    2. Any liability due nonmembers; and
    3. Redemption of shares, share accounts, and members' special accounts.

      Assets then remaining shall be distributed to the members proportionately to the purchase price of shares held by each member as of the date dissolution was voted, or the date of order of liquidation or suspension by the commissioner, as the case may be.

  2. As soon as the board or the liquidating agent determines that all assets from which there is a reasonable expectancy of realization have been liquidated and distributed as set forth in this section, it shall execute a certificate of dissolution and forward the same to the commissioner, who shall review the details of the liquidation and, if approving it, shall issue a certificate of approval and return the certificate to the board or liquidating agent, who shall then file it with the secretary of state and thereafter with the office of the register of deeds of the county in which the credit union has its principal place of business.
  3. If a credit union has filed a certificate of dissolution or has indicated an intention to file the certificate, and the directors and officers of the credit union, in the opinion of the commissioner, are not conducting the liquidation proceedings in an expeditious, orderly, and efficient manner or in the best interests of its members, the commissioner may terminate the liquidation proceedings, take possession of the business and property of the credit union, and, for the purpose of carrying out the liquidation, may appoint, or cause to be appointed, a liquidating agent. The liquidating agent shall furnish bond for the faithful discharge of duties in an amount to be approved by the commissioner.
  4. The liquidating agent may, under rules and regulations that the supervisor prescribes:
    1. Receive and take possession of the books, records, assets, and property of every description of the credit union in liquidation; sell, enforce collection of, and liquidate the assets and property; compound all bad or doubtful debts; sue in the name of the credit union in liquidation; and defend actions brought against the liquidating agent in that capacity or against the credit union;
    2. Receive, examine, and pass upon all claims against the credit union in liquidation, including claims of members;
    3. Make distribution and payment to creditors and members as their interests appear;
    4. Execute documents and papers and do other acts that the liquidating agent deems necessary or desirable to discharge duties; and
    5. The expenses incurred by the liquidating agent in the liquidation of the credit union include the compensation of the liquidating agent and any other necessary or proper expenses connected therewith, all of which shall be paid in order of priority out of the property of the credit union in the hands of the liquidating agent. The expenses of liquidation, including the compensation of the liquidating agent, are subject to approval by the commissioner unless the agent is appointed by the court.

Acts 1923, ch. 68, § 23; Shan. Supp., § 2198a30; Code 1932, § 3857; Acts 1973, ch. 294, § 6; 1974, ch. 557, § 3; T.C.A. (orig. ed.), § 45-1828; Acts 1986, ch. 558, § 5.

Cross-References. Shares of liquidating credit unions in volunteer corporate credit unions, § 45-4-1208.

45-4-903. Merger.

  1. Any credit union may, with the approval of the commissioner of financial institutions, merge with any other credit union under the existing charter of the other credit union, pursuant to any plan approved by the board of directors of each credit union joining in the merger, and approved by two-thirds (2/3) of the members of each credit union represented at a meeting of members duly called for that purpose, at which a minimum of ten percent (10%) of the entire membership is present, unless the meeting of members of either credit union has been waived by the commissioner. After approval of the board and members of each credit union, the president or chair of the board and secretary of each credit union shall execute a certificate of merger, which shall set forth all of the following:
    1. The time and place of the meeting of the board of directors at which the plan was agreed upon;
    2. The vote in favor of adoption of the plan;
    3. A copy of the resolution or other action by which the plan was agreed upon;
    4. The time and place of the meeting of the members at which the plan agreed upon was approved; and
    5. The vote by which the plan was approved by the members.
  2. The certificates and a copy of the plan of merger agreed upon shall be forwarded to the commissioner and, upon approval, returned to the merging credit unions. The certificate of merger, with the certificate of approval of the commissioner annexed it, shall be recorded in the office of the secretary of state and in the register's office of the county in which each credit union has its principal place of business.
  3. Upon a merger so effected, all property, property rights, and interests of the merged credit unions shall vest in the surviving credit union without deed, endorsement, or other instrument of transfer, and all debts, obligations, and liabilities of the merged credit unions shall be deemed to have been assumed by the surviving credit union under whose charter the merger was effected.
  4. This section shall be construed, whenever possible, to permit a credit union chartered under any other act to merge with one chartered under this chapter.
  5. All members of both credit unions effecting a merger shall be deemed to have a common bond of association, occupation or residence as required by § 45-4-101, for formation of credit unions generally.
  6. A merger fee of three hundred dollars ($300) shall be paid to the commissioner to cover the salary and expenses of department personnel assigned to supervise the merger. The fee shall be paid by the surviving credit union if it is chartered under the laws of Tennessee. Otherwise the fee shall be paid by the merging credit union.

Acts 1923, ch. 68, § 23; Shan. Supp., § 2198a30; Code 1932, § 3857; Acts 1973, ch. 294, § 6; 1974, ch. 557, § 3; 1979, ch. 86, § 9; T.C.A. (orig. ed.), § 45-1828; Acts 1984, ch. 714, § 1.

Part 10
Supervision by State

45-4-1001. Supervision of credit unions — Financial report — Failure to file — Promulgation of rules and regulations.

  1. Credit unions shall be subject to the supervision of the commissioner and shall make a report of conditions to the commissioner at least semiannually, on blank forms to be supplied by the commissioner, on the dates of the second and fifth calls made to national banks, notice of which calls shall be sent out by the commissioner; returns shall be verified under oath of the president and treasurer, and additional reports may be required by the commissioner. Any credit union that neglects to make the reports shall forfeit to the state treasury fifty dollars ($50.00) for each day of neglect unless excused.
  2. The commissioner may promulgate rules for the implementation of the credit union laws of this state and the sound operation of state chartered credit unions pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 1923, ch. 68, § 8; Shan. Supp., § 2198a11; Code 1932, § 3839; Acts 1973, ch. 294, § 6; 1977, ch. 117, § 1; T.C.A. (orig. ed.), § 45-1808; Acts 1985, ch. 17, § 9; 1986, ch. 558, § 5.

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).

45-4-1002. Examinations — Examiners — Supervision fee.

  1. The commissioner shall either personally or by competent examiner appointed by the commissioner visit and examine every credit union subject to the commissioner's supervision at least once in each year; provided, that this provision requiring examination at least once in each year may be extended to eighteen (18) months. In making a determination, the commissioner should consider the credit union's quality of management, capitalization, internal controls and any other factors the commissioner deems relevant. In no event may a credit union's examination cycle be extended to eighteen (18) months if it did not receive a composite rating of one (1) or two (2) at its last examination. The commissioner may order examinations and shall at all times be given free access to all the books, papers, securities and other sources of information in respect to the credit union. For that purpose, the commissioner shall have the power to subpoena and examine, personally or through a deputy duly authorized, witnesses on oath and documents pertaining to the business of the credit union. The commissioner may have follow-up examinations and visitations conducted on a credit union if the commissioner believes that the examinations and visitations are necessary to protect the interests of the members of the credit union.
  2. The commissioner is authorized and empowered to appoint examiners who are conversant with credit union law and correct rules and practices thereunder or made so by usage.
    1. The commissioner shall assess each credit union an annual supervision fee as described in this subsection (c).
    2. The commissioner shall determine an annual budget for the credit union division attributable to the regulation and examination of credit unions. The budget shall be divided among the credit unions by the commissioner and shall be assessed to each credit union as a supervision fee.
    3. The supervision fee assessed to each credit union shall be allocated in proportion to the total assets reported by the credit union in its June 30 Statement of Financial Condition, commonly known as the June 30 call report; provided, that:
      1. The commissioner may establish minimum assessment tiers, which shall not exceed five thousand dollars ($5,000);
      2. The maximum assessment shall not exceed eighty percent (80%) of the allocated amount as calculated pursuant to this subdivision (c)(3) for any credit union with an asset size greater than one billion dollars ($1,000,000,000);
      3. The commissioner may annually adjust the percentage provided in subdivision (c)(3)(B) to another percentage, not exceeding eighty percent (80%), unless adjusting the percentage will result in any credit union being assessed a supervision fee higher than the previous year's supervision fee; and
      4. In determining the minimum assessment tiers and the maximum assessment, the commissioner may consider:
        1. The asset size of each credit union;
        2. The concentration risk on department revenue sources;
        3. The budgetary needs of the credit union division; and
        4. Other information that the commissioner considers relevant to the determination.
    4. If a credit union that was a state credit union on July 1 did not file a June 30 Statement of Financial Condition, the commissioner shall determine that credit union's assets for purposes of making the assessment from other sources of information.
    5. The supervision fee 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.
      1. The department's budget is accounted for on a fiscal year basis, July 1 through June 30. A credit union that is a state credit union on the first day of a fiscal year shall pay the full credit union supervision fee for that fiscal year. The supervision fee shall not be prorated for any reason.
      2. Unless credit unions are notified otherwise by the department, the department shall send each credit union or its successor notice of the credit union's supervision fee in December of the fiscal year in which the fee is being collected. Payment shall be due within thirty (30) days of receipt of the notice.

Acts 1923, ch. 68, § 8; Shan. Supp., § 2198a12; Code 1932, § 3840; Acts 1931, ch. 67, § 1; 1937, ch. 264, § 6; 1941, ch. 124, §§ 1-3; 1947, ch. 90, § 1; C. Supp. 1950, § 3840 (Williams, § 3840, 3840.1, 3840.2, 3840.3); Acts 1951, ch. 126, § 1; 1959, ch. 82, § 1; 1972, ch. 454, § 1; 1973, ch. 294, § 6; 1975, ch. 81, §§ 1, 2; T.C.A. (orig. ed.), § 45-1809; Acts 1980, ch. 524, §§ 1, 2; 1981, ch. 53, § 4; 1988, ch. 550, § 2; 1998, ch. 585, § 1; 2015, ch. 241, § 1.

45-4-1003. Fiscal year — Special meetings — Voting power — Members may overrule directors — Amendment of bylaws.

  1. The credit union fiscal year shall end at the close of business on December 31.
  2. Special meetings of the members may be held by order of the board of directors and shall be held on request of ten percent (10%) of the members.
  3. At all meetings, a member shall have but one (1) vote, regardless of the number of shares held.
  4. No shareholder may vote by proxy, but a society, association, copartnership, or corporation, having membership in the credit union, may be represented by one (1) person, duly authorized by the society, association, copartnership, or corporation to represent it.
    1. Amendments of the credit union bylaws may be adopted by the affirmative vote of two-thirds (2/3) of the authorized number of members of the board at any duly held meeting of the board, if the members of the board have been given prior written notice of the meeting and the notice has contained a copy of the proposed amendment or amendments.
    2. No amendment of the bylaws of the credit union shall become effective until approved in writing by the commissioner.
  5. At any meeting of the membership, the members may decide on any matter of interest to the credit union and may overrule the directors; provided, that the notice of the meeting shall have stated the question to be considered in connection with any prior board action.

Acts 1923, ch. 68, § 10; Shan. Supp., § 2198a15; Code 1932, § 3843; T.C.A. (orig. ed.), § 45-1811; Acts 1980, ch. 559, § 1; 1989, ch. 223, § 9.

Part 11
Share Insurance Corporation

45-4-1101. Creation.

  1. There is created the state credit union share insurance corporation, a nonprofit membership public corporation, sometimes referred to as “the corporation” in this part.
  2. The corporation may begin operations at any time within one (1) year after March 13, 1974, upon the adoption of articles of incorporation by the duly authorized representatives of not less than nine (9) credit unions chartered and existing under the laws of Tennessee. The articles of incorporation shall be subject to the approval of the commissioner of financial institutions, and shall be filed with the secretary of state and with the commissioner; and shall be recorded in the register's office of Hamilton County in which shall be located the principal office of the corporation.

Acts 1974, ch. 577, § 1; T.C.A., § 45-1835; Acts 1986, ch. 558, § 5.

Law Reviews.

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

45-4-1102. Purposes of corporation.

The general purposes of the corporation are to:

  1. Aid and assist any member credit union that is in liquidation or incurs financial difficulty, such as insolvency or lack of liquidity, in order that the shareholdings and deposits of any individual member of a member credit union shall be protected or guaranteed against loss. The primary amount of loss to be protected or guaranteed shall be established from time to time by the corporation with the approval of the commissioner of financial institutions. With the approval of the commissioner, the corporation may, in addition to the primary amount of loss to be protected or guaranteed, establish additional loss protection or guarantees for the benefit of those member credit unions that voluntarily elect to obtain the additional protection, upon the terms and conditions and the payment of fees that the board of directors of the corporation establishes; and
  2. Cooperate with its member credit unions and the commissioner and the appropriate supervisory agency of credit unions that become members under § 45-4-1107(c) or (d), for the purpose of advancing the general welfare of credit unions in this state and in other states where credit unions become members of the corporation.

Acts 1974, ch. 577, § 2; T.C.A., § 45-1836; Acts 1983, ch. 93, § 4; 1984, ch. 715, § 2.

Law Reviews.

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

45-4-1103. Powers.

The corporation may:

  1. Enter into contracts of any nature including contracts for reinsurance;
  2. Sue and be sued;
  3. Adopt, use and display a corporate seal;
  4. Advance funds in accordance with agreed terms and conditions to aid member credit unions to operate and to meet liquidity requirements;
  5. Upon the written direction of the commissioner, or of the appropriate supervisory authority of any credit union that becomes a member under § 45-4-1107(c) or (d), assume control of the property and business of any member credit union and operate the credit union in accordance with any recommendations the commissioner or other authority may offer;
  6. Assist in the merger, consolidation or liquidation of credit unions;
  7. Receive money or other property from its member credit unions, or any corporation, association or person;
  8. Invest its funds in:
    1. Bonds, notes or securities of the federal government or its agencies;
    2. Investments authorized under § 35-3-120;
    3. Any investment that is lawful for federal credit unions chartered under title 12 of the United States Code;
    4. Obligations of a territory of the United States, a province of the Dominion of Canada, a subdivision or instrumentality of a state or territory of the United States, an authority organized under state law, an interstate compact or by substantially identical legislation adopted by two (2) or more states; provided, that the obligations are general obligation bonds and are given “Investment Grade” ratings by Moodys Investors Service, Inc. or by Standard and Poor's Corporation and are bank eligible investments as defined by the comptroller of the currency;
    5. Obligations of a corporation chartered by the United States or a state of the United States, doing business in the United States; provided, that the investments do not exceed more than ten percent (10%) of the funds invested by the corporation;
    6. Any agency or association organized either as a stock company, mutual association, or membership corporation; provided, that the purposes for which the agency or association is organized are designed to service, aid or otherwise assist credit unions; and
    7. Other investments, other than investments in credit unions or central credit unions that are members of the corporation, that are deemed prudent by the directors, but these other investments shall not exceed twenty percent (20%) of the funds of the corporation;
  9. Borrow money from any source, upon the terms and conditions that the directors determine, for the purpose of this section;
  10. Purchase in its own name, hold and convey property of any nature;
  11. Receive by assignment or purchase, from its member credit unions, any property of any nature owned by those member credit unions;
  12. Sell, assign, mortgage, encumber or transfer property of any nature; and
  13. Adopt and amend bylaws and rules and regulations for carrying out the purposes of this section.

Acts 1974, ch. 577, § 3; T.C.A., § 45-1837; Acts 1983, ch. 93, § 4; 1984, ch. 715, § 3.

Law Reviews.

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

45-4-1104. Exclusive use of name — Right to change name.

  1. The corporation shall have the sole right to use the name state credit union share insurance corporation.
  2. The board of directors of the corporation has the right to change the name of the corporation.

Acts 1974, ch. 577, § 4; T.C.A., § 45-1838; Acts 1986, ch. 558, § 4.

45-4-1105. Amendments to articles.

  1. Amendments to the articles, adopted by a vote of two-thirds (2/3) of the number of member credit unions present at an annual meeting or a special meeting called for that purpose, shall be filed with the commissioner and, if approved by the commissioner, shall become effective upon being filed in the same manner as the original articles.
  2. Any credit union that becomes a member of the corporation under § 45-4-1107(c) or (d) shall be entitled to vote on any proposed amendments arising after the credit union becomes a member, and the credit unions present shall be included when ascertaining whether the requisite two-thirds (2/3) vote of the proposed amendment has been met.

Acts 1974, ch. 577, § 5; T.C.A., § 45-1839; Acts 1983, ch. 93, § 4.

45-4-1106. Bylaws.

  1. The credit unions that adopt the articles of incorporation under § 45-4-1101 shall also subscribe and submit to the commissioner of financial institutions for approval, the initial bylaws under which the corporation shall operate.
  2. The bylaws may be amended at any regular meeting of the directors, or special meeting of the directors called for that purpose, by a vote of two-thirds (2/3) of the entire board.

Acts 1974, ch. 577, § 6; T.C.A., § 45-1840; Acts 1986, ch. 558, § 5.

45-4-1107. Membership.

  1. Any credit union legally chartered by the state of Tennessee, or any credit union legally chartered by those states eligible for membership under subsection (c), or any credit union chartered by the federal government eligible for membership under subsection (d), may become a member of the corporation upon application by the board of directors of the credit union and approval of the board of directors of the corporation.
  2. Any credit union that becomes a member under subsection (c) or (d) shall have the same privileges, benefits, and obligations of membership as those credit union members chartered under the laws of the state of Tennessee.
  3. At any time after the corporation begins operations, credit unions chartered by other states of the United States may make application for membership in the corporation in either of the following methods:
    1. Upon enactment of statutes in the state in which it is chartered, which provide:
      1. Credit unions of the state may maintain membership in the corporation, or associations or corporations similar to the corporation;
      2. The credit union supervisory authority of the state shall cooperate with the corporation and the commissioner toward the end that the corporation can exercise its powers; and
      3. The member credit union shall comply with the articles of incorporation and bylaws of the corporation and comply with the statutes of the state of Tennessee establishing and governing the corporation; or
    2. By contract if all of the following conditions are satisfied:
      1. The commissioner permits the agreement;
      2. The credit union supervisory authority of the domicile state of the credit union applying for membership permits the agreement;
      3. The agreement is lawful under the laws of both the state of Tennessee and the domicile state of the credit union applying for membership;
      4. The corporation by agreement or law has sufficient authority to require the credit union applying for membership to comply with the bylaws and regulations of the corporation; and
      5. The board of directors of the corporation authorizes the contract.
  4. Credit unions chartered by the federal government may make application for membership in the corporation; provided, that the following conditions are satisfied:
    1. The commissioner permits the agreement;
    2. The National Credit Union Association or the supervisory authority of the credit unions chartered by the federal government and applying for membership permits the agreement;
    3. The agreement is lawful under the laws of both the state of Tennessee and the federal government;
    4. The corporation by agreement or law has sufficient authority to require the credit union applying for membership to comply with the bylaws and regulations of the corporation;
    5. The board of directors of the corporation authorizes the contract; and
    6. The credit union supervisory authority of the credit union chartered by the federal government shall agree to furnish to the corporation copies of all examination reports on all credit unions chartered by the federal government that are or become members of the corporation.

Acts 1974, ch. 577, § 7; 1978, ch. 553, § 1; T.C.A., § 45-1841; Acts 1981, ch. 89, § 2; 1983, ch. 93, §§ 1-3.

Law Reviews.

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

45-4-1108. Capital contribution — Additions — Special assessments — Dividends.

  1. In order to provide a capital fund for carrying out the purposes of the corporation pursuant to § 45-4-1102, the corporation shall bill and collect from all credit unions accepted for membership an initial capital contribution not to exceed one percent (1%) of all insured shares, accounts, and certificates of the credit union with the approval of the commissioner. The corporation shall annually declare and collect additions to the capital account as the corporation may deem appropriate, except to the extent that refunds have been paid under subsection (b).
  2. The capital contribution of each member credit union shall be refunded to each member credit union when the unencumbered funds of the corporation exceed two percent (2%) of the aggregate total of all shares, accounts and certificates of member credit unions by an amount equal to the aggregate capital contributions of all members, as determined by the annual report of the commissioner or the annual report of the supervisory agency of the credit unions in each state in which credit unions have become members of the corporation under § 45-4-1107(c). A portion of the capital contribution of each member credit union may, with the prior approval of the commissioner, be refunded to each member credit union, though the unencumbered funds of the corporation do not exceed two percent (2%) of the aggregate total of all shares, accounts and certificates of member credit unions by an amount equal to the aggregate capital contributions of all members as determined by the method specified in this section, if the board of directors of the corporation deems a partial refund to be in the best interest of the corporation. These refunds shall be paid to the then existing member credit unions in proportion to their capital contribution.
  3. At the option of the board of directors of the corporation, the corporation may exclude from its calculations of the capital contribution required by subsections (a) and (b), the share holdings and deposits of shareholders and depositors of member credit unions that either are not protected or guaranteed by the corporation or that are in excess of the primary amount of loss to be protected or guaranteed by the corporation pursuant to § 45-4-1102(1).
  4. In the event of potential impairment of the corporation's capital fund, a special assessment to the capital fund may be levied by the corporation with the approval of the commissioner or, in addition or as an alternative to a special assessment, the corporation may issue debt instruments the board of directors of the corporation deems appropriate with the approval of the commissioner.
  5. The corporation may also, subject to the prior approval of the commissioner, declare a dividend from net earnings annually. The dividend shall be paid on the amount of paid-in membership capital as defined in subsection (a). When capital contributions have not been fully paid during the entire preceding dividend period, a proportional part of the dividend may be paid.
  6. In case of the liquidation of this corporation, the funds shall be paid to the then existing member credit unions in proportion to contributions to the capital fund including any special assessments paid.

Acts 1974, ch. 577, § 8; 1978, ch. 553, §§ 2, 3; T.C.A., § 45-1842; Acts 1982, ch. 603, §§ 1, 2; 1983, ch. 93, § 5; 1984, ch. 715, § 4; 1985, ch. 18, § 1.

Cross-References. Administrative fees to credit union, accounting, § 45-4-703.

Law Reviews.

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

45-4-1109. Administrative fees.

    1. A regular annual administrative fee, not to exceed one percent (1%) of the member credit union's shares, accounts and certificates, shall be levied by the corporation. The corporation may raise, lower or waive the annual administrative fee when the corporation and the commissioner of financial institutions agree that the total funds of the corporation justify or require the change.
    2. At the option of the board of directors of the corporation, the corporation may exclude from its calculation of the administrative fee required by subsection (a) the shareholdings and deposits of shareholders and depositors of member credit unions that either are not protected or guaranteed by the corporation or that are in excess of the primary amount of loss to be protected or guaranteed by the corporation pursuant to § 45-4-1102(1).
  1. The corporation may return to its member credit unions or credit against future annual administrative fees that portion of annual administrative fees paid into the corporation by its members in excess of the corporation's requirements for administrative expenses, losses, loss provisions, retained earnings and reserves. The return or credit of excessive administrative fees may be made by the corporation in accordance with risk rating categories established by the board of directors, or as a proportional part of the administrative fee paid, as the board of directors may deem appropriate.
    1. The basis for calculating the administrative fee due the ensuing year shall be the member credit union's shares, accounts and certificates as of either:
      1. December 31; or
      2. The date, if different, upon which the member credit union's fiscal year ends.
    2. The corporation shall determine, as to each member credit union, which of the dates specified in subdivision (c)(1) shall be used to calculate the member credit union's administrative fee. The corporation shall additionally determine the date the annual administrative fee is due and payable.

Acts 1974, ch. 577, § 9; 1976, ch. 705, § 1; 1978, ch. 553, §§ 2, 4; T.C.A., § 45-1843; Acts 1981, ch. 89, § 3; 1982, ch. 603, §§ 3, 4; 1984, ch. 715, §§ 5-7; 1985, ch. 18, § 2.

Cross-References. Accounting treatment of amounts paid to corporation, § 45-4-703.

45-4-1110. Directors.

  1. The corporation's business shall be conducted by the incorporators who shall serve until the organizational meeting of the corporation, at which time directors shall be elected by the members of the corporation in accordance with the bylaws. Thereafter, the corporation's business shall be conducted by the directors.
  2. Directors shall not be compensated for their services as directors, but may be reimbursed for reasonable expenses in connection with corporation business.

Acts 1974, ch. 577, § 10; T.C.A., § 45-1844.

45-4-1111. Supervision of corporation.

  1. The corporation is declared to be performing the functions of a credit union and shall be subject to exclusive supervision and an annual examination by the commissioner. A copy of the annual examination report shall be transmitted as soon as practicable to the corporation and to the supervisory agency of each jurisdiction of which one (1) or more credit unions have become members under § 45-4-1107(c) or (d), and the latter also shall be entitled to further information reasonably necessary in connection with the examination.
  2. The corporation shall not be subject to regulation or control by the department of commerce and insurance, and the statutes of the state governing the operation of insurance companies, including, but not limited to, title 56, shall not be applicable to the corporation.
  3. Nothing in this part shall create any liability upon the state for the payment of any funds to any member credit union by reason of the acts or omissions of the corporation created hereunder, nor shall the state be required to pay any loss to any member credit union in the event the corporation shall be unable to pay the loss.

Acts 1974, ch. 577, § 11; T.C.A., § 45-1845; Acts 1983, ch. 93, § 6.

45-4-1112. Examination of credit unions by corporation — Effect of failure to pay assessments.

  1. The commissioner of financial institutions shall promptly forward to the corporation copies of all examination reports of all member credit unions. The cost of furnishing these copies shall be paid by the corporation.
  2. The corporation, in addition, may require independent audits and investigations of any member credit union in order to learn of the financial condition of the credit union as it relates to share insurance. The audits shall be at the corporation's expense; provided, that the member credit union shall pay the expense of an annual audit as required by the corporation; provided, that the foregoing proviso shall not conflict with the rules of the commissioner.
  3. If the corporation ascertains evidence of carelessness, unsound practices or mismanagement of any member credit union that appears to adversely affect the solvency or liquidity of the credit union or threaten undue loss to the corporation, the corporation may order that corrective actions be taken, or after due notice and hearing, as provided in the bylaws, revoke the credit union's membership in the corporation. The corporation may also recommend to the commissioner or the supervisory agency of the state of each credit union that becomes a member under § 45-4-1107(c) or (d), that the credit union be liquidated.
  4. If any member credit union  fails to pay any assessment lawfully required under this part, the corporation shall notify the commissioner or the supervisory agency of the state of each credit union that becomes a member under § 45-4-1107(c) or (d), and the commissioner or the supervisory agency shall forthwith notify the credit union in writing. The failure of the credit union to make the payment within fifteen (15) days after the written notice may subject the credit union to the sanctions set forth in subsection (c).

Acts 1974, ch. 577, § 12; T.C.A., § 45-1846; Acts 1981, ch. 89, § 4; 1983, ch. 93, § 4.

45-4-1113. Administrative review.

  1. If a Tennessee credit union is aggrieved by a decision or order of the corporation or the commissioner, or if the corporation is aggrieved by a decision or order of the commissioner or of a supervisory agency, the Tennessee credit union or corporation shall, upon appropriate petition and after due notice, be entitled to a hearing and administrative review by the Tennessee credit union board of appeals, which may stay enforcement of the decisions or orders pending administrative review.
  2. The Tennessee credit union board of appeals shall consist of three (3) members: the commissioner or the commissioner's appointee; one (1) appointee of the corporation; and one (1) appointee of the attorney general and reporter. Directors, officers, and employees of the corporation shall be ineligible to serve on the Tennessee credit union board of appeals. The Tennessee credit union board of appeals shall enact reasonable bylaws and rules of procedure necessary to provide for administrative review.
    1. Judicial review of decisions or orders of the corporation shall not be available unless the aggrieved party has sought administrative review under this section, and a final decision has been made by the credit union board of appeals.
    2. Any action for judicial review shall be pursuant to § 27-8-101 solely upon the record of the board of appeals and shall be brought in a court of general or equity jurisdiction, without the intervention of a jury, within six (6) months after the date of final decision of the credit union board of appeals, and shall be brought only in Hamilton County.

Acts 1974, ch. 577, § 13; T.C.A., § 45-1847; Acts 1986, ch. 558, § 5.

45-4-1114. Exemption from taxation.

The corporation is declared to be performing a public function on behalf of those citizens of the state whose shares and deposits, with respect to which the corporation is organized, are to be protected and to be a public instrumentality of the state of Tennessee for those purposes. Accordingly, the corporation and all properties at any time owned by it, with the exception of real estate properties, and the income therefrom, and all notes, bonds, debentures and other obligations issued by it, and the income therefrom shall be exempt from all taxation in the state of Tennessee. Also, for purposes of the Tennessee Securities Act of 1980, compiled in title 48, chapter 1, part 1, and any amendment thereto or substitution therefor, notes, bonds, debentures and other obligations issued by the corporation shall be deemed to be securities issued by a public instrumentality or a political subdivision of the state of Tennessee.

Acts 1974, ch. 577, § 14; T.C.A., § 45-1848.

Law Reviews.

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

Part 12
Volunteer Corporate Credit Union

45-4-1201. Corporation created — Articles of incorporation.

  1. There is created the volunteer corporate credit union, a nonprofit membership public corporation, sometimes referred to as “the corporation” in this part.
  2. The corporation shall begin operations at any time within three (3) months after March 26, 1981, upon the adoption of articles of incorporation by the duly authorized representatives of not less than fifteen (15) credit unions chartered and existing under the laws of Tennessee. The articles of incorporation shall be subject to the approval of the commissioner, shall be filed with the secretary of state and with the commissioner of financial institutions, and shall be recorded in the register's office of Hamilton County.

Acts 1981, ch. 76, § 1; 1983, ch. 94, § 1; impl. am. 1983, ch. 216, §§ 1-9.

Compiler's Notes. Miscellaneous provisions concerning credit unions, formerly compiled as §§ 45-4-120145-4-1204, have been transferred to §§ 45-4-190145-4-1904, respectively.

Cross-References. Investment in volunteer corporate credit union, § 45-4-501.

Law Reviews.

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

45-4-1202. Purposes.

The general purposes of the corporation are to:

  1. Aid and assist its member credit unions in providing needed service functions;
  2. Provide a source for liquidity management;
  3. Provide financial, custodial and related services for credit unions; associations of credit unions; and corporations, organizations or agencies owned or operated by a credit union or credit unions; and
  4. Provide management for mergers and joint ventures and for other credit unions.

Acts 1981, ch. 76, § 2; 1984, ch. 714, § 2.

Compiler's Notes. For transfer of former section, see Compiler's Notes under § 45-4-1201.

45-4-1203. Powers.

The corporation may:

  1. Enter into contracts of any nature;
  2. Sue and be sued;
  3. Adopt, use and display a corporate seal;
  4. Receive the payment from its members for members' shares, members' deposits, special accounts and certificates;
  5. Make loans to credit unions, associations of credit unions, and corporations, organizations, or agencies owned or operated by a credit union or credit unions;
  6. Receive money or other property from credit unions, associations of credit unions, and corporations, organizations, or agencies owned or operated by a credit union or credit unions;
  7. Invest its funds, not otherwise required for lending to its members, in the following manner:
    1. In any legally chartered bank or trust company supervised by a state or federal bank regulatory agency;
    2. In any state or federal savings and loan association or corporation;
    3. In any agency or association organized either as a stock company, mutual association, or membership corporation; provided, that the membership or stockholders, as the case may be, of the agency or association are restricted to credit unions, or organizations of credit unions; and provided further, that the purposes for which the agency or association is organized are designed to service or otherwise assist credit union operations;
    4. In obligations of or securities fully guaranteed as to principal and interest for the government of the United States or of the state of Tennessee;
    5. In any bonds or other obligations issued by the Tennessee valley authority pursuant to the Tennessee Valley Authority Act of 1933 (16 U.S.C. §§ 831-831dd);
    6. In investments authorized under § 35-3-120, and in any investment that is lawful for federal credit unions chartered under U.S.C., title 12;
    7. In obligations permitted for state banks under § 45-2-607(a)(4) and (a)(5); and
    8. In other investments not specifically enumerated in this subdivision (7) that may be permitted by rule or regulation of the commissioner;
  8. Borrow money from any source upon terms and conditions that the directors determine. The corporation shall not be subject to the limitations of § 45-4-502(a);
  9. Purchase in its own name, hold and convey property of any nature;
  10. Receive by assignment or purchase, from its member credit unions, any property of any nature owned by those member credit unions;
  11. Sell, assign, mortgage, encumber or transfer property of any nature;
  12. Adopt and amend bylaws for carrying out the purposes of this section;
  13. Extend to each member credit union discounts, advancements and accommodations that may be safe and reasonably made with due regard for the claims and demands of other member credit unions and the maintenance of sound credit conditions. It may further prescribe standards for defining the conditions under which discounts, advancements and accommodations may be extended to member credit unions;
  14. Manage and operate other credit unions; and
  15. Undertake other activities, not inconsistent with this part, that the bylaws may provide.

Acts 1981, ch. 76, § 3; 1984, ch. 714, § 3; 1986, ch. 558, § 5; 1995, ch. 23, § 1.

Compiler's Notes. For transfer of former section, see Compiler's Notes under § 45-4-1201.

45-4-1204. Use of name exclusive.

This corporation shall have the sole right to use the names “volunteer state corporate central credit union,” “Volunteer Corporate Credit Union” and “VolCorp.”

Acts 1981, ch. 76, § 4; 1995, ch. 23, § 2.

Compiler's Notes. For transfer of former section, see Compiler's Notes under § 45-4-1201.

45-4-1205. Amendments to articles of incorporation.

Amendments to the articles, adopted by a vote of two-thirds (2/3) of the number of member credit unions who own shares, shall be filed with the commissioner, and if the commissioner approves the amendments, shall become effective upon being filed in the same manner as the original articles.

Acts 1981, ch. 76, § 5; 1995, ch. 23, § 3.

45-4-1206. Bylaws.

  1. The credit unions that adopt the articles of incorporation under § 45-4-1201 shall also subscribe and submit to the commissioner for approval the initial bylaws under which the corporation shall operate.
  2. The bylaws may be amended at any regular meeting of the directors, or at a special meeting of the directors called for that purpose by vote of two-thirds (2/3) of the entire board.

Acts 1981, ch. 76, § 6.

45-4-1207. Membership — State credit unions, federal credit unions and foreign credit unions.

Any credit union legally chartered under federal law or chartered under the laws of any state may become a member of the corporation, in accordance with provisions of this part and the bylaws, rules and regulations adopted for carrying out the purposes of this part.

Acts 1981, ch. 76, § 7; 1995, ch. 23, § 4.

45-4-1208. Primary shares — Dividends — Withdrawing credit unions.

On July 1, 1995, primary shares of the corporation shall automatically be converted to membership shares of the corporation.

Acts 1981, ch. 76, § 8; 1983, ch. 94, §§ 2, 3; impl. am. 1983, ch. 216, §§ 1-9; 1987, ch. 100, § 4; 1995, ch. 23, § 5.

Law Reviews.

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

45-4-1209. Directors.

The corporation's business shall be conducted by the directors, who shall be elected pursuant to the terms, conditions and provisions of the corporation's bylaws.

Acts 1981, ch. 76, § 9; 1985, ch. 16, §§ 1, 2; 1986, ch. 558, § 5; 1995, ch. 23, § 6.

45-4-1210. Supervision by commissioner of financial institutions — Fee.

  1. The corporation is declared to be performing the functions of a credit union and shall be subject to exclusive supervision and an annual examination by the commissioner of financial institutions.
  2. The corporation shall pay an annual supervision fee equal in amount to one-half (½) of the fee calculated to be due in accordance with § 45-4-1002(c) from a noncorporate credit union having assets equal in amount to the corporation.

Acts 1981, ch. 76, § 10; 1984, ch. 714, § 4; 2015, ch. 241, § 2.

45-4-1211. Tax status of corporation — Status of its bonds and other obligations.

  1. The corporation and all properties at any time owned by it, with the exception of real estate properties, and the income therefrom shall be exempt from all taxation in this state.
  2. Also, for the purposes of the Tennessee Securities Act of 1980, compiled in title 48, chapter 1, part 1, and any amendment thereto or substitution therefor, notes, bonds, debentures and other obligations issued by the corporation shall be deemed to be securities issued by a state-chartered credit union as more specifically defined in § 48-1-103(a)(5).

Acts 1981, ch. 76, § 11.

45-4-1212. Exemption from share and deposit insurance.

The corporation shall be exempt from the requirements of § 45-4-505 relating to insurance of its shares and deposits.

Acts 1981, ch. 76, § 12.

45-4-1213. Exemption from annual meetings and reserves.

The corporation shall be exempt from the requirements applicable to noncorporate credit unions relating to the date of its annual meetings and reserves.

Acts 1983, ch. 94, § 4.

Law Reviews.

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

45-4-1901. Bureau of information maintained by commissioner of financial institutions.

It is the duty of the commissioner to:

  1. Organize and conduct a bureau of information in regard to credit unions and maintain an educational campaign in the state, looking to the promotion and organization of credit unions; and
  2. Upon application of three (3) persons, residing in the state, furnish without cost printed information and blank forms that may be necessary for the formation and establishment of any local credit union in the state and, upon written request of seven (7) residents of the state, expressing a desire to form a local credit union in their particular locality, proceed as promptly as convenient to the locality and to advise and assist the organizers to perfect their organization and to submit to the commissioner their recommendations in the matter of incorporating the credit union in question.

Acts 1923, ch. 68, § 9; Shan. Supp. § 2198a14; Code 1932, § 3842; Acts 1967, ch. 227, § 1; Acts 1973, ch. 294, § 6; T.C.A. (orig. ed.), §§ 45-1801, 45-4-1201.

45-4-1902. Conversion of state credit union into federal credit union.

A state credit union may be converted into a federal credit union by complying with the following requirements:

  1. A majority of the directors of the state credit union shall first approve the proposition for conversion and the date set for a vote by the members of the state credit union either at a regular meeting or by written ballot to be filed before the date set for the vote. Written notice of the proposition and of the date set for the vote shall then be delivered in person to each member, or mailed to each member at the address for the member appearing on the records of the credit union, not more than thirty (30) nor less than seven (7) days prior to the date. Approval of the proposition for conversion shall be by the affirmative vote of a majority of the members who vote on the proposal. The written notice of the proposition shall in boldfaced type state the issue that will be decided by a majority of the members who vote;
  2. A statement of the results of the vote, verified by the affidavits of the president or vice president and of the secretary, shall be filed with the commissioner of financial institutions within ten (10) days after the vote is taken;
  3. Promptly after the vote is taken and in no event later than ninety (90) days thereafter, if the proposition for conversion was approved by the vote, the credit union shall take action that may be necessary under the federal Credit Union Act to make it a federal credit union, and within ten (10) days after receipt of the federal credit union charter, there shall be filed with the commissioner a copy of the charter thus issued. Upon filing, the credit union shall cease to be a state credit union; and
  4. Upon ceasing to be a state credit union, the credit union shall no longer be subject to this chapter. The successor federal credit union shall be vested with all the assets and shall continue to be responsible for all the obligations of the state credit union to the same extent as though the conversion had not taken place.

Acts 1963, ch. 31, § 1; 1973, ch. 294, § 6; 1978, ch. 633, § 1; 1979, ch. 86, § 10; T.C.A., §§ 45-1831, 45-4-1202; Acts 1993, ch. 56, § 2.

45-4-1903. Conversion of federal credit union into state credit union.

A federal credit union, organized under the federal Credit Union Act, may be converted into a state credit union by:

  1. Complying with all federal requirements requisite to enabling it to convert to a state credit union or cease being a federal credit union;
  2. Filing with the commissioner proof of compliance, satisfactory to the commissioner;
  3. Filing with the commissioner the articles of incorporation and bylaws required by state credit unions; and
  4. The commissioner, when satisfied that all of the requirements, and all other requirements of the state Credit Union Act have been complied with, shall issue a certificate of approval of the charter of incorporation and of the bylaws. Upon approval, the federal credit union shall become a state credit union as of the date it ceases to be a federal credit union. The state credit union shall be vested with all of the assets and shall continue to be responsible for all of the obligations of the federal credit union to the same extent as though the conversion had not taken place.

Acts 1963, ch. 31, § 2; 1973, ch. 294, § 6; T.C.A., §§ 45-1832, 45-4-1203.

Compiler's Notes. The “state Credit Union Act,” referred to in this section, is apparently a reference to Acts 1923, ch. 68, compiled generally as this chapter.

The federal Credit Union Act is codified at 12 U.S.C. § 1752.

45-4-1904. Foreign credit unions.

  1. Before a foreign credit union, defined as a credit union chartered and operating under the laws of another state, may open an office in Tennessee for the purpose of serving its members residing or working in Tennessee, the credit union shall procure from the commissioner a certificate of authority to operate in Tennessee. The foreign credit union may obtain a certificate of authority from the commissioner by filing an application, which shall include a copy of the foreign credit union's charter, bylaws, a statement of its field of membership if not contained in the bylaws, a copy of its most recent call report made to its supervisory agency, and other information that the commissioner may require.
  2. The commissioner may issue a certificate of authority to the foreign credit union if the commissioner finds that all of the following requirements are satisfied:
    1. The Tennessee members of the credit union will be protected by share insurance comparable to that approved for members of Tennessee credit unions;
    2. The credit union supervisor in the chartering state of the foreign credit union has consented to the entry of the foreign credit union into Tennessee and agrees to furnish upon request copies of its examination reports of the foreign credit union;
    3. The field of membership proposed to be served in Tennessee by the foreign credit union is not being adequately served by a credit union chartered under this title or under the federal Credit Union Act;
    4. A designation of registered agent, upon a form prescribed by the commissioner. The registered agent shall be a natural person who is a resident of and has a business address in this state or a domestic or foreign corporation for profit authorized to transact business in this state. If a registered agent resigns by filing a written notice thereof or is unable to perform the agent's duties, the designating credit union shall promptly designate another registered agent to the end that the credit union shall at all times have a registered agent in this state; and
    5. Reciprocal recognition and authority are given to credit unions chartered in Tennessee by the chartering state of the foreign credit union.
  3. Upon issuance of a certificate of authority by the commissioner, the foreign credit union may serve its members residing or working in Tennessee with an office or offices in Tennessee. The activities or services offered the members served from a Tennessee office shall be in accordance with the bylaws of the foreign credit union and the laws of the state where the foreign credit union is chartered; provided, that loans executed in Tennessee to members residing in Tennessee shall not bear a rate of interest in excess of that rate of interest for similar loans permitted credit unions chartered under this chapter.
  4. The commissioner may examine the records and affairs of any foreign credit union operating in Tennessee if the commissioner deems it necessary to protect the interest of Tennessee members of the foreign credit union. In all cases, a foreign credit union operating in Tennessee shall file with the commissioner a copy of its annual report or call report at the time it files the reports with the credit union supervisor where it is chartered. The commissioner may revoke a certificate of authority if a foreign credit union violates any order issued pursuant to § 45-4-206.
  5. Whenever the laws of any other state of the United States shall impose a supervisory fee or any other charge upon the assets or deposits of credit unions chartered under the laws of this state, the credit unions chartered under the laws of the foreign states shall be required to pay to the commissioner an annual supervision fee based upon the assets of the foreign credit unions located within Tennessee, including loans made by the credit unions to persons or entities that resided in Tennessee at the time the loans were first made. The fee shall be calculated in accordance with § 45-4-1002(c).
    1. A foreign credit union may participate in a shared service center network that is operated from inside or outside of this state and which shared service center, referred to as “center” in this subsection (f), uses an electronic network to provide credit union services to members of credit unions, who are participants in the network, and at which center the services provided are performed by automated teller machines and/or similar electronic communications between the center and the participating credit union. Credit unions whose members use such centers shall not be deemed to be maintaining offices in Tennessee and shall not be subject to any of the foregoing sections applicable to the opening and maintaining of offices by foreign credit unions.
      1. For purposes of this section, “services performed by automated teller machines and/or similar electronic communications” means only the following activities:
        1. Access to and withdrawals from a member's share and other accounts through the acceptance of share drafts, debit approvals and transfers between accounts;
        2. Loan advances pursuant to any lending agreement between the member using the service center and the member's home credit union through any credit access device including drafts, credit cards or otherwise, and including authorizations to increase lines of credit; provided, that the service center may not make a credit determination or create a new loan; and
        3. May provide access to member account information, account balance inquiries, transfers between accounts, initiation of payments from existing accounts to existing loans;
      2. The service center may not, for any foreign credit union, accept loan payments directly, open member accounts, solicit new members or otherwise act as a branch.
    2. Nothing in this section shall limit the ability of a branch of a Tennessee credit union to engage in any service for its members permitted by law at a location where a service center is maintained.
    3. The commissioner may promulgate rules for the implementation of the foregoing section and the sound operation of credit union services in the state pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 1979, ch. 86, § 12; T.C.A., §§ 45-1851, 45-4-1204; Acts 1984, ch. 714, § 5; 1996, ch. 650, § 1; 2015, ch. 241, § 3.

Compiler's Notes. The federal Credit Union Act is codified at 12 U.S.C. § 1752.

45-4-205. Compensation of board and committees.

45-4-802. Fee.

Chapter 5
Industrial Loan and Thrift Companies

Part 1
General Provisions

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).

NOTES TO DECISIONS

1. Powers of Commissioner.

There is nothing in the Industrial Loan and Thrift Act that gives the commissioner the power to adopt rules pertaining to financial soundness. Madison Loan & Thrift Co. v. Neff, 648 S.W.2d 655, 1982 Tenn. App. LEXIS 497 (Tenn. Ct. App. 1982).

2. Remedies.

A borrower's remedies for a violation of the limitations on loan charges and interest rates imposed by this chapter are limited to the remedies prescribed by the general statutes pertaining to interest and other charges by lenders. Hathaway v. First Family Fin. Servs., 1 S.W.3d 634, 1999 Tenn. LEXIS 408 (Tenn. 1999).

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;
    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).

NOTES TO DECISIONS

1. Actuarial Method.

Actuarial methods apply applied only where monthly payments are made or due, not where payments do not begin until months after the loan. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

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.

NOTES TO DECISIONS

1. In General.

Violation of the sections on usury and investment certificates were intended to be made criminal acts pursuant to T.C.A. § 45-5-106. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

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

45-5-201. General qualifications for registration.

  1. In order to qualify for registration as an industrial loan and thrift company, a person must:
    1. Demonstrate experience, character and general fitness to command the confidence of the public and warrant the belief that the business to be operated will be operated lawfully and fairly;
    2. If a natural person or a partnership, have a net worth of at least twenty-five thousand dollars ($25,000) for each office or place of business to be registered;
    3. If a corporation, be either:
      1. Organized under the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, to transact business as an industrial loan and thrift company; or
      2. Organized and existing under the laws of some other jurisdiction, holding a certificate of authority to transact business in this state from the secretary of state under the Tennessee Business Corporation Act and authorized to transact business as an industrial loan and thrift company or to engage in a similar business in the jurisdiction of its incorporation; and
    4. Whether foreign or domestic, have a total stated capital and surplus of at least twenty-five thousand dollars ($25,000) for each certificate of registration.
  2. In order to qualify for registration as an industrial investment company or industrial bank, a person must:
    1. Demonstrate experience, character and general fitness as to command the confidence of the public and warrant the belief that the business to be operated will be operated lawfully and fairly;
    2. Have a capital structure in accordance with § 45-5-603;
    3. Be organized under the Tennessee Business Corporation Act to transact business as an industrial bank or industrial investment company, as the case may be;
    4. Have a name that does not include the word “bank” or any word deceptively similar thereto; and
    5. Comply with the requirements of part 6 of this chapter.

Acts 1979, ch. 204, § 4; T.C.A., § 45-2004; Acts 1983, ch. 274, § 13; 1994, ch. 551, § 19.

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

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

45-5-202. Procedures for registration.

  1. In order to obtain a certificate of registration, a person must file an application with the commissioner on forms approved and furnished by the commissioner, giving the information that the commissioner may reasonably require in order to determine the qualifications of the applicant, including, but not limited to, identification of all persons owning an interest in the applicant and addresses of any affiliated lenders in this state.
  2. Upon the filing of an application and payment by the applicant of a nonrefundable supervision fee, as provided in § 45-1-118(i), the commissioner shall investigate the facts concerning the application and the information contained in the application. If the commissioner finds that the applicant meets the qualifications specified in this chapter for registration, the commissioner shall approve the application.
  3. At the time of the filing of an application for a certificate of registration, each applicant that makes or proposes to make residential mortgage loans shall file with the commissioner a surety bond payable to the state, in a form to be approved by the commissioner, for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the registrant. The surety bond shall provide coverage for each mortgage loan originator in an amount that reflects the dollar amount of residential mortgage loans originated by the registrant, as determined by the commissioner; provided, that, for the first period of registration during which the company makes or proposes to make residential mortgage loans, or for the 2009-2010 registration period, or both, as applicable, the surety bond shall be in the amount of two hundred thousand dollars ($200,000). Only one (1) bond is required for the registrant, regardless of the number of offices. Immediately upon recovery upon any action on the bond, the registrant shall file a new bond. The bond shall be maintained by the registrant for not less than twenty-four (24) months following the expiration, revocation, suspension or surrender of the certificate of registration. A registrant that has obtained registration under subsection (d) shall first comply with the surety bond requirements of this subsection (c) prior to making or proposing to make a residential mortgage loan. A registrant authorized to make residential mortgage loans on July 1, 2009, and holding a letter of credit, as opposed to a surety bond, shall be required to comply with the surety bond requirements of this subsection (c) in order to renew the registrant’s registration in 2010.
  4. All other applicants shall, at the time of the filing of an application for a certificate of registration, file with the commissioner a surety bond payable to the state or a letter of credit, in each case in a form to be approved by the commissioner, for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the registrant or the registrant's employees, or both, in the amount of fifty thousand dollars ($50,000). Only one (1) bond or letter of credit is required, regardless of the number of offices of the registrant. The bond or letter of credit shall be maintained by the registrant for not less than twenty-four (24) months following the expiration, revocation, suspension or surrender of the certificate of registration.
  5. As a condition of registration for applicants that propose to make residential mortgage loans, or as a condition of a registrant later obtaining such authority, the commissioner may adopt rules to require that certain individuals associated with the applicant or registrant successfully complete testing or educational courses, or both, approved by the commissioner. The rules may extend to any individual who is an officer, partner, managing member or controlling person, or to any other individual associated with the applicant or registrant as is reasonably necessary to meet the purposes of this chapter.
  6. The commissioner may require education and testing providers of any of the educational courses or tests required under this chapter to file information regarding the contents and materials of the proposed courses or tests with the commissioner for review and approval. The commissioner may set fees for the initial and continuing review of courses and tests.
  7. The commissioner is authorized to require an applicant for a certificate of registration to consent to a criminal history records check and to provide with the application fingerprints in a form acceptable to the commissioner. The commissioner may require such consent and fingerprints from any individual who is an officer, partner, managing member or ultimate equitable owner of ten percent (10%) or more of the applicant, as well as from any other individual associated with the applicant as is reasonably necessary to meet the purposes of this chapter. Refusal of any person to consent to a criminal history records check or to provide fingerprints as allowed by this section constitutes grounds for the commissioner to deny registration to the applicant.
    1. Any criminal history records check conducted under subsection (g) shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, and the results of the criminal history records check shall be forwarded to the commissioner. All costs incurred in conducting the criminal history records check shall be paid by the applicant, in addition to any other fees required by this chapter.
    2. Notwithstanding any other provision in this chapter, the commissioner shall not use a multi-state automated licensing system to share federal bureau of investigation criminal history background information of any individual other than mortgage loan originators, unless authorized to do so by the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §§ 5101-5116), as amended, or other federal law.

Acts 1979, ch. 204, § 5; T.C.A., § 45-2005; Acts 2001, ch. 165, §§ 3, 4; 2009, ch. 499, §§ 3, 4; 2014, ch. 736, §§ 2, 3; 2016, ch. 745, § 1.

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

45-5-203. Expiration of registration certificates — Renewal — Fees — Evidence that surety bond adjusted — Continuing education and testing — Biennial registration.

  1. A certificate of registration issued pursuant to this chapter expires on December 31. A certificate of registration may be renewed for the ensuing twelve-month period upon application by the registrant showing continued compliance with the requirements of § 45-5-201 and payment of the nonrefundable supervision fee, as provided in § 45-1-118(i). A registrant making timely and complete application and payment for renewal of its certificate of registration may continue to operate under its existing certificate of registration until its application is approved or denied. The completed renewal application and the payment of the annual supervision fee must be sent to the department on or before December 31, but no earlier than November 1, of each year.
  2. A registrant submitting an application for renewal of a certificate of registration expiring on March 31, 2018, must pay the supervision fee as provided in § 45-1-118(i). The completed renewal application and payment must be sent to the department on or before March 1, 2018. A renewal certificate of registration with a beginning effective date of April 1, 2018, expires on December 31, 2018.
  3. As a condition of renewal of a certificate of registration for a registrant that makes or proposes to make residential mortgage loans, the registrant shall file with its renewal application evidence that its surety bond is adjusted in accordance with § 45-5-202(c).
  4. As a condition of renewal of a certificate of registration for a registrant that makes or proposes to make residential mortgage loans, the commissioner may adopt rules to require that any of the individuals identified pursuant to § 45-5-202(e) successfully complete continuing education course requirements. The rules pertaining to continuing education requirements, as well as those pertaining to any testing or education requirements, or both, under § 45-5-202, may include criteria for content, accreditation of sponsors and programs, computation of credit, special cases and exemptions, general compliance procedures and sanctions for noncompliance.
  5. The commissioner may establish a biennial registration arrangement for the filing of the application for renewal of the certificate of registration, but in no case shall the supervision fee be payable for more than one (1) year at a time.

Acts 1979, ch. 204, § 6; T.C.A., § 45-2006; Acts 1984, ch. 698, § 2; 2001, ch. 165, § 5; 2009, ch. 499, § 5; 2014, ch. 736, § 4; 2017, ch. 122, §§ 2, 3.

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

Acts 1984, ch. 698, § 3, provided that the provisions of the 1984 amendment by that act were declared to be remedial in nature to be liberally construed to effectuate its purposes.

45-5-204. Denial of applications for registration.

  1. If the commissioner determines that an applicant is not qualified to receive a certificate of registration, the commissioner shall notify the applicant in writing that the application has been denied, stating the basis for denial.
  2. If the commissioner denies an application, or if the commissioner fails to act on an application within ninety (90) days after its filing, the applicant may make written demand to the commissioner for a hearing before the commissioner on the question of whether the certificate of registration should be granted.
  3. The hearing shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In the hearing, the burden of proving that the applicant is entitled to a certificate of registration shall be on the applicant. Decisions of the commissioner on the hearings shall be subject to review under the Uniform Administrative Procedures Act.

Acts 1979, ch. 204, § 7; T.C.A., § 45-2007.

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

45-5-205. Suspension or revocation of certificates of registration.

  1. The commissioner may, after notice and opportunity for a hearing, suspend or revoke any certificate of registration if the commissioner finds that the registrant has knowingly or without exercising due care:
    1. Failed to pay any fees or assessments imposed by the commissioner under the authority of this chapter; or
    2. Violated any provision of this chapter or of any rule or regulation issued under this chapter.
  2. A hearing shall be held on twenty (20) days' notice, in writing, setting forth the time and place and a concise statement of the facts alleged to sustain a suspension or revocation, which hearing shall be full, fair and public. The suspension or revocation and its effective date shall be set forth in a written order accompanied by conclusions of law, findings of fact and the reasons for the suspension or revocation, and a copy shall forthwith be delivered to the registrant. The order, findings, conclusions and any transcript of the evidence considered by the commissioner shall be filed with the public records of the department of financial institutions.
  3. If a registrant operates more than one (1) office, any suspension or revocation of its certificate of registration shall be directed only against the office or offices that the commissioner may find in violation of this chapter.
  4. Suspension or revocation of a certificate of registration shall not affect the validity of any existing loan contracts made under this chapter, or the validity of any investment certificates or thrift certificates issued in accordance with  this chapter.

Acts 1979, ch. 204, § 19; T.C.A., § 45-2019; Acts 1983, ch. 274, § 14; 2001, ch. 165, § 6; 2014, ch. 736, § 5.

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

45-5-206. Lost certificates of registration — Substitutions.

In the event that a certificate of registration issued under this chapter is lost or destroyed, the person to whom the certificate of registration was issued may, upon payment of a fee prescribed by the commissioner, obtain a substitute certificate of registration, upon furnishing proof satisfactory to the commissioner that the certificate of registration has become lost or destroyed.

Acts 2004, ch. 747, § 11.

45-5-207. License requirement — Sponsorship — Registrant subject to all applicable requirements and prohibitions of chapter 13 of this title — Violations — Submission of reports to the Nationwide Mortgage Licensing System and Registry.

  1. Effective July 31, 2009, no registrant shall make a residential mortgage loan unless each individual that acts as a mortgage loan originator with respect to the loan has obtained a mortgage loan originator license under chapter 13, part 3 of this title, and has been sponsored by the registrant in accordance with subsection (b), except as follows:
    1. A registrant authorized to make residential mortgage loans on July 30, 2009, is authorized to continue doing so after July 30, 2009; provided, that each individual who acts as a mortgage loan originator with respect to any residential mortgage loan is registered with the commissioner in affiliation with that registrant on or before July 30, 2009. The excepted authority shall only continue for so long as the mortgage loan originator registration remains effective;
    2. To register a mortgage loan originator under subdivision (a)(1), the registrant must timely submit to the commissioner a nonrefundable registration fee of one hundred dollars ($100) and a completed registration form containing any information the commissioner deems necessary, including the following:
      1. The name of the registrant for whom the mortgage loan originator provides origination services;
      2. The mortgage loan originator's name, birth date, social security number and address; and
      3. The office location where the mortgage loan originator will engage in residential mortgage loan origination services;
    3. Any mortgage loan originator timely registered with a registrant shall be considered sponsored by that registrant for purposes of subsection (b) for the term of the registration and any successive licensure;
    4. The registration of a mortgage loan originator under this section shall expire without further notice or process upon either of the following occurrences:
      1. If the mortgage loan originator ceases providing services for the affiliated registrant at the office listed in the registration form; or
      2. On December 31, 2009, unless between November 1, 2009, and December 31, 2009, the individual files an application through the Nationwide Mortgage Licensing System and Registry for a mortgage loan originator license under chapter 13, part 3 of this title, pays all licensing fees and submits fingerprints for a criminal background check. If this is timely accomplished, the registration shall remain effective until such time as the commissioner acts on the licensure application, but in no event shall the registration be valid after July 30, 2010. If the licensure application is approved, the license shall be issued for calendar year 2010; and
    5. An individual registered as a mortgage loan originator under this subsection (a) shall not be in violation of any law requiring a license to act as a mortgage loan originator for any origination services performed while the registration is effective.
  2. To sponsor a mortgage loan originator on or after July 31, 2009, a registrant must file the form with the commissioner as the commissioner prescribes and pay to the commissioner a nonrefundable sponsorship fee of one hundred dollars ($100), which fee may be decreased or increased by rule of the commissioner. Upon determining that the individual has obtained a license under chapter 13, part 3 of this title and is not sponsored by any other registrant, mortgage lender or mortgage loan broker, the commissioner shall authorize the sponsorship. A mortgage loan originator sponsorship terminates if the sponsoring registrant's authority to make residential mortgage loans expires or is revoked or otherwise terminates, or if the mortgage loan originator ceases providing services for the registrant. A mortgage loan originator sponsorship does not terminate if the mortgage loan originator changes from one (1) office of the sponsoring registrant to another registered office of the same company. Upon any change in the mortgage loan originator's office, the sponsoring registrant shall notify the commissioner in writing within fourteen (14) days of the change.
  3. Should a mortgage loan originator sponsorship terminate, the mortgage loan originator's license shall become inactive, but shall not expire so long as the mortgage loan originator continues to meet all other requirements for licensure and renewal of licensure. An inactive license is reactivated if the mortgage loan originator obtains a new sponsorship under this section or under chapter 13, part 3 of this title. The commissioner may not approve a new sponsorship unless and until the commissioner has been notified that any prior sponsorship has terminated.
  4. The sponsoring registrant shall ensure that each application for a residential mortgage loan contains the name and registration number of the registrant, as well as the name, signature and license number of the mortgage loan originator who provided origination services with respect to the loan. The registrant shall also ensure that the registrant's records pertaining to the residential mortgage loan contain the unique identifier, if different from the license number, of each mortgage loan originator that provided services with respect to the loan.
  5. The sponsoring registrant is responsible for and shall supervise the acts of each sponsored mortgage loan originator.
  6. A mortgage loan originator of a registrant is subject to all applicable requirements and prohibitions of chapter 13 of this title, unless otherwise stated in chapter 13 of this title.
  7. A registrant that is authorized to make residential mortgage loans is subject to investigation and examination under chapter 13 of this title, to the extent that chapter 13 of this title provides the commissioner greater or different investigatory or examination power than is authorized under this chapter.
  8. It is a violation of this chapter for a registrant to commit any of the acts or practices prohibited by § 45-13-401 in the making of a residential mortgage loan, as applicable.
  9. A registrant that is authorized to make residential mortgage loans shall, pursuant to order or direction of the commissioner, submit reports of condition to the Nationwide Mortgage Licensing System and Registry pertaining to its residential mortgage loan business, which shall be in the form and shall contain the information that the Nationwide Mortgage Licensing System and Registry requires.

Acts 2009, ch. 499, § 6.

45-5-208. Multi-state automated licensing system.

  1. In addition to any other powers imposed upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be registered through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate any rules reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system;
    2. Establish relationships or enter into agreements reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements, and technology licensing agreements;
    3. Require that applications for registration under this chapter and renewals of such registrations be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning registrations to a multi-state automated licensing system. The commissioner may deny any applications or renewal applications not filed with a multi-state automated licensing system after the deadlines have passed, notwithstanding any other deadlines established elsewhere in this chapter. The commissioner shall provide reasonable notice of any transition deadlines to registrants; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section authorizes the commissioner to require a person who is not subject to this chapter to submit information to, or participate in, a multi-state automated licensing system.
  3. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to register persons under this chapter and to enforce this chapter. Nothing in this section reduces or derogates that authority and discretion.
  4. Applicants for and holders of registrations issued under this chapter must pay all costs associated with submitting an application or transitioning a registration to a multi-state automated licensing system, as well as all costs associated with maintaining and renewing any registration issued by the commissioner on a multi-state automated licensing system.

Acts 2017, ch. 122, § 4.

45-5-209. Privacy or confidentiality of shared information.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, continue to apply to the information or material after it has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with consumer finance industry oversight authority without the loss of privilege or confidentiality protections provided by federal or state law, including the protection available under § 45-1-120;
  2. For purposes of subdivision (1), the commissioner may enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies, as established by rule, regulation, or order of the commissioner;
  3. Information or material that is subject to a privilege or confidentiality protection under subdivision (1) is not subject to:
    1. Disclosure under any federal or state law governing disclosure to the public of information held by an officer or agency of the federal government or the respective state; or
    2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless the person to whom such information or material pertains, in the person's discretion, waives any applicable privilege held by a multi-state automated licensing system, in whole or in part;
  4. This section supersedes any inconsistent provisions of title 10, chapter 7, part 5, pertaining to the records open to public inspection; and
  5. This section does not apply to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.

Acts 2017, ch. 122, § 4.

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

Part 3
Powers of Registered Companies

45-5-301. General powers of registrants.

Any registrant under this chapter has the power to:

  1. Lend money, with or without security, and to take as security real or personal property, or both;
    1. Charge interest:
      1. On loans where the amount financed is less than one hundred dollars ($100), at a nominal rate not in excess of seven and one-half percent (7.5%) per annum, deducted in advance, on the principal for the full term thereof without regard to the payment schedule; but no interest shall be charged on the loans in excess of a maximum effective rate of eighteen percent (18%) per annum;
      2. On loans where the amount financed is one hundred dollars ($100) or more, up to five thousand dollars ($5,000), on the principal at any rate not in excess of a maximum effective rate of thirty percent (30%) per annum;
      3. On loans where the amount financed is more than five thousand dollars ($5,000), on the principal at any rate not in excess of the maximum effective rate of twenty-four percent (24%) per annum; and
      4. On loans made under open-end credit plans, which are plans under which a registrant contemplates repeated loans that may be without fixed maturities or limitation as to the length of term, and that are subject to prepayment at any time, at any rate not in excess of a maximum effective rate of twenty-four percent (24%) per annum;
    2. All the interest shall be contracted for and computed in accordance with § 45-5-401;
  2. Charge loan charges, but subject to the limitations provided in § 45-5-403; provided, that no loan charge shall be imposed unless a loan is made or an open-end credit plan is established or renewed for a term of not less than three (3) years;
  3. Require, at the expense of the borrower, insurance against the hazards to which any collateral used to secure the loan is subject; and upon the failure of the borrower to supply the same to procure the same, subject to § 45-5-305;
  4. Accept, but not require, as additional collateral at the expense of the borrower or borrowers, insurance against the hazards of death, or disability, or involuntary unemployment, or any combination thereof, of the borrower or borrowers, subject to § 45-5-305;
  5. Engage in the purchase, discount and rediscount of notes, security agreements or security interests or other indicia of security originating from the sale or purchase of property or services;
  6. Make loans to dealers in motor vehicles, appliances and other chattels for the purpose of acquiring, stocking and offering for sale the merchandise and to take appropriate security therefor;
  7. Purchase or otherwise acquire and sell and negotiate drafts and acceptances drawn in connection with the sale of personal property on account of the purchase price thereof and take from the acceptors or holders of the drafts and acceptances as security for the drafts and acceptances, with or without other collateral, choses in action or other evidences of indebtedness issued by it and to be paid in uniform monthly, weekly or other periodical installments;
  8. If an industrial investment company, not insured by an agency of the United States government, issue investment certificates subject to this chapter;
  9. If an industrial bank, insured by an agency of the United States government, issue thrift certificates subject to this chapter;
  10. Have any and all powers not specifically defined in this chapter that are granted by the laws of this state to corporations generally, except powers that are inconsistent with this chapter; provided, that nothing in this chapter shall be construed as limiting the power of registrants to make loans, charge interest and other charges consistent with the powers of corporations generally and subject to the limitations provided by title 47, chapters 14 and 15;
    1. Subject to § 45-5-305(b), accept or sell, but not require, at the expense of the borrower or borrowers, one (1) or more credit-related insurance products;
    2. As used in subdivision (12)(A) and § 45-5-305(b), “credit-related insurance products” is limited to individual term life or individual accidental death and dismemberment insurance sold by a registrant where the:
      1. Beneficiary named by the debtor is a person other than the creditor;
      2. Insurance is purchased by the debtor and financed as part of the credit transaction; and
      3. Premium for the insurance is included in the principal of the loan; and
  11. Make any change among the president, chief executive officer, treasurer, or chief financial officer, or among the general partner or partners; provided that the registrant gives written notice to the commissioner within fourteen (14) days of the change and furnishes other information that the commissioner may require.

Acts 1979, ch. 204, § 8; T.C.A., § 45-2008; Acts 1983, ch. 164, § 1; 1983, ch. 274, § 15; 1985, ch. 107, § 5; 1987, ch. 124, § 1; 1991, ch. 87, § 1; 1993, ch. 100, § 1; 1999, ch. 172, § 1; 2001, ch. 165, § 7; 2017, ch. 164, § 1; 2018, ch. 600, § 3.

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

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.

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

Attorney General Opinions. Loan charges under the Industrial Loan and Thrift Companies Act. OAG 14-82, 2014 Tenn. AG LEXIS 85 (9/12/14).

NOTES TO DECISIONS

1. Legislative Intent.

Violation of the sections on usury T.C.A. § 45-5-301 and investment certificates (T.C.A. § 45-5-302) were intended to be made criminal acts pursuant to T.C.A. § 45-5-106. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

2. Usury Shown.

Usury was established where the interest charged exceeded the 18 percent (18%) statutory limit. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

3. Usury Not Shown.

With respect to a loan by a national bank, a default interest rate of 24 percent was not usurious, because T.C.A. § 45-5-301(2) authorized industrial loan and thrift companies to charge this rate, and federal law authorized national banks to charge interest at rates allowed by the state where the banks were located. J & B Invs., LLC v. Surti, 258 S.W.3d 127, 2007 Tenn. App. LEXIS 816 (Tenn. Ct. App. Dec. 27, 2007), appeal denied, — S.W.3d —, 2008 Tenn. LEXIS 396 (Tenn. May 27, 2008).

Dismissal of a debtor's suit against the bank that issued the promissory note and the holder of the note for charging usurious interest was proper because the bank was authorized to charge interest at the default rate under T.C.A. § 45-5-301(2) when the note was executed, and the holder was entitled to collect interest at the default rate. Foster Bus. Park, LLC v. J & B Invs., LLC, 269 S.W.3d 50, 2008 Tenn. App. LEXIS 52 (Tenn. Ct. App. Jan. 30, 2008), appeal denied, — S.W.3d —, 2008 Tenn. LEXIS 634 (Tenn. Aug. 25, 2008).

Decisions Under Prior Law

1. Constitutionality.

The former section concerning loan charges was unconstitutional prior to the 1978 amendment of Tenn. Const., art. XI, § 7, and void insofar as it was applied to any note or obligation, discounted at seven and one-half percent and payable in monthly installments, or to any other transaction, regardless of how payment was programmed, if the end result was an effective rate of interest in excess of 10 percent (10%). Cumberland Capital Corp. v. Patty, 556 S.W.2d 516, 1977 Tenn. LEXIS 614 (Tenn. 1977).

This decision regarding the maximum amount of interest allowable under the former section was applicable to all notes, contracts, and obligations signed or incurred on or after August 23, 1977, and to all interest accruing on and after that date, irrespective of the date the instrument was signed or the obligation was incurred; it was also applicable retroactively in cases where there had not been strict compliance with the Industrial Loan and Thrift Company Act. Cumberland Capital Corp. v. Patty, 556 S.W.2d 516, 1977 Tenn. LEXIS 614 (Tenn. 1977).

2. Powers.

Industrial loan and thrift corporation organized under the former chapter had power to lease a part of the premises in that it conducted its business to an affiliated corporation for purpose of conducting a catalog sales business. Williams v. American Plan Corp., 216 Tenn. 435, 392 S.W.2d 920, 1965 Tenn. LEXIS 589 (1965).

3. Usury Shown.

Where by terms of loan made pursuant to the former chapter, providing for the deduction of interest in advance and for monthly installments pursuant to note, debtor would have paid approximately 12 percent (12%) interest on amount of money of that he had used, loan was usurious as it exceeded constitutional maximum of 10 percent interest. In re Bogan, 281 F. Supp. 242, 1968 U.S. Dist. LEXIS 8499 (W.D. Tenn. 1968).

Since loan company required debtor to take out insurance charged to him in order to obtain loan from company whose official was also agent of the insurance companies that wrote the insurance provided for in loan note, loan company had acquired additional profit that constituted usury. In re Bogan, 281 F. Supp. 242, 1968 U.S. Dist. LEXIS 8499 (W.D. Tenn. 1968).

Discounting a note is not unconstitutional, per se, but where the discounting would result in a rate of interest in excess of the constitutional or statutory limit, it is invalid. Cumberland Capital Corp. v. Patty, 556 S.W.2d 516, 1977 Tenn. LEXIS 614 (Tenn. 1977).

4. Insurance Required of Borrower.

Where the loan company had an insurable interest in property put up by owner as collateral, the insurance policy was not subject to proration with a policy insuring the separate interest of the property owner. Langdon v. Cambridge Mut. Fire Ins. Co., 484 S.W.2d 353, 1972 Tenn. LEXIS 373 (Tenn. 1972).

5. Conventional Interest Rate.

The former section concerning loan charges had to be construed to provide for a conventional rate of interest since the former § 47-14, that wthat the general law regulating interest, fixed both a legal and a conventional rate of interest and excepted industrial loan and thrift companies from application of the conventional interest provision. Cumberland Capital Corp. v. Patty, 556 S.W.2d 516, 1977 Tenn. LEXIS 614 (Tenn. 1977)

45-5-302. General limitations on registrants.

No registrant under this chapter has the power to:

  1. Receive deposits of money subject to check, payable on demand, or payable unconditionally at a fixed time; or to use the word “bank” or “banking,” “trust company” or other term commonly used to describe a banking corporation in its name; or to accept trusts or act as administrator, executor, testamentary or judicial trustee in any form;
  2. Make any loan for an original principal sum of three hundred dollars ($300) or less for a term in excess of twenty-four (24) months, or make any loan for an original principal sum of more than three hundred dollars ($300) but less than one thousand dollars ($1,000) for a term in excess of thirty-six (36) months, but the term of any other loan shall be as the parties may contract, but not for a term in excess of one hundred eighty-one (181) months with respect to any loan subject to the limitations provided in this chapter as to interest and loan charges;
  3. Make any loan to one (1) person, firm or corporation for more than ten percent (10%) of the amount of the stated capital and surplus of the registrant, except that this limitation shall not apply to loans made pursuant to § 45-5-301(7); nor shall this limitation apply to a registrant that does not issue, sell and have outstanding investment or thrift certificates;
  4. Require the purchase of its investment or thrift certificates by a borrower simultaneously with a loan transaction;
  5. Deposit any of its funds with any other corporation unless the corporation has been designated as the depository by a vote of the majority of the directors, exclusive of any director who is an officer, director or trustee of the depository so designated, present at a meeting duly called at which a quorum is in attendance; provided, that this subdivision (5) shall not apply to proprietorships or partnerships;
  6. Move an office until five (5) days' notice of the registrant's intention to move has been given to the commissioner, who shall endorse the new address on the certificate of registration;
  7. Take an instrument in which blanks are left to be filled in after the loan is made;
  8. Accept or procure willfully and knowingly a false financial statement from a borrower;
  9. Use any unreasonable collection tactics, which include, but are not limited to, any conduct by the registrant or any employee or agent of the registrant that:
    1. Causes the borrower or any member of the borrower's family to suffer bodily injury or physical harm;
    2. Constitutes a willful or intentional trespass by force of the borrower's home or the borrower's personal property therein, without process of law;
    3. Holds up the borrower to public ridicule or unreasonably degrades the borrower in the presence of the borrower's neighbors or business associates;
    4. Uses, distributes, employs or mails any document, paper or instrument purporting to be a summons, warrant, notice or other process, or copy thereof, issued by a court or other public authority; or
    5. Although otherwise lawful, occurs at an unreasonable hour of the night. Attempts to make collections by means of personal visits, telephone calls and the like shall be deemed to occur at an unreasonable hour of the night if they occur between the hours of ten o'clock p.m. (10:00 p.m.) and five o'clock a.m. (5:00 a.m.);
  10. Publish or distribute or cause to be published or distributed any false or misleading advertising; or
  11. Use multiple agreements, including those with affiliated lenders, with the intent to obtain a higher effective rate of interest or greater charges than would otherwise be authorized by this chapter.

Acts 1979, ch. 204, § 13; T.C.A., § 45-2013; Acts 1983, ch. 274, § 16; 1986, ch. 576, § 1; 1991, ch. 87, § 2.

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

Law Reviews.

Selected Tennessee Legislation of 1986, 54 Tenn. L. Rev. 457 (1987).

NOTES TO DECISIONS

1. Legislative Intent.

Violation of the sections on usury (T.C.A. § 45-5-301) and investment certificates (T.C.A. § 45-5-302) were intended to be made criminal acts pursuant to T.C.A. § 45-5-106. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

2. Evidence.

Lender violated this section in requiring purchase of investment certificate as a prerequisite to obtaining a loan. Brabson v. Valentine, 804 S.W.2d 451, 1990 Tenn. App. LEXIS 760 (Tenn. Ct. App. 1990), appeal denied, — S.W.2d —, 1991 Tenn. LEXIS 31 (Tenn. Jan. 14, 1991).

45-5-303. Names used by registrants — Rules governing advertisements.

  1. Every registrant under this chapter may use the words “industrial loan and thrift company” or any part of those words in its corporate name. It is unlawful for any registrant organized after July 1, 1968, and qualified under this chapter, to use as a part of its company name the words “savings and loan.” Each company organized prior to July 1, 1968, and using such words as part of its corporate name, as a condition precedent to its registration or reregistration under this chapter, shall agree to include with each use of its corporate name in advertising the issuance and sale of certificates of investment, in lettering at least two-thirds (2/3) the size of the lettering in its name and directly beneath its name so as to be plainly visible, the following addendum: “not federally insured.”
  2. Nothing in this chapter shall be construed to deny the use or alteration of any name of any company registered under the former Industrial Loan and Thrift Companies Act on July 1, 1979.
  3. The commissioner is authorized and directed to adopt rules governing the advertisements of registrants under this chapter in order to prevent confusion as to the different categories of registrants under this chapter and between the registrants and other financial institutions.

Acts 1979, ch. 204, § 14; T.C.A., § 45-2014; Acts 1983, ch. 274, § 17; 1989, ch. 591, § 113.

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

For information concerning the former Industrial Loan and Thrift Companies Act, see Compiler's Notes to § 45-5-101.

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

NOTES TO DECISIONS

1. Constitutionality.

Provision of this section requiring companies organized prior to July 1, 1968 using “savings and loan” as part of their corporate name to make additional disclosure “not federally insured” was a valid exercise of police power and did not constitute vicious class legislation or a denial of due process or of equal protection of the laws. Peoples Sav. & Loan of Nashville Co. v. Pack, 225 Tenn. 296, 467 S.W.2d 578, 1971 Tenn. LEXIS 345 (1971).

Provision of this section requiring companies organized prior to July 1, 1968 using “savings and loan” as part of their corporate name to make additional disclosure “not federally insured” was not unconstitutional as impairing contract between companies and state allegedly granting unqualified right to use the term “savings and loan” or as granting a copyright to a selected group to use the term. Peoples Sav. & Loan of Nashville Co. v. Pack, 225 Tenn. 296, 467 S.W.2d 578, 1971 Tenn. LEXIS 345 (1971).

45-5-304. Investment certificates.

  1. A registrant shall not issue investment certificates until:
    1. The registrant has qualified as an industrial investment company and furnishes evidence to the commissioner that it meets the capital requirements specified in § 45-5-603;
    2. The registrant gives notice to the commissioner that the registrant intends to issue investment certificates, which notice shall specify the number and total dollar amount of certificates to be offered and the terms of the offering;
    3. The registrant files the forms, documents, and receipts to be used by the registrant with the commissioner; and
    4. The registrant furnishes proof that the offering and sale of the investment certificates is covered by an effective registration under the Tennessee Securities Act, compiled in title 48, chapter 1, part 1, or that the securities division of the department of commerce and insurance has reviewed the proposed offering and determined that it is exempt from registration.
  2. A registrant may use the forms, documents and receipts that have been filed with the commissioner until the commissioner gives the registrant notice that they do not meet the requirements of this chapter or that the registrant has not complied with other applicable laws.
  3. Each investment certificate shall have printed thereon in at least ten-point bold-face type the following: “not federally insured.”
  4. Except with the prior written approval of the commissioner, a registrant shall use the proceeds from the issuance and sale of investment certificates only in the conduct of its business.
  5. A registrant shall not use the terms “banking hours,” “banking room,” or other similar banking terms in connection with advertising the issuance and sale of investment certificates. Each piece of the advertisement shall bear the full name of the registrant.

Acts 1979, ch. 204, § 15; T.C.A., § 45-2015; Acts 1983, ch. 274, § 18.

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

NOTES TO DECISIONS

1. Financial Soundness.

There is nothing in this section or elsewhere in the Industrial Loan and Thrift Act that gives the commissioner the power to adopt rules pertaining to financial soundness. Madison Loan & Thrift Co. v. Neff, 648 S.W.2d 655, 1982 Tenn. App. LEXIS 497 (Tenn. Ct. App. 1982).

45-5-305. Insurance.

  1. With respect to all insurance offered, sold or procured pursuant to the powers given registrants under § 45-5-301(4) and (5):
    1. The insurance shall be written by an agent and with a company authorized to do business in Tennessee, or under a group policy issued by a company authorized to do business in Tennessee, at rates approved by the commissioner of commerce and insurance;
    2. The borrower has the right to furnish the insurance through any agent or company the borrower desires, if the insurance company is in good standing with the department; or the borrower may authorize the registrant to obtain the insurance for the borrower, and when so authorized by written request, which writing shall be preserved by the company during the term of the loan and for a period of at least two (2) years thereafter, the registrant may have the insurance written by an agent who is an employee, servant, or agent of the registrant, or the insurance may be effected under a group policy issued to the registrant. Any gain or advantage to a registrant or any employee, officer, director, agent, affiliate or associate of the registrant from the insurance or its sale shall not be considered as additional or further charge or interest in connection with any loan made under this chapter; and
    3. The amount and type of insurance that may be required or accepted shall bear a reasonable relation to the existing hazard and risk of loss and shall be subject to the following terms and conditions:
      1. Life insurance shall be in an amount that does not exceed the total amount of the loan and shall be for a period that does not exceed the term of the loan;
      2. Insurance against the hazard of disability of the borrower shall provide equal benefits, the total of all of which shall not exceed the total amount of the loan and shall not be payable beyond the maturity of the loan. The required time of continuous and total disability of the borrower before the beginning of the payment of benefits under the terms of the policy shall be at least seven (7) days, after which time benefits may accrue from then forward or may be retroactive to the first day of disability. Nothing in this subdivision (a)(3)(B) shall be construed to prevent the issuance of insurance requiring more than seven (7) days waiting period;
      3. Property insurance on collateral required pursuant to § 45-5-301(4) shall include only coverage that bears a reasonable relationship to the existing hazards or risk of loss in an amount not in excess of the total amount of the loan or for a term not longer than the term of the loan. If a minimum dollar premium is charged or retained, the total amount so charged to or retained from a borrower or spouse or both by a lender and affiliated lenders in any one (1) year shall not exceed the minimum dollar premium approved by the commissioner of financial institutions for that type of insurance. Neither shall the insurance be required during a period of time when there is adequate property insurance in force that was written in connection with any loan made by the same registrant or an affiliated lender to the same borrower or spouse, or both;
      4. Insurance against the hazard of involuntary unemployment shall provide for a specified number of monthly benefit payments during a specified term of coverage expressed in number of months; provided, that the term of coverage shall not exceed sixty (60) months, and the number of monthly benefit payments shall be at least one-third (1/3) the number of months in the term of coverage;
      5. A registrant that obtains a group policy for the purpose of perfecting any insurance that may be required or accepted hereunder, or that obtains any life, disability, property, or involuntary unemployment insurance described in subdivisions (a)(3)(A)-(D), at the request of the borrower, shall contract with the insurance company for a provision in the policy that the coverage effected as to each individual insured debtor or borrower shall terminate automatically on prepayment in full of the loan by refinancing, renewal or otherwise, and the unearned premium shall be refunded to the registrant. The registrant shall pay or credit the unearned premium refund to the borrower. Only one (1) policy or group certificate of each of these types of insurance shall be accepted as collateral on any one (1) loan, except in the case of joint life insurance, and except in the case of joint disability insurance;
      6. At the time the loan is made, the lender shall give to the borrower:
        1. An insurance policy, a binder, or a certificate of insurance; or
        2. A memorandum showing the name of the insurance company, the types of insurance issued, a description of the coverages, the date of the policy, which shall be the date on which the loan is made, the premium charge for each type of insurance, and if issued under a group policy, the number of the master policy;
      7. If the premiums for insurance are paid from the proceeds of the loan, the amount so paid shall not exceed the premiums charged by the insurer for the insurance; and
      8. In addition to this chapter, registrants shall have the power to accept or sell credit life and credit health and accident insurance pursuant to and in accordance with title 56, chapter 7, part 9.
  2. The acceptance or sale of credit-related insurance products by registrants shall be subject to the following provisions:
    1. The maximum term life insurance coverage and the maximum accidental death or dismemberment coverage available to one insured through a registrant shall not exceed twenty-five thousand dollars ($25,000) for each coverage, and the maximum term for each credit-related life insurance product shall not exceed sixty (60) months;
    2. The registrant shall provide to each prospective insured a separate disclosure statement, signed by both the borrower or borrowers and the registrant's agent indicating the following:
      1. The borrower's or borrowers' desire or desires to purchase the insurance as described in the disclosure statement;
      2. The borrower or borrowers fully understand that buying the insurance is not a condition of the loan. The disclosure shall be made in bold face print appearing in the disclosure statement. In addition, notice of the disclosure shall be posted at any physical location where customers are served;
      3. The owner of the policy may cancel the policy within thirty (30) days after the policy is issued and receive a full refund of the premium paid, by returning the policy to the insurer or upon written instructions to the insurer from the policy owner;
      4. The owner of the policy may also cancel the policy more than thirty (30) days after the policy has been issued by giving notice of cancellation to the insurer, and on cancellation, the owner of the policy shall receive a portion of the premium paid in accordance with the terms of the policy; and
      5. A statement with three (3) representative examples of the purchase of insurance under this section indicating the total amount of interest payable for each example of a loan and the amount of interest of the loan attributable to the insurance purchased under this section; and
    3. Credit-related insurance products shall be treated as credit life insurance or credit accident and health insurance only as those terms are used in title 56, chapter 6, part 2 and title 56, chapter 8, part 1; credit-related insurance products shall not be treated as credit life insurance, credit accident and health insurance or credit disability insurance as those terms are otherwise used in title 56; provided, that this subsection (b) shall not affect any other provision of title 56, or any regulation adopted pursuant thereto.

Acts 1979, ch. 204, § 12; T.C.A., § 45-2012; Acts 1985, ch. 107, § 5; 1993, ch. 100, § 2; 1994, ch. 588, § 1; 1999, ch. 172, § 2.

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

Part 4
Interest and Borrowers

45-5-401. Contracts for interest — Computation.

    1. With respect to loans where the amount financed is less than one hundred dollars ($100), this chapter permits, but does not require, interest to be contracted for by way of discount. Interest may also be contracted for at an effective rate that results in the same amount being paid as if interest had been contracted by way of discount at a nominal rate not in excess of the maximum nominal rate specified in § 45-5-301(2) for loans of this category, always subject to the maximum effective rate provided in § 45-5-301(2) for loans of this category.
    2. With respect to loans where the amount financed is one hundred dollars ($100) or more, this chapter does not limit or restrict the manner or method of contracting for interest, whether by way of add-on, discount, or otherwise, so long as the maximum effective rate of interest for loans of this category does not exceed that authorized by § 45-5-301(2) for the loans.
    3. With respect to loans made under open-end credit plans, interest shall be computed on the principal balance unpaid from time to time, always subject to the maximum effective rate provided in § 45-5-301(2) for loans of this category.
  1. In any event, the maximum effective rate of interest on a loan shall:
    1. Be determined in accordance with the actuarial method;
    2. In the case of precomputed interest, be calculated and determined as of the date of the loan on the assumption that all scheduled payments will be made as contracted; and
    3. Not be affected by the prepayment of the loan, in whole or in part.
  2. Interest may be contracted for on the unpaid balance due after the maturity date of the loan:
    1. Where the amount financed is less than one hundred dollars ($100), at an effective rate not to exceed eighteen percent (18%) per annum;
    2. Where the amount financed is one hundred dollars ($100) or more, up to five thousand dollars ($5,000), at an effective rate not to exceed thirty percent (30%) per annum;
    3. Where the amount financed is more than five thousand dollars ($5,000), at an effective rate not to exceed twenty-four percent (24%) per annum; and
    4. Where the loan is made under an open-end credit plan, at an effective rate not to exceed twenty-four percent (24%) per annum.
  3. The term of a loan for the purposes of this section commences on the date the loan is made. Differences in the lengths of months are disregarded and, for any period less than a month, each day may be counted as one-thirtieth (1/30) of a month.

Acts 1979, ch. 204, § 9; T.C.A., § 45-2009; Acts 1983, ch. 164, § 2; 2018, ch. 600, §§ 4, 5.

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

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.

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

NOTES TO DECISIONS

1. Loan Amount Calculations.

In determining the service charge that an industrial loan and thrift company may lawfully impose under § 45-5-403(1)(A), the amount to be subtracted from the total amount of the loan is that portion of the refinancing loan that is used to pay all or any part of the initial loan from the industrial loan and thrift company, but interest on the initial loan that would have accrued after the date of the refinancing should not be included when computing the balance outstanding on the initial loan. Hathaway v. First Family Fin. Servs., 1 S.W.3d 634, 1999 Tenn. LEXIS 408 (Tenn. 1999).

45-5-402. Changes in payment schedules — Prepayments — Deferrals.

  1. With respect to loans where the total amount of the loan is less than one hundred dollars ($100):
    1. If the loan is precomputed and is prepaid in full, by refinancing or otherwise, more than thirty (30) days prior to its original maturity date, the borrower shall be entitled to receive a refund, or a refund credit, of any precomputed interest charge in an amount at least equal to the following:
      1. If the loan is payable in periodic installments, an amount on each installment for the time each installment is so paid in advance of its due date at the maximum authorized nominal rate; or
      2. If the loan is not payable in installments, an amount equal to that required in subdivision (a)(1)(A) and computed as if the loan was paid in consecutive equal monthly installments; and
    2. No prepayment refund of less than one dollar ($1.00) need be made.
  2. With respect to loans where the total amount of the loan is one hundred dollars ($100) or more:
    1. Unless the parties to the transaction otherwise agree in writing, the installment loans shall be paid in accordance with the schedule of payments provided in the loan contract. The parties may, however, agree that the loan may be prepaid or that the payment of all or part of one (1) or more unpaid installments may be deferred, subject, however, to the limitations provided in this section;
    2. In the event of prepayment in full, by refinancing or otherwise, of the installment loan:
        1. With respect to a precomputed transaction that has an original term of sixty-one (61) months or less and that is scheduled to be repaid in substantially equal successive installments at approximately equal intervals, the amount required to prepay shall be the outstanding balance as of the applicable scheduled installment date; provided, that the borrower shall be entitled to a refund or credit of interest, the amount of which shall be no less than the amount computed in accordance with the Rule of 78, as follows: the amount of the refund or credit shall be as great a proportion of the total interest originally contracted for as the sum of the periodic time balances of the loan scheduled to follow the applicable scheduled installment date bears to the sum of all the periodic time balances of the loan, both sums to be determined according to the schedule of payments originally contracted for. The applicable scheduled installment date shall be the scheduled installment date next following the actual date of payment, unless payment is made on a scheduled installment date, in which case the date of payment shall be the applicable scheduled installment date;
        2. With respect to a precomputed transaction that has an original term of more than sixty-one (61) months and that is scheduled to be repaid in substantially equal successive installments at approximately equal intervals, the amount required to prepay shall be the outstanding balance as of the date of prepayment; provided, that the borrower shall be entitled to a refund or credit of interest, the amount of which shall be no less than the amount computed in accordance with the actuarial method;
      1. In a transaction not covered by subdivision (b)(2)(A), the amount required to prepay shall be the outstanding balance as of the date of payment, including any earned interest unpaid as of that date;
      2. Where the amount of the refund credit is less than one dollar ($1.00), no refund credit shall be made. Any refund credit in the amount of one dollar ($1.00) or more may be made in cash or credit to the outstanding indebtedness of the borrower;
      3. If the indebtedness created by the installment loan is fully satisfied prior to maturity through surrender of any collateral securing the loan, repossession of collateral, or any judgment, the outstanding obligation of the borrower shall be determined as provided in either subdivision (b)(2)(A) or (B), as may be appropriate, computed as of the date the registrant recovers the value of the collateral through disposition of the collateral, or the date judgment is entered in favor of the registrant, or, if the registrant elects to keep the collateral in satisfaction of the indebtedness, as of the date the registrant takes possession of the collateral. In the case of a precomputed transaction, if the date is other than a scheduled payment date, the next following scheduled payment date shall be used in the computation; and
    3. The parties may, at any time, agree to a deferral of all or part of one (1) or more unpaid installments, and the registrant on the agreement may make and collect a charge for the deferral, subject to the following provisions:
      1. A deferral postpones the scheduled due date of an installment or installments as originally scheduled, or as previously deferred, for the deferment period;
      2. The deferment period is that period of time for which the payment is or the payments are deferred;
      3. The deferral charge shall not exceed an amount equal to the result of applying the effective rate of interest provided in the original agreement between the parties, to the amount deferred for the deferment period, calculated without regard to differences in the lengths of months, but proportionately for a part of a month, counting each day as one-thirtieth (1/30) of a month. A deferral charge is earned pro rata during the deferment period and is fully earned on the last day of the deferment period;
      4. If a loan is prepaid in full during a deferment period, then the registrant shall make or credit to the borrower a refund of the unearned deferral charge in addition to any other refund or credit made for prepayment in full;
      5. A deferral charge may be collected at the time it is assessed or at any time thereafter;
      6. Any payment received at the time of the deferment may be applied first to the deferral charge and the remainder, if any, to the unpaid balance of the loan, but if the payment is sufficient to pay, in addition to the appropriate delinquency charge, any installment that is in default, it shall be first so applied, and the installment shall not then be deferred or be subject to the deferral charge;
      7. No installment on which a delinquency charge has been collected shall be deferred or included in the computation of the deferral unless the delinquency charge is refunded to the borrower or credited to the deferral charge;
      8. In addition to the deferral charge, the registrant may make appropriate additional charges as provided in this chapter. The amount of the charges that are not paid in cash may be added to the amount deferred for the purpose of calculating the deferral;
      9. The deferral agreement shall be evidenced in writing, which shall include:
        1. The amount of the deferral charge;
        2. The amount or amounts deferred;
        3. The date to which, or the time period for which, payment is deferred; and
        4. The nature and amount of any other charges made at the time;
      10. No deferral charge may be made for a period after the date that the registrant elects to accelerate the maturity of the loan; and
      11. An agreement to a deferral shall not affect the determination of the length of the term of the loan under § 45-5-302(2).

Acts 1979, ch. 204, § 10; T.C.A., § 45-2010; Acts 1983, ch. 164, § 3; 1988, ch. 705, § 1.

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

Law Reviews.

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

NOTES TO DECISIONS

1. Applicability of Rule of 78.

T.C.A. § 45-5-402 does not mandate the use of the Rule of 78 in rebating unmatured interest; rather, it establishes a minimum rebate to the borrower in the event of an authorized prepayment in full of an installment loan having an original term of five years or less. In re McMurray, 218 B.R. 867, 1998 Bankr. LEXIS 297 (Bankr. E.D. Tenn. 1998).

Use of the Rule of 78 is inappropriate to calculate the payoff of a debt necessitated by the act of filing bankruptcy since a bankruptcy petition does not constitute a prepayment, and the Rule of 78 is an inaccurate approximation that imposes a payment penalty to the detriment of a bankruptcy debtor, the bankruptcy estate and creditors. In re McMurray, 218 B.R. 867, 1998 Bankr. LEXIS 297 (Bankr. E.D. Tenn. 1998).

45-5-403. Limitations on loan charges — Acquisition charges — Term of loan.

  1. No registrant under this chapter has the power to charge loan charges other than, or in amounts greater than, the following:
      1. Registrants may charge a service charge in an amount equal to four percent (4%) of the total amount of the loan, which charge may be deducted in advance from the principal of the loan. This service charge shall be in lieu of all other compensation for services, expenses, detriments or commitments directly incident to the loan, except those charges that are otherwise specifically provided in this chapter. This charge is authorized and limited on the basis that it is generally reasonably related to the total costs and expenses that it is designed to cover, and in order to make the amount of the charges more certain and readily ascertainable by the registrants, their borrowers and the commissioner; and to that end, registrants shall not be required to maintain detailed records with respect to the services, expenses, detriments or commitments covered by the charges. This charge shall not, however, be imposed on that portion of a loan used to pay any existing loan or part thereof owing by the same borrower or spouse, or both, to the same registrant or any affiliated lender;
      2. In the case of open-end credit plans or in the case of loans secured by real property, in lieu of the four percent (4%) service charge provided in subdivision (a)(1)(A), registrants may charge borrowers with the actual, bona fide, reasonable expenses, directly incident to the loan, paid or to be paid by the registrant to third parties, including, but not limited to, expenses for title examination or title insurance, surveys, preparation of necessary documents, credit reports and appraisals;
    1. In lieu of the four-percent service charge provided in subdivision (a)(1)(A), and for the same purposes, registrants may charge:
      1. A flat service charge of two dollars ($2.00) on all loans that do not exceed twenty dollars ($20.00), and charge a flat service charge in addition thereto of fifty cents (50¢) per each five-dollar increase on all loans in excess of twenty dollars ($20.00) but that do not exceed one hundred dollars ($100), and to charge a flat service charge of ten dollars ($10.00) on all loans of more than one hundred dollars ($100); provided, that no lender may charge the flat service charge on multiple loans existing at the same time to any one (1) borrower;
      2. In the event the borrower shall repay the loan in full within three (3) business days following the date of the loan, then all charges of every kind shall be refunded in cash; provided, that in the event a loan on which a flat service charge has been made shall be renewed, rescheduled or refinanced within forty-five (45) days of the date of the making of the loan, the flat service charge in connection with any new moneys advanced shall not exceed one-half (½) of the flat service charge that would be applicable thereto; and
      3. It being the intent of the general assembly that the flat service charges permitted hereunder shall never be imposed on any portion of any loan used to pay any existing loan, or part thereof, owing by the same borrower or spouse or both to the same registrant or any affiliated lender;
    2. Registrants may also charge the borrower with any fees or taxes paid, or to be paid, any public official for filing, recording or releasing any document relating to the loan. In lieu of charging the borrower with any fees for filing or recording any document relating to the loan, registrants may charge the borrower with any premiums payable for insurance in lieu of filing or recording the document; provided, that the premium shall not exceed the current fee for filing or recording the document. Moreover, the sum shall not be charged more than one (1) time during any twelve-month period;
    3. Registrants may also charge a handling or delinquent charge of five cents (5¢) for each default in the payment of each one dollar ($1.00), or fraction thereof, or fifteen dollars ($15.00), whichever is greater, at the time any payment on any loan made hereunder becomes past due for a period of five (5) or more days; provided, that the charge shall not be collected more than once for the same default;
      1. Registrants may also charge an installment maintenance fee of:
        1. Two dollars and fifty cents ($2.50) per month on loans where the total amount of the loan is less than one hundred dollars ($100);
        2. Three dollars and fifty cents ($3.50) per month where the total amount of the loan is one hundred dollars ($100) or more but not more than seven hundred fifty dollars ($750);
        3. Three dollars ($3.00) per month where the total amount of the loan is more than seven hundred fifty dollars ($750) but not more than one thousand two hundred fifty dollars ($1,250); and
        4. Two dollars and fifty cents ($2.50) per month where the total amount of the loan is more than one thousand two hundred fifty dollars ($1,250);
      2. The fee may be charged for a period not to exceed the original term of the loan; provided, that the loan is made for a period of ninety (90) days or more; and provided further, that the monthly installment payments are at least fifteen dollars ($15.00) per month. No registrant may charge the installment maintenance fee on multiple loans existing at the same time to any one (1) borrower. The installment maintenance fees shall not be deducted in advance. Registrants may, however, include the maximum maintenance fee for the term of the loan in the face amount of the note evidencing that loan; provided, that neither interest, loan charges, delinquent charges nor insurance charges are computed on the amount; and provided further, that any installment maintenance fee due more than one (1) month following payment in full of the note shall be credited to the note;
    4. Registrants may also require the payment by the borrower of any reasonable and actual attorneys' fees and other costs incurred in the collection or enforcement of any loan contract;
    5. Registrants may also charge and collect from the borrower, through regular billing procedure or otherwise, a bad check charge as provided in § 47-29-102 for any check, draft, electronic funds transfer, electronic check, card payment, or any other electronic payment, negotiable order of withdrawal or like instrument drawn on a bank or other depository institution given by any person in full or partial repayment of a loan or other extension of credit if the instrument is not paid or dishonored by the institution; provided, that:
      1. Registrants may redeposit the instrument with the institution or return the dishonored instrument to the borrower or person to whom the credit was extended upon redemption of the instrument; and
      2. Registrants may collect not more than one (1) bad check charge on any one (1) check or electronic debit authorization;
    6. In the case of a residential mortgage loan, a registrant may, from the service charge imposed under subdivision (a)(1)(A), pay a mortgage broker, licensed or otherwise exempt from licensing under the Residential Lending Brokerage and Servicing Act, compiled in chapter 13 of this title, a fee for the services actually rendered by the mortgage broker with respect to a specific transaction; provided, however, that the aggregate fee paid to a mortgage broker may not exceed the four percent (4%), which may be imposed under subdivision (a)(1)(A); and
      1. Registrants may also impose and collect a convenience fee from any borrower making payment by credit card, debit card, electronic funds transfer, electronic check, or other electronic means in order to offset actual costs incurred by a registrant for accepting and processing payments made by electronic means;
        1. Any convenience fee collected by a registrant pursuant to this subdivision (a)(9) may not exceed the actual costs incurred by the registrant; provided, however, a registrant may impose a convenience fee in lieu of the actual cost of the individual payment type that does not exceed the average of the actual cost incurred for the various types of electronic payments for which the registrant imposes a convenience fee;
        2. Any registrant charging a convenience fee pursuant to this subdivision (a)(9) shall notify the customer of the amount of the fee prior to completing a transaction, provide an opportunity for the customer to cancel the transaction without incurring a fee, and make available the option to make a payment on a loan by check, cash, or money order directly to the registrant without the imposition of a convenience fee for a card payment or electronic payment;
        3. When a borrower elects to make a payment to the registrant by credit card, debit card, electronic funds transfer, electronic check, or other electronic means and a convenience fee is imposed and collected pursuant to this subdivision (a)(9), the payment of the convenience fee shall not be refundable;
        4. The convenience fee may be charged in addition to all other interest and fees allowed by law;
        5. For purposes of this subdivision (a)(9)(B), “actual costs” means actual third party costs incurred for the processing of payments made by electronic means. If a registrant is a subsidiary of an entity that processes payments made by electronic means, then the parent entity shall be considered a third party;
        6. A registrant shall not charge a convenience fee on any debit card or prepaid card transaction if the payment card network on which the transaction is initiated or processed prohibits such convenience fee by contract, rule or policy.
    1. As an alternative to the loan charges permitted under subsection (a) and interest permitted under § 45-5-301, a registrant may charge loan charges in amounts no greater than the following:
      1. On any loan of an amount of one hundred dollars ($100) or more up to and including the amount of three hundred dollars ($300), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed twelve dollars ($12.00) per month;
      2. On any loan of an amount in excess of three hundred dollars ($300) but not more than four hundred dollars ($400), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed fourteen dollars ($14.00) per month;
      3. On any loan of an amount in excess of four hundred dollars ($400) but not more than five hundred dollars ($500), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed sixteen dollars ($16.00) per month;
      4. On any loan of an amount in excess of five hundred dollars ($500) but not more than one thousand dollars ($1,000), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition thereto, an installment account handling charge shall be allowed not to exceed twenty dollars ($20.00) per month;
      5. On any loan of an amount in excess of one thousand dollars ($1,000) but not more than one thousand two hundred fifty dollars ($1,250), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-three dollars ($23.00) per month;
      6. On any loan of an amount in excess of one thousand two hundred fifty dollars ($1,250) but not more than one thousand five hundred dollars ($1,500), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-six dollars ($26.00) per month;
      7. On any loan of an amount in excess of one thousand five hundred dollars ($1,500) but not more than one thousand seven hundred fifty dollars ($1,750), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed twenty-nine dollars ($29.00) per month; or
      8. On any loan of an amount in excess of one thousand seven hundred fifty dollars ($1,750) but not more than two thousand dollars ($2,000), there shall be allowed an acquisition charge for making the loan not in excess of ten percent (10%) of the amount of the principal. In addition, an installment account handling charge shall be allowed. The handling charge shall not exceed thirty-two dollars ($32.00) per month.
    2. The minimum term of any loan made under this subsection (b) is three (3) months. The maximum term of any loan made under this subsection (b) is twenty-five (25) months.
    3. On the prepayment of any loan under this subsection (b), the installment account handling charges are subject to § 45-5-402 as it relates to refunds; provided, for the purpose of calculating the rebate due, the term of the loan begins on the date the loan is made.
    4. On any loan established under this subsection (b), no insurance charge or any other charge of any nature whatsoever is permitted except as provided in this subsection (b) and except for the delinquent charge under subdivision (a)(4), the reasonable attorney fee and costs charge under subdivision (a)(6) and the bad check charge under subdivision (a)(7) and a convenience fee under subdivision (a)(9).
    5. In a civil action, a finding by the court that a registrant has violated this subsection (b) gives rise to a rebuttable presumption that the violation constitutes unconscionable conduct under § 47-14-117(c), and the registrant is subject to the remedies under that section.
    6. The loan charges allowed under this subsection (b) may not be imposed on a loan to a borrower who has one (1) or more loans outstanding with the same registrant or an affiliated lender and upon which loan charges were imposed under subsection (a).

Acts 1979, ch. 204, § 11; T.C.A., § 45-2011; Acts 1983, ch. 164, § 4; 1986, ch. 576, § 2, 3; 1987, ch. 124, § 2; 1988, ch. 621, § 1; 1989, ch. 265, § 1; 1990, ch. 685, § 1; 1996, ch. 607, §§ 1-4; 1998, ch. 576, § 1; 1999, ch. 172, § 3; 2000, ch. 684, § 1; 2001, ch. 165, § 8; 2006, ch. 563, § 1; 2009, ch. 499, § 7; 2012, ch. 534, §§ 1-5; 2014, ch. 616, §§ 1-4.

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

Acts 1996, ch. 607, § 5 provided that the amendments by that act apply to all loans made after July 1, 1996.

Textbooks. Tennessee Jurisprudence, 18 Tenn. Juris., Loans, § 9.

Law Reviews.

Selected Tennessee Legislation of 1986, 54 Tenn. L. Rev. 457 (1987).

Attorney General Opinions. Loan charges under the Industrial Loan and Thrift Companies Act. OAG 14-82, 2014 Tenn. AG LEXIS 85 (9/12/14).

NOTES TO DECISIONS

1. Service Charges.

Any service charge in excess of the fair and reasonable worth of expense and service attributable directly to a loan must be treated as additional compensation to the lender and constitutes conventional interest, that must be added to the stated, or resulting, amount of interest in order to determine the validity of the charge. Cumberland Capital Corp. v. Patty, 556 S.W.2d 516, 1977 Tenn. LEXIS 614 (Tenn. 1977).

In determining the service charge that an industrial loan and thrift company may lawfully impose under T.C.A. § 45-5-403(a)(1)(A), the amount to be subtracted from the total amount of the loan is that portion of the refinancing loan that is used to pay all or any part of the initial loan from the industrial loan and thrift company, but interest on the initial loan that would have accrued after the date of the refinancing should not be included when computing the balance outstanding on the initial loan. Hathaway v. First Family Fin. Servs., 1 S.W.3d 634, 1999 Tenn. LEXIS 408 (Tenn. 1999).

45-5-404. Remedies of borrowers — Defenses — Limitations of actions.

The remedies of borrowers, the limitations on actions of borrowers, the defenses available to borrowers and to registrants, and the procedures applicable in the actions with respect to interest and loan charges under this chapter shall be those as prescribed by the general statute pertaining to interest and other charges by lenders or creditors.

Acts 1979, ch. 204, § 21; T.C.A., § 45-2021.

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

45-5-405. Interest on judgments.

When a judgment is based on a note or loan contract hereunder fixing a rate of interest within the limits provided herein, that judgment shall bear interest at the rate so fixed.

Acts 1979, ch. 204, § 22; T.C.A., § 45-2022.

Part 5
Supervision by Commissioner

45-5-501. Supervision by commissioner — Powers of commissioner.

  1. Each registrant shall be subject to the supervision of the commissioner.
  2. The commissioner is authorized to make and enforce reasonable rules and regulations necessary and proper for the administration, enforcement and interpretation of this chapter.
  3. In adopting the rules and regulations, the commissioner shall follow the procedures set forth in the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. A copy of every rule and regulation shall be mailed to each registrant at least thirty (30) days prior to the date it shall take effect.
  4. The commissioner, for the purpose of discovering violations of this chapter and for the purpose of determining whether persons are subject to this chapter, is authorized to examine the registrants, including all books, records and papers employed by the registrants in the transaction of their business, and to summon witnesses and examine them under oath, concerning matters relating to the business of the persons or other matters that may be relevant in the discovery of violations of this chapter. The commissioner may employ deputies and assistants who may be necessary for this purpose, and the deputies and assistants shall be vested with the same authority conferred upon the commissioner by this subsection (d).

Acts 1979, ch. 204, § 16; T.C.A., § 45-2016; Acts 1983, ch. 274, § 19; 1985, ch. 107, § 5; 2004, ch. 747, § 12.

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

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).

NOTES TO DECISIONS

1. Rules Concerning Financial Soundness.

There is nothing in § 45-5-304 or elsewhere in the Industrial Loan and Thrift Act that gives the commissioner the power to adopt rules pertaining to financial soundness. Madison Loan & Thrift Co. v. Neff, 648 S.W.2d 655, 1982 Tenn. App. LEXIS 497 (Tenn. Ct. App. 1982).

45-5-502. Examination or investigation fees.

The costs for an examination or investigation of registrants shall be assessed pursuant to § 45-1-118(i). An unregistered person subject to the certificate of registration requirements of this chapter, that is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination.

Acts 1979, ch. 204, § 17; T.C.A., § 45-2017; Acts 1981, ch. 416, § 3; 1984, ch. 698, § 1; 1986, ch. 576, § 4; 2004, ch. 747, § 13; 2014, ch. 736, § 6.

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

45-5-503. Annual reports of registrants — Reports by commissioner to governor and general assembly.

  1. Each registrant shall file an annual report with the commissioner by July 31 of each year, containing the following information:
    1. The names and addresses of persons owning controlling interest in the registrant;
    2. The location of all places of business operated by the registrant and the nature of the business conducted at each location;
    3. The names and addresses of all affiliated lenders and affiliated insurance companies doing business in this state;
    4. Balance sheets, statements of income and expense, summaries of the types of loans made, and other statistical information that may reasonably be required by the commissioner, consistent with generally accepted accounting practices, for the purpose of determining the general results of operations under this chapter; and
    5. If the registrant is a corporation, the names and addresses of its officers and directors, or if the registrant is a partnership, the names and addresses of the partners.
  2. If the registrant holds two (2) or more certificates of registration or is affiliated with other registrants, a composite report may be filed, but may not be required.
  3. The reports shall be filed in a form that may reasonably be required by the commissioner and shall be sworn to by a responsible officer of the registrant. The commissioner is encouraged to adopt forms for the reports consistent with any system uniform with other states.
  4. The commissioner shall prepare and submit to the governor and the general assembly, annually, an analysis and recapitulation of the reports for the preceding calendar year for the purpose of reflecting the general results of operations under this chapter.

Acts 1979, ch. 204, § 18; T.C.A., § 45-2018.

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

Cross-References. Reporting requirement satisfied by notice to general assembly members of publication of report, § 3-1-114.

45-5-504. Violations — Cease and Desist Orders — Penalties.

If, after notice and opportunity for a hearing, the commissioner finds that a person has violated this chapter, or any administrative rule issued pursuant to this chapter, the commissioner may take any or all of the following actions:

  1. Order the person to cease and desist violating this chapter or any administrative rule issued pursuant to this chapter;
  2. Require the refund of any interest, fees, or charges collected by the person in violation of this chapter or any administrative rule issued pursuant to this chapter; and
  3. Order the person to pay the commissioner a civil monetary penalty of not more than ten thousand dollars ($10,000) for each violation of this chapter or administrative rule issued pursuant to this chapter.

Acts 1979, ch. 204, § 20; T.C.A., § 45-2020; Acts 2004, ch. 747, § 14.

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

Decisions Under Prior Law

1. Orders to Cease and Desist.

Official residence of former enforcing officer was at the capital in Nashville, Davidson County, and Chancery Court of Shelby County was without jurisdiction to issue statutory writ of certiorari and supersedeas for review of order for industrial loan and thrift company to cease and desist from violation. Delta Loan & Finance Co. v. Long, 206 Tenn. 709, 336 S.W.2d 5, 1960 Tenn. LEXIS 401 (1960), superseded by statute as stated in, Johnson v. McReynolds, — S.W.2d —, 1989 Tenn. App. LEXIS 184 (Tenn. Ct. App. Mar. 15, 1989).

45-5-505. Change of control.

  1. A change in control of a registrant shall require thirty (30) days prior notice in writing to the commissioner. However, in the case of a publicly traded corporation, notification shall be made in writing within thirty (30) days of a change or acquisition of control of a registrant.
  2. Upon notification, the commissioner may require information deemed necessary to determine whether an application for registration is required. The commissioner may waive the filing of an application if, in the commissioner's discretion, the change in control does not pose any risk to the interests of the public.
  3. Whenever control of a registrant is acquired or exercised in violation of this section, the registration of the registrant shall be deemed revoked as of the date of the unlawful acquisition of control. The registrant, or its controlling person, shall surrender the registration to the commissioner on demand.

Acts 2001, ch. 165, § 9.

45-5-506. Bar from industry.

  1. If the crime or civil or administrative judgment involved any offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with  this chapter, the commissioner, after notice and opportunity for hearing, may censure, suspend for a period not to exceed twelve (12) months, or bar a person from any position of management, control, employment or providing services for any registrant or other person subject to the commissioner's jurisdiction, if the commissioner finds that the:
    1. Censure, suspension or bar is in the public interest and that the person has committed or caused a violation of this chapter, a rule or regulation, or an order of the commissioner; or
    2. Person has been:
      1. Convicted of or pled guilty to or nolo contendere to any crime; or
      2. Held liable in any civil action by final judgment, or any administrative judgment by any public agency.
  2. Persons suspended or barred under this section are prohibited from participating in any business activity of a registrant and from engaging in any business activity on the premises where a registrant is conducting its business. This subsection (b) shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a registrant.
  3. This section shall apply to any violation, conviction, plea, or judgment after July 1, 2001.

Acts 2001, ch. 165, § 9; 2004, ch. 747, § 15.

45-5-507. Filing of written report with commissioner — Events impacting activities of registrant.

Within fifteen (15) days of the occurrence of any one (1) of the events listed in this section, a registrant shall file a written report with the commissioner describing the event and its expected impact on the activities of the registrant:

  1. The filing for bankruptcy or reorganization by the registrant;
  2. The institution of revocation or suspension proceedings against the registrant by any state or governmental authority;
  3. The denial of the opportunity to engage in business by any state or governmental authority;
  4. Any felony indictment of the registrant or any of its officers, directors or principals, or partners;
  5. Any felony conviction of the registrant or any of its officers, directors, principals, or partners; and
  6. Other events that the commissioner may determine and identify by rule.

Acts 2001, ch. 165, § 9.

45-5-508. Preservation of records — Reproduction.

All books and records required to be preserved by any regulation of the commissioner or required by any federal statute, regulation, or regulatory guideline, as applicable to each registrant, shall be preserved and made available to the commissioner, as provided in this chapter, for a period of twenty-five (25) months on all rejected applications and for a period of twenty-four (24) months on loans paid in full. The registrant may cause any or all records at any time in its custody to be reproduced or preserved, or both, by itself or by any other person who agrees in writing to submit its operations to the examination of the commissioner to the extent that the operations directly affect recordkeeping by any microphotographic process, electronic or mechanical data storage technique or any other means. A record reproduced or preserved, or both, by those processes, techniques or means shall have the same force and effect as the original record and be admitted into evidence equally with the original.

Acts 2001, ch. 165, § 9.

45-5-509. Consent orders.

  1. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained in the consent order. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation or order promulgated or issued under this chapter has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this chapter or any rule, regulation or order promulgated or issued under this chapter.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken that is filed with the commissioner within twenty (20) days after receipt of the notice to the commissioner's emergency action.

Acts 2004, ch. 747, § 16.

Part 6
Industrial Banks and Industrial Investment Companies

45-5-601. Supervision and examination.

In addition to the supervision and examination for compliance with this chapter as herein provided, industrial banks and industrial investment companies shall also be supervised and examined as banks for the protection of holders of investment and thrift certificates. To that end, the commissioner shall have and exercise with respect to industrial banks and industrial investment companies, in addition to the other powers and duties conferred by this title, the powers and duties specified in § 45-1-107 and in chapter 2, part 16 of this title, which part 16 shall be fully applicable to industrial banks and industrial investment companies.

Acts 1983, ch. 274, § 20.

45-5-602. Liquidation, dissolution, and reorganization of industrial banks.

Chapter 2, part 15 of this title, pertaining to the liquidation, dissolution and reorganization of state banks, is fully applicable to industrial banks and industrial investment companies.

Acts 1983, ch. 274, § 20.

45-5-603. Capital structure.

  1. To be registered as an industrial bank and to be authorized to issue thrift certificates, an industrial bank must have the capital structure required of state banks.
  2. To be registered as an industrial investment company and to be authorized to issue investment certificates, an industrial investment company must have a capital structure in keeping with the scope of its existing and proposed operations, as determined by the commissioner. In making the determinations, the commissioner shall consider the justification offered by the applicant in support of its existing or proposed capital structure; the amount of outstanding and proposed investment certificates of the applicant; the number and characteristics of any existing holders of the certificates and of the market contemplated for any proposed offering; the terms of any proposed offering; the assets and liabilities of the company; the history of profitability of the company; and any other factors deemed pertinent to the protection of investors in the certificates. In no event shall the commissioner require a capital structure for an industrial investment company less than that required for a comparable industrial loan and thrift company or more than that required for a comparable industrial bank.

Acts 1983, ch. 274, § 20.

45-5-604. Insurance of thrift certificates.

For the purpose of providing for the insurance of thrift certificates, chapter 2, part 8 of this title shall be fully applicable to qualified industrial banks and to thrift certificates issued by them, and for that purpose, the word “bank” as used in that part includes “industrial bank” and the word “deposit” as used in that part includes “thrift certificate.”

Acts 1983, ch. 274, § 20.

45-5-605. Issuance of thrift certificates.

An industrial bank shall not issue thrift certificates until and unless:

  1. It is qualified for federal deposit insurance and its thrift certificates are insured by the federal deposit insurance corporation;
  2. It has filed the forms, documents and receipts to be used by it in the offering and sale of the thrift certificates with the commissioner; and
  3. It has complied with all rules and orders of the commissioner governing the issuance of the thrift certificates by it.

Acts 1983, ch. 274, § 20.

45-5-606. Rules concerning investment and thrift certificates.

In addition to the other rulemaking powers conferred upon the commissioner by this title, the commissioner is authorized and directed to adopt rules governing the issuance, offering and sale of investment certificates by industrial investment companies or thrift certificates by industrial banks and all operations of industrial investment companies and industrial banks in connection therewith, in order to protect the interests of the holders of the certificates, including, but not limited to, the maintenance of appropriate reserves.

Acts 1983, ch. 274, § 20.

45-5-607. Applicability of laws pertaining to banks.

In order to protect the interests of holders of thrift certificates, in addition to the other provisions of chapters 1 and 2 of this title made applicable by this chapter to industrial banks, the following sections are applicable to industrial banks as to state banks generally: §§ 45-1-122; 45-2-101 [repealed]; 45-2-103; 45-2-203; 45-2-207(a), (d) and (e); 45-2-207(c), except the reference to “trust powers”; 45-2-208, except that loan limits for industrial banks shall be controlled by § 45-5-302, rather than § 45-2-1102; 45-2-209 [repealed]; 45-2-404; 45-2-607, except that industrial banks may invest in obligations that satisfy the requirements of chapter 5 of this title; and 45-2-616.

Acts 1983, ch. 274, § 20.

Compiler's Notes. Section 45-2-209, referred to in this section, was repealed by Acts 1994, ch. 551, § 5.

Section 45-2-101, referred to in this section, was repealed by Acts 2001, ch. 54, § 4.

45-5-608. Conversion of industrial loan and thrift companies.

Any industrial loan and thrift company holding a certificate of registration under this chapter may convert to an industrial bank or to an industrial investment company by meeting the qualifications for operating as an industrial bank or industrial investment company as provided in this chapter. The commissioner shall provide forms for applications for conversion and may adopt rules governing conversion.

Acts 1983, ch. 274, § 20.

45-5-609. Merger with state bank.

  1. Any industrial loan and thrift company holding a certificate of registration under this chapter that has converted into an industrial bank may, with the approval of the commissioner, be merged into a state bank in accordance with the procedures contained in § 45-2-1304 if the following conditions are met:
    1. The industrial loan and thrift company was legally chartered to transact business before 1930, and has, since its original incorporation, and prior to May 16, 1983, maintained branch offices in more than four (4) counties;
    2. The industrial loan and thrift company has been registered continuously with the state of Tennessee since the first enactment of statutes regulating the industrial loan and thrift industry; and
    3. The capital of the industrial loan and thrift company is, in the opinion of the commissioner, impaired or the company is, in the opinion of the commissioner, otherwise in an unsound condition as evidenced by a pending petition for corporate reorganization in bankruptcy or other similar legal proceeding.
  2. The authority of the commissioner to approve the mergers authorized in subsection (a) shall extend only to those transactions for which a merger agreement has been filed with the commissioner on or before December 1, 1983.
  3. The commissioner shall not approve any merger of an industrial bank into a state bank under this section unless the commissioner determines that the industrial bank will not be owned or controlled, directly or indirectly, by any person who would not be otherwise qualified to own or acquire control in a state bank.
  4. For a period of three (3) full years following the effective date of the merger of an industrial bank into a state bank, in those counties other than the county in which the principal office of a state bank is located, the state bank into which the industrial bank is merged may continue to operate only those branch offices of the original industrial loan and thrift company that were in existence and operating on January 1, 1983, and those branch offices for which, in the opinion of the commissioner, land acquisition and plans for construction were substantially complete on or before January 1, 1983.

Acts 1983, ch. 274, § 20.

45-5-610. Conversion of investment certificates to thrift certificates.

Any outstanding investment certificates of an industrial loan and thrift company or of an industrial investment company that converts to operation as an industrial bank or any outstanding investment certificates of an industrial bank may be converted to thrift certificates, if the certificates will be insured by the federal deposit insurance corporation and otherwise meet the requirements for thrift certificates provided in this chapter and of any applicable rules adopted by the commissioner.

Acts 1983, ch. 274, § 20.

45-5-611. Fees.

The commissioner is authorized and directed to adopt a schedule of fees to cover the reasonable costs of examination and supervision and of the processing of conversion applications provided for in this part. Failure to pay any such fee shall be cause for suspension or revocation of authority or denial of any application.

Acts 1983, ch. 274, § 20.

45-5-612. Out-of-state banks restricted — Compliance with § 45-5-609 required for all banks.

    1. The general assembly finds and declares that the ownership of industrial banks by non-Tennessee bank holding companies or other non-Tennessee corporations is not of benefit to the people and economy of this state and will result in the drain of capital from Tennessee.
    2. By July 5, 1984, any industrial bank owned by a bank holding company, or other company whose principal place of business is not in Tennessee, shall be divested by the company or liquidated and dissolved under § 45-2-1501(b), or shall be recertified by the commissioner as an industrial investment company, as defined in § 45-5-102, with the rights and powers of an industrial investment company, and shall no longer qualify as an industrial bank nor exercise any of the rights and powers of an industrial bank.
  1. No industrial bank shall be created nor any industrial loan and thrift company or industrial investment company shall be converted to an industrial bank pursuant to § 45-5-608, or pursuant to any other provision of law unless the industrial bank, industrial loan and thrift company or industrial investment company satisfies the conditions set forth in § 45-5-609(a)(1) and (2).
  2. If an application for organization as or conversion to an industrial bank is pending or the application has been approved for certification as an industrial bank, then any applicant or industrial bank that does not meet the requirements of this section and § 45-5-609 shall be recertified by May 5, 1984, by the commissioner as an industrial investment company as defined in § 45-5-102, with the rights and powers of an industrial investment corporation, and shall no longer qualify as an industrial bank nor exercise any of the rights and powers of an industrial bank, or shall be liquidated and dissolved under § 45-2-1501(b).
  3. Subsection (c) applies to any and all industrial banks and applications for organization as or conversion to an industrial bank including, but not limited to, applications filed and approved prior to February 23, 1984; applications filed prior to but approved after February 23, 1984, and prior to April 5, 1984; applications filed before February 23, 1984, and pending on April 5, 1984; and applications filed and pending or filed and approved after February 23, 1984, and before April 5, 1984.
  4. This section shall not be construed to alter, deny, void or otherwise affect the rights and powers of either an industrial bank meeting the requirements of § 45-5-609, or a state bank resulting from a merger provided for in § 45-5-609.

Acts 1984, ch. 513, §§ 1-5.

Compiler's Notes. Portions of this section concerning exempt institutions have been held to be inoperative. See Notes to Decisions, 1. Constitutionality, Citicorp Fin. Servs. Corp. v. Adams, 674 S.W.2d 705 (Tenn. 1984).

NOTES TO DECISIONS

1. Constitutionality.

The body of Acts 1984, ch. 513, codified as this section, was not broader than its caption for the purposes of Tenn. Const., art. II, § 17, where the caption purported to prohibit “certain” industrial banks, and where the body of the act did not purport to prohibit all industrial banks, even though the effect of the act was to prohibit “all” industrial banks; the caption gave adequate notice of the proposed legislation, and the subject matter of the body was germane to that expressed in the title. Citicorp Fin. Servs. Corp. v. Adams, 674 S.W.2d 705, 1984 Tenn. LEXIS 825 (Tenn. 1984).

The purported exception in subsection (b) of industrial banks meeting specified portions of § 45-5-609 allegedly violated Tenn. Const., art. XI, § 8; however, only one institution, Southern Industrial Banking Corporation, ever has or ever could come within this narrow exception, and that corporation did not exist at the time the legislation was introduced or enacted. The exception or exemption provisions with respect to it, therefore, are meaningless and without legal effect. Legal issues presented by their inclusion in the statute are entirely hypothetical, and therefore should be and they hereby are ordered to be stricken and elided from the 1984 statute. Citicorp Fin. Servs. Corp. v. Adams, 674 S.W.2d 705, 1984 Tenn. LEXIS 825 (Tenn. 1984).

2. Construction.

The provisions of this section purporting to deal differently with out-of-state institutions are inoperative except as a general declaration of legislative policy and except for allowing a slightly longer time for divestiture if there is not a liquidation or conversion to an industrial investment company. Citicorp Fin. Servs. Corp. v. Adams, 674 S.W.2d 705, 1984 Tenn. LEXIS 825 (Tenn. 1984).

3. Certain Provisions Stricken.

All provisions of Acts 1984, ch. 513 purporting to refer to or exempt institutions meeting the provisions of § 45-5-609 are deemed separable and should be stricken and deleted except for the general declaration in subsection (e) that the 1984 statute shall not be construed to affect the rights and powers of a state bank resulting from a merger under § 45-5-609. Citicorp Fin. Servs. Corp. v. Adams, 674 S.W.2d 705, 1984 Tenn. LEXIS 825 (Tenn. 1984).

Chapter 6
Pawnbrokers

Part 1
Pawnbroker Restitution Act

45-6-101. Short title.

This part shall be known and may be cited as the “Pawnbroker Restitution Act”.

Acts 2016, ch. 862, § 1.

Code Commission Notes.

Acts 2016, ch. 862, § 1 enacted a new part 3, §§ 45-6-30145-6-303,  but the part has been redesignated as part 1,  §§ 45-6-10145-6-103, by authority of the Code Commission.

Compiler's Notes. Former part 1, §§ 45-6-10145-6-120 (Acts 1875, ch. 142, § 15; 1927, ch. 76, §§ 2, 6; Code 1932, §§ 4001, 6747, 6749; Acts 1937, ch. 1985, §§ 1-16, 18-20; C. Supp. 1950, §§ 6750.1-6750.18, Williams, §§ 6747, 6749, 6750.10-6750.17, 6750.19-6750.21; Shan., § 2356; Acts 1972, ch. 531, § 1; 1984, ch. 673, § 1; T.C.A. (orig. ed.), §§ 45-2201 — 45-2220), containing general provisions concerning pawnbrokers, was repealed by Acts 1988, ch. 724, § 22. For provisions concerning pawnbrokers, see part 2 of this chapter.

45-6-102. Crediting money paid by conveying customer if goods are misappropriated or stolen.

Notwithstanding § 40-24-105, all moneys paid by a conveying customer pursuant to § 45-6-213(c), § 40-35-301, or § 40-35-304, or pursuant to an order by any court of this state, whether civil or criminal in nature, shall be credited as follows:

  1. If the misappropriated or stolen goods are returned to the claimant of the property, the pawnbroker shall first receive payment until the full amount the conveying customer received from the pawnbroker for the property, plus all applicable pawn service charges, and all fees and costs incurred by the pawnbroker in defending a replevin action or civil matter, are paid. Only after the pawnbroker is repaid in full shall payments be credited toward litigation taxes, costs, fines, or any other payment specified by the court; or
  2. If the misappropriated or stolen goods are not returned to the claimant of the property, the claimant shall first receive payment in an amount specified by the court. After the claimant receives payment in full, all other payments shall be made in accordance with subdivision (1).

Acts 2016, ch. 862, § 1.

Code Commission Notes.

Acts 2016, ch. 862, § 1 enacted a new part 3, §§ 45-6-30145-6-303, but the part has been redesignated as part 1, §§ 45-6-10145-6-103, by authority of the Code Commission.

45-6-103. Relinquishment of item believed misappropriated or stolen.

A pawnbroker shall not be required to relinquish to a claimant an item believed to be misappropriated or stolen unless a court has ordered the pawnbroker to do so; provided, that the pawnbroker shall be subject to any hold order issued pursuant to § 45-6-213.

Acts 2016, ch. 862, § 1.

Code Commission Notes.

Acts 2016, ch. 862, § 1 enacted a new part 3, §§ 45-6-30145-6-303, but the part has been redesignated as part 1, §§ 45-6-10145-6-103, by authority of the Code Commission.

Part 2
Pawnbrokers Act of 1988

45-6-201. Short title.

This part shall be known and may be cited as the “Tennessee Pawnbrokers Act of 1988.”

Acts 1988, ch. 724, § 1.

Cross-References. Buyer of goods, § 47-9-320.

Commercial instruments and transactions, title 47.

Disposition of collateral after default, § 47-9-610.

Sales of dangerous weapons, certification of purchaser, exceptions, licensing of dealers, § 39-17-1316.

Uniform Commercial Code, leases, title 47, ch. 2A.

Attorney General Opinions. Pawnbroker compliance with scrap jewelry and metal dealers act.  OAG 12-101, 2012 Tenn. AG LEXIS 102 (10/31/12).

NOTES TO DECISIONS

1. In General.

The pawnbroker statutes are penal in nature, and must therefore be strictly construed. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

45-6-202. Purpose.

The making of pawn loans and the acquisition and disposition of tangible personal property by and through pawnshops vitally affects the general economy of this state and the public interest and welfare of its citizens. It is the policy of this state and the purpose of this part to:

  1. Ensure a sound system of making loans and acquiring and disposing of tangible personal property by and through pawnshops and to prevent unlawful property transactions, particularly in stolen property, through licensing and regulating pawnbrokers and certain persons employed by or in pawnshops;
  2. Provide for licensing fees, investigation fees, and minimum capital requirements of licensees;
  3. Ensure financial responsibility to the state and the public;
  4. Ensure compliance with federal and state laws; and
  5. Assist local governments in the exercise of their police power.

Acts 1988, ch. 724, § 2.

45-6-203. Part definitions.

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

  1. “Dealer and trader” means a person who holds a current certificate of registration with the department of revenue pursuant to title 67, chapter 6, part 6;
  2. “Maturity date of pawn transaction” means the date the pawn transaction is due to be paid, which date shall not be less than thirty (30) days after the date of the pawn transaction;
  3. “Net assets” means the book value of the current assets of a person or pawnbroker less its applicable liabilities as stated in this subdivision (3);
    1. “Applicable liabilities” includes trade or other accounts payable; accrued sales, income, or other taxes; accrued expenses and notes or other payables that are unsecured or secured in whole or in part by current assets. “Applicable liabilities” does not include liabilities secured by assets other than current assets;
    2. “Current assets” includes the investments made in cash, bank deposits, merchandise inventory, and loans due from customers excluding the pawnshop charge. “Current assets” do not include the investments made in fixed assets of real estate, furniture, fixtures, or equipment, investments made in stocks, bonds, or other securities or investments made in prepaid expenses or other general intangibles; and
    3. “Net assets” must be represented by a capital investment unencumbered by any liens or other encumbrances to be subject to the claims of general creditors. If the pawnshop is a corporation, the capital investment consists of common or preferred shares and capital or earned surplus, as those terms are defined by the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, as amended; if it is any other form of business entity, the capital investment consists of a substantial equivalent of that of a corporation and is determined by generally accepted accounting principles;
    1. “Pawn” or “pawn transaction” means either of the following transactions:
      1. “Buy-sell” agreement means any agreement whereby a pawnbroker agrees to hold a property (pledged goods) for a specified period of time not to be less than sixty (60) days to allow the seller the exclusive right to repurchase the property. A buy-sell agreement is not a loan of money, but shall still meet all recording procedures to law enforcement officers as with a pawn transaction; or
      2. “Loan of money” transaction means any loan on the security of pledged goods and being a written bailment of pledged goods as a security lien for the loan, for the cash advanced, interest and fees authorized by Acts 1995, ch. 186, redeemable on certain terms and with the implied power of sale on default;
    2. For purposes of all state and federal bankruptcy laws, a pledgor's interest in the pledgor's pledged goods during the pendency of a pawn transaction shall be deemed to be that of a right of redemption only;
  4. “Pawnbroker” means any person, partnership or corporation engaged in the business of lending money on the security of pledged goods; or engaged in the business of purchasing tangible personal property on condition that it may be redeemed and repurchased by the seller for a fixed price within a fixed period of time; or engaged in the business of advancing money to a customer in consideration for the customer surrendering possession of tangible personal property on an agreement by which the property may be returned to the customer's possession on repayment of the money advanced; and engaged in the business of selling new and used tangible personal property, whether unredeemed tangible personal property resulting from a pawn transaction, or acquired by a purchase of tangible personal property not acquired in a pawn transaction or purchased merchandise for resale from dealers and traders;
  5. “Pawnshop” means the location at which or premises in which a pawnbroker regularly conducts business;
  6. “Person” means any individual, corporation, joint venture, association or any other legal entity however organized;
  7. “Pledged goods” means tangible personal property, other than choses in action, securities, printed evidences of indebtedness or title documents, which tangible personal property is purchased by, deposited with, or otherwise actually delivered into the possession of a pawnbroker in connection with a pawn transaction, and includes “pawn” or “pledged property” or similar words; and
  8. “Pledgor” means the pawn loan customer of the pawnbroker, entering into a pawn transaction with the pawnbroker.

Acts 1988, ch. 724, § 3; 1994, ch. 539, § 1; 1995, ch. 186, §§ 1, 2.

Compiler's Notes. Acts 1995, ch. 186, referred to in (2)(B), amended or enacted numerous sections in this title. Consult the Volume 13 tables for a translation.

Cross-References. Business Corporation Act, title 48, chs. 11-27.

Attorney General Opinions. Personal check as tangible personal property, OAG 98-012, 1998 Tenn. AG LEXIS 12 (1/9/98).

NOTES TO DECISIONS

1. Possession Required.

A loan of money on a vehicle structured as a “pawn” or “pawn transaction” requires that the pawnbroker take actual possession of the vehicle. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

45-6-204. Authority of licensed pawnbrokers.

  1. A pawnbroker licensed pursuant to this part has the power to:
    1. Make loans on the security of pledged goods as a pawn or pawn transaction;
    2. Purchase tangible personal property under a buy-sell agreement from individuals as a pawn or pawn transaction on the condition it may be redeemed or repurchased by the seller at a fixed price within a fixed time not to be less than sixty (60) days;
    3. Lend money on bottomry and respondentia security, at marine interest;
    4. Deal in bullion, stocks and public securities;
    5. Make loans on real estate, stocks and personal property;
    6. Purchase merchandise for resale from dealers and traders;
    7. Make over-the-counter purchases of goods that the seller does not intend to buy back. The pawnbroker shall hold the goods for a period of not less than twenty (20) business days before offering the merchandise for resale; and
    8. Use its capital and funds in any lawful manner within the general scope and purposes of its creation.
  2. Notwithstanding this section, except for a pawn or pawn transaction authorized by Acts 1995, ch. 186, no pawnbroker shall have the power as enumerated in this section without first complying with the law regulating the particular transactions involved.

Acts 1988, ch. 724, § 4; 1995, ch. 186, § 3; 1997, ch. 409, § 1.

Compiler's Notes. Acts 1995, ch. 186, referred to in (b), amended or enacted numerous provisions in this title. For disposition of the act, see the Volume 13 tables.

Attorney General Opinions. Pawnbroker compliance with scrap jewelry and metal dealers act.  OAG 12-101, 2012 Tenn. AG LEXIS 102 (10/31/12).

NOTES TO DECISIONS

1. Loan on a Pledge of Any Nature.

A licensed pawnbroker can lend money on the security of a motor vehicle while allowing the borrower to retain possession of his vehicle provided that the loan is not otherwise a “pawn” or “pawn transaction,” and the pawnbroker complies with other applicable laws. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

If a pawnbroker's loan of money on a vehicle was construed as a “loan on a pledge of any nature” and not a “pawn” or “pawn transaction,” then it would be governed by Article 9 of the Uniform Commercial Code; therefore, where the pawnbroker failed to give proper notice of the sale of the vehicle, conducted a private sale unreasonable in its method, and received a grossly inadequate sale price, the sale of the repossessed vehicle was not conducted in a “commercially reasonable” manner. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

45-6-205. License required.

It is unlawful for any person, firm, or corporation to establish or conduct a business of pawnbroking unless the person, firm, or corporation has first procured a license to conduct the business in the manner and form as provided in this part.

Acts 1988, ch. 724, § 5.

NOTES TO DECISIONS

1. Evidence Sufficient.

Evidence was sufficient to support defendant's conviction of acting as a pawnbroker without a license because it showed that the victim went to defendant's shop and pawned a tablet for $70 with the agreement that she could buy it back for $90, the victim called defendant at least four times to get her property back, a receipt for the transaction and a business card were admitted at trial, and an investigator testified that the local clerk's office had no record of defendant having procured a license to operate a pawnbroker's business. State v. Schmitz, — S.W.3d —, 2019 Tenn. Crim. App. LEXIS 674 (Tenn. Crim. App. Oct. 22, 2019).

45-6-206. Eligibility requirements for license.

  1. To be eligible for a pawnbroker's license, an applicant must:
    1. Be of good moral character;
    2. Have net assets, as defined herein, of at least seventy-five thousand dollars ($75,000), readily available for use exclusively in conducting the business of each licensed pawnbroker;
    3. Show that the business will be operated lawfully and fairly within the purpose of this part; and
    4. Each licensed pawnbroker shall conform to the requirements set forth in § 45-6-221.
  2. Despite a person's eligibility for a pawnbroker's license under subsection (a), the county clerk shall find ineligible an applicant who has a prior felony conviction within ten (10) years next preceding that:
    1. Directly relates to the duties and responsibilities of the occupation of a pawnbroker; or
    2. Otherwise makes the applicant presently unfit for a pawnbroker's license.
  3. If an applicant for a pawnbroker's license is a business entity, the eligibility requirements of subsections (a) and (b) apply to each operator or beneficial owner, and as to a corporation, to each officer, shareholder, and director.

Acts 1988, ch. 724, § 6; 1994, ch. 935, § 1; 1995, ch. 186, § 4; 1997, ch. 409, § 4; 2012, ch. 778, § 2.

45-6-207. Petition for license — Fee for investigation.

  1. Every person, firm or corporation desiring to engage in the business of pawnbroker shall petition the county clerk in the county in which the pawnbroker establishment is to be operated for a license to conduct the business.
  2. The petitions shall provide:
    1. The name of the person, and in case of a firm or corporation, the names of the persons composing the firm or of the officers and stockholders of the corporation;
    2. The place, street, and number where business is to be carried on;
    3. Specify the amount of net assets or capital proposed to be used by the petitioner in the business;
    4. The signature of at least ten (10) freeholders, citizens of the county in which petitioner resides, of good reputation, certifying to the good reputation and moral character of the applicant or applicants;
    5. The statement required in subdivision (b)(3) shall be accompanied by an unaudited statement from a certified public accountant and shall contain the following statement:

      According to the information provided to me, the net assets, as defined in Tennessee Code Annotated, § 45-6-203, or proposed capital to be used by the applicant,  (name) in the pawnbroker business, are valued at not less than seventy-five thousand dollars ($75,000);

    6. An affidavit by petitioner that petitioner has not been convicted of a felony within the past ten (10) years, that directly affects the petitioner's ability to lawfully and fairly operate pursuant to this part;
    7. A certificate from the chief of police and/or sheriff and/or the Tennessee bureau of investigation that petitioner is of good moral character and has not been convicted of a felony within the past ten (10) years; and
    8. Certified funds in the amount of fifty dollars ($50.00) payable to the county clerk to defray the costs of investigation of the petition, plus to pay directly for the costs of the city, sheriff, and Tennessee bureau of investigation investigating the petitioner.

Acts 1988, ch, 724, § 7; 1993, ch. 229, § 1.

45-6-208. Granting of license — Transfer — Fee.

Every person, firm, or corporation having satisfied the provisions of § 45-6-206 and having paid the business tax and any other taxes as provided by law, and having produced to the county clerk satisfactory evidence of good character as to being a suitable person or persons to carry on the business of pawnbroker, shall be granted a license as herein provided. The license issued hereunder shall state the name of the person, firm, or corporation to whom issued, the place of business and street number where the business is located and the amount of capital employed, and shall entitle the person receiving the same to do business at the place designated in the license. The license shall not be transferable from one (1) person to another, but may be transferred from one (1) place to another, by consent of the county clerk, on payment to the county clerk of a transfer fee of ten dollars ($10.00).

Acts 1988, ch. 724, § 8.

45-6-209. Record of transactions required — Inspection — Fingerprinting.

  1. Every pawnbroker shall keep a consecutively numbered record of each and every pawn transaction, which shall correspond in all essential particulars to the detachable pawn ticket attached. The consecutive numbering process for pawnbroker transactions dealing with over-the-counter purchases, described in § 45-6-204(a)(7) shall be numbered and identified independently from a buy-sell agreement and/or a loan of money transaction.
  2. The pawnbroker shall, at the time of making the pawn transaction and/or buy-sell transaction, enter upon the pawnshop copy of the records as well as on the pawn ticket, and/or buy-sell ticket, the following information, which shall be typed or written in ink and in the English language:
    1. A complete and accurate description of the pledged goods including, but not limited to, the following information, if applicable:
      1. Brand name;
      2. Model number;
      3. Serial number, if issued by the manufacturer and not intentionally defaced, altered or removed;
      4. Size;
      5. Color, as apparent to the untrained eye, not applicable to diamonds;
      6. Precious metal type, content and weight, if indicated;
      7. Gemstone description, including the number of stones;
      8. Any other unique identifying marks, numbers, names or letters; and
      9. In the case of firearms, the type of action, caliber or gauge, number of barrels, barrel length, and finish;
    2. The date of the pawn transaction;
    3. The amount of cash loan advanced on the pawn transaction;
    4. The exact value of property as stated by pledgor who pledges the property;
    5. The maturity date of the pawn transaction, which date shall not be less than thirty (30) days after the date of the pawn transaction;
    6. The name, race, sex, height, weight, date of birth, residence address and numbers from the items used as identification. Acceptable items of identification are one (1) of the following documents:
      1. A state-issued driver license;
      2. A state-issued identification card;
      3. A passport;
      4. A valid military identification;
      5. A nonresident alien border crossing card;
      6. A resident alien border crossing card; or
      7. A United States immigration and naturalization service identification; and
    7. As a pilot project, in any county having a population in excess of eight hundred thousand (800,000), and in any county having a population of not less than three hundred eighty-two thousand (382,000) nor more than three hundred eighty-two thousand one hundred (382,100), according to the 2000 federal census or any subsequent federal census, the right thumbprint of the pledgor, provided that if taking the right thumbprint is not possible the pawnbroker shall take a fingerprint from the left thumb or another finger and shall identify on the pawn ticket which finger has been used. A thumb or fingerprint taken pursuant to this subdivision (b)(7) must be clear and complete and contain no smears or smudges. A thumb or fingerprint taken pursuant to this subdivision (b)(7) shall be maintained by the pawnbroker for a period of five (5) years from the date of the pawn transaction.
  3. The pledgor shall sign the stub providing the pledgor's residence address and shall receive the detached pawn ticket; the stub shall also be signed by the pawnbroker.
  4. These records shall be delivered to the appropriate law enforcement agency, by mail or in person, within forty-eight (48) hours following the day of the transactions. Delivery by mail shall be deemed made when deposited in the United States mail, postage prepaid. Further, these records shall be made available for inspection each business day, except Sunday, by the sheriff of the county and the chief of police of the municipality in which the pawnshop is located.
  5. These records shall be a correct copy of the entries made of the pawn transactions and/or buy-sell transactions and shall be carefully preserved without alteration and shall be available during regular business hours for inspection by the appropriate law enforcement officers as herein provided.
  6. In any county having a population of more than eight hundred thousand (800,000), according to the 1990 federal census or any subsequent federal census, each licensed pawnbroker shall retain these records for a period of one (1) year. After that time these records shall be delivered to the appropriate law enforcement agency in the county.
    1. Notwithstanding this section to the contrary, in counties or municipalities that require a thumbprint pursuant to subdivision (b)(7), if the pawn transaction involves a firearm, the pawnbroker shall exclude from the information sent to law enforcement pursuant to subdivision (b)(1)-(6), the name, address and identification numbers required by subdivision (b)(6) of the pledgor pawning the firearm. The name, address and identification numbers of the pledgor shall remain with the pawnbroker along with the pledgor's thumbprint. A law enforcement officer inspecting a record involving a firearm pursuant to subdivision (d) or (e) shall not take or record the name, address and identification numbers of the pledgor except pursuant to a subpoena as provided in subdivision (g)(2).
    2. If a court grants the request of a law enforcement officer for a subpoena to require the production of the thumbprint of a pledgor taken and maintained pursuant to subdivision (b)(7) pursuant to the procedure set out in this section, the pawnbroker shall at the same time supply the law enforcement officer with the name, address and identification numbers of the pledgor whose thumbprint was subpoenaed.
    1. It is an offense for a law enforcement officer or agency to use any information supplied by a pawnbroker pursuant to  this section to create or maintain a separate registry, list or database of persons who own firearms.
    2. A violation of subdivision (h)(1) is a Class A misdemeanor.

Acts 1988, ch. 724, § 9; 1994, ch. 935, § 3; 1995, ch. 186, §§ 5, 6; 1997, ch. 409, § 3; 2001, ch. 429, §§ 1, 3; 2004, ch. 499, § 1; 2005, ch. 126, § 1.

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

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

Attorney General Opinions. A city may not adopt an ordinance requiring the pledgor in a pawn transaction to place a thumbprint on the pawnbroker's copy of the pawn transaction, OAG 00-071, 2000 Tenn. AG LEXIS 73 (4/11/00).

45-6-210. Rate of interest — Other charges permitted.

In connection with and for a pawn or pawn transaction, no pawnbroker shall demand and receive a rate of interest greater than two percent (2%) per month of the amount of the loan advance under the pawn or pawn transaction, and no other charge of any description, for any purpose whatsoever, shall be made by the pawnbroker; except that the pawnbroker may charge, contract for and receive a fee not to exceed one-fifth (1/5) of the amount of the loan advance under the pawn or pawn transaction for investigating the title, storage, insuring the pledged goods, closing the loan, making daily reports to local law enforcement officers and for other expenses, losses of every nature whatsoever and for all other services. The fee when made and collected shall not be deemed interest for any purpose of law. The interest and fee shall be deemed to be earned, due and owing as of the date of the pawn transaction and a like sum shall be deemed earned, due and owing on the same day of each subsequent month.

Acts 1988, ch. 724, § 10; 1995, ch. 186, § 7.

NOTES TO DECISIONS

1. Reasonable Charge Required.

A pawn agreement calling for interest at 2 percent (2%) per month on the value of the loan plus a pawn/loan service fee of 20 percent (20%) per month, mathematically requiring the payment of $1,680 in pawn loan fees for a $3,000 loan that had a repayment life of less than three months, did not comply with the “reasonable” requirement of this section. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

45-6-211. Failure to redeem — Notice to pledgor.

  1. In every pawn transaction made under a loan of money pawn transaction as defined in this part, the pawnbroker shall retain in the pawnbroker's possession the pledged goods for thirty (30) days after the maturity date of the pawn transaction. Pledged goods not redeemed by the pledgor on or before the maturity date of the pawn transaction set out in the pawn ticket issued in connection with any pawn transaction may be redeemed by the pledgor within the period of thirty (30) days after the maturity date of the pawn transaction by the payment of the originally agreed redemption price (interest, fee and loan amount), and the payment of the additional interest and fee for the period following the original maturity date due on the pawn transaction.
  2. If the pledgor fails to redeem the pledged goods within thirty (30) days after the maturity date of the pawn transaction, the pledgor shall thereby forfeit all right, title and interest of, in and to the pledged goods to the pawnbroker, who shall thereby acquire an absolute title to the pledged goods and the debt becomes satisfied, and the pawnbroker shall have the authority to sell or dispose of the unredeemed pledged goods as the pawnbroker's own and may sell the unredeemed pledged goods.
  3. If the pledgor loses the pawn ticket, the pledgor shall not thereby forfeit the right to redeem the pledged goods, but may promptly, before the lapse of the final redemption date, make affidavit for the loss, describing the pledged goods, which affidavit shall take the place of the pawn ticket, unless the pledged goods have already been redeemed under this part.
  4. The following information shall be printed on all pawn tickets or buy-sell tickets:
    1. ANY PERSONAL PROPERTY PLEDGED TO A PAWNBROKER WITHIN THIS STATE IS SUBJECT TO SALE OR DISPOSAL WHEN THERE HAS BEEN NO PAYMENT MADE ON THE ACCOUNT FOR A PERIOD OF THIRTY (30) DAYS AFTER THE MATURITY DATE OF THE PAWN TRANSACTION AND NO FURTHER NOTICE IS NECESSARY;
    2. THE PLEDGOR OF THIS ITEM ATTESTS THAT IT IS NOT STOLEN, IT HAS NO LIENS OR ENCUMBRANCES AGAINST IT AND THE PLEDGOR HAS THE RIGHT TO SELL OR PAWN THE ITEM;
    3. THE ITEM PAWNED IS REDEEMABLE ONLY BY THE BEARER OF THIS TICKET; and
    4. A blank line for the pledgor's signature.

Acts 1988, ch. 724, § 11; 1995, ch. 186, § 8.

NOTES TO DECISIONS

1. Bankruptcy.

Tennessee law extinguishes all rights of the debtor in pawned property once the statutory redemption requirements have been met and the period has passed. Once redemption is no longer possible, the debtor loses any legal or equitable interest in a pawned good, and thus this good cannot be considered part of the bankruptcy estate. Dunlap v. Cash Am. Pawn, 158 B.R. 724, 1993 U.S. Dist. LEXIS 13293 (M.D. Tenn. 1993).

2. Maturity Date.

“Maturity” cannot be the date of execution of a pawn agreement, unless the agreement had called for immediate repayment or the pawnbroker had accelerated the loan upon a default on the same date. The “maturity of the loan” means when the loan becomes due by default and acceleration or by arrival of the due date as given on the face of the agreement; thus, failure of a pawnbroker to retain possession of pledged property for 50 days following the first date the pawnor failed to make a scheduled payment violated the requirements of this section. Lynn v. Financial Solutions Corp. (In re Lynn), 173 B.R. 894, 1994 Bankr. LEXIS 1669 (Bankr. M.D. Tenn. 1994), amended, — B.R. —, 1994 Bankr. LEXIS 1916 (Bankr. M.D. Tenn. Dec. 12, 1994).

Bankruptcy debtor's right to redeem pawned property was property of the bankruptcy estate since the date of maturity of the pawn tickets was the last date for payment rather than the maturity date stated on the tickets, and the debtor's bankruptcy petition was filed before expiration of the statutory redemption period after maturity. In re Hatman, — B.R. —, 2009 Bankr. LEXIS 2588 (Bankr. M.D. Tenn. Aug. 31, 2009).

45-6-212. Prohibited actions.

A pawnbroker shall not:

  1. Accept a pledge or purchase property from a person under eighteen (18) years of age, nor accept a pledge from anyone who appears intoxicated, nor from any person known to the pawnbroker to be a thief, or to have been convicted of larceny, burglary or robbery, without first notifying a police officer;
  2. Make any agreement requiring the personal liability of a pledgor in connection with a pawn transaction;
  3. Accept any waiver, in writing or otherwise, of any right or protection accorded a pledgor under this part;
  4. Fail to exercise reasonable care to protect pledged goods from loss or damage;
  5. Fail to return pledged goods to a pledgor upon payment of the full amount due the pawnbroker on the pawn transaction. In the event the pledged goods are lost or damaged while in the possession of the pawnbroker, it shall be the responsibility of the pawnbroker to replace the lost or damaged goods with like kind or kinds of merchandise. In the event the pledgor and pawnbroker cannot agree as to replacement with like kind or kinds, the pawnbroker shall reimburse the pledgor for the agreed upon value of the article as recited under § 45-6-209(b)(4);
  6. Purchase property in a pawn transaction for the pawnbroker's own personal use;
  7. Take any article in pawn, pledge, or as security or under a buy-sell agreement from any person, which article is known to the pawnbroker to be stolen;
  8. Sell, exchange, barter, or remove from the pawnbroker's place of business, or permit to be redeemed any goods pledged, pawned, or disposed of by the pawnbroker for a period of forty-eight (48) hours after making the report as provided in § 45-6-209;
  9. Keep more than one (1) house, shop, or place for the business of pawnbroker under one (1) license; provided, that the person may remove from one (1) place of business to another, as provided in § 45-6-208;
  10. Keep open the pawnbroker's place of business before eight o'clock a.m. (8:00 a.m.) or after six o'clock p.m. (6:00 p.m.) of any day during the year, with the exception of thirty (30) days before Christmas, meaning November 25 through December 24, of each year, and then the pawnbroker may open the place of business at eight o'clock a.m. (8:00 a.m.) and shall be entitled to close same at nine o'clock p.m. (9:00 p.m.); provided, that any municipality that contains within its corporate limits a portion of a military reservation that is located partially within the boundary of this state and partially within the boundary of another state and that has a population of not less than fifty-three thousand (53,000) and not more than seventy-five thousand (75,000), according to the 1980 federal census or any subsequent federal census, may extend the hours of operation by ordinance of the governing body beyond the hours of operation established pursuant to this subdivision (10), but the extension of hours shall not exceed the hours authorized in the closest contiguous state to the municipality; or
  11. Enter into any pawn transaction that has a maturity date less than thirty (30) days after the date of the pawn transaction.

Acts 1988, ch. 724, § 12; 1989, ch. 433, § 1; 1994, ch. 539, § 2; 1995, ch. 186, § 9.

Attorney General Opinions. Metro pawnshop enforcement program, OAG 06-112, 2006 Tenn. AG LEXIS 121 (7/13/06).

45-6-213. Identification of pawnors — Procedure for misappropriated or stolen property.

  1. When any person sells property to a pawnbroker or pledges property as security for a loan, the pawnbroker shall obtain and record the information provided for in § 45-6-209(b)(6) and obtain a statement of the pledgor that the pledgor is the lawful owner of the item, as provided in § 45-6-211(d), and have the record signed by the person from whom the pawnbroker receives the property. This record shall be made available to any law enforcement agency or officer upon request.
    1. To obtain possession of purchased or pledged goods held by a pawnbroker which a claimant claims to be misappropriated or stolen, the claimant shall notify the pawnbroker by certified mail, return receipt requested, or in person evidenced by signed receipt, of the claimant’s claim to the purchased or pledged goods. The notice shall contain a complete and accurate description of the purchased or pledged goods and shall be accompanied by a legible copy of the applicable law enforcement agency’s report on the misappropriation or theft of such property.
    2. The claimant and the pawnbroker shall, in good faith, attempt to resolve the claimant’s claim to the purchased or pledged goods within ten (10) days after the claimant notifies the pawnbroker pursuant to subdivision (b)(1). If, after the ten-day period, the claimant and pawnbroker do not resolve the claimant’s claim, then:
      1. The claimant may petition a court of competent jurisdiction to order the return of the property, naming the pawnbroker as a defendant, and must serve the pawnbroker with a copy of the petition. The pawnbroker shall hold the property described in the petition until either the pawnbroker and the claimant resolve the claim, or a court specifically orders disposition of the property. The court shall waive any filing fee for the petition to recover the property, and the sheriff shall waive the service fees; or
      2. An appropriate law enforcement official may place a hold order on the property pursuant to subsection (f).
  2. If, after notice and a hearing, the court finds that the property was misappropriated or stolen and orders the return of the property to the claimant:
    1. The claimant may recover from the pawnbroker the cost of the action, including the claimant's reasonable attorney's fees; and
      1. If the conveying customer is convicted of theft or dealing in misappropriated or stolen property, the court shall order the conveying customer to repay the pawnbroker the full amount the conveying customer received from the pawnbroker for the property, plus all applicable pawn service charges;
      2. As used in this subdivision (c)(2), the term “convicted of” includes a plea of nolo contendere to the charges or any agreement in which adjudication is withheld;
    2. The conveying customer shall be responsible for paying all attorney fees and costs incurred by the pawnbroker in defending a replevin action or any other civil matter wherein it is found that the conveying customer has been convicted of theft or dealing in misappropriated or stolen property; and
    3. Notwithstanding § 40-24-105, all moneys paid by the conveying customer shall be distributed in accordance with § 45-6-102.
  3. If the court finds that the claimant failed to comply with the requirements in subsection (b) or otherwise finds against the claimant, the claimant is liable for the defendants' costs, including reasonable attorney's fees.
  4. The sale, pledge, or delivery of tangible personal property to a pawnbroker by any person in this state is considered to be:
    1. An agreement by the person who sells, pledges, or delivers the tangible personal property that the person is subject to the jurisdiction of a court of competent jurisdiction in all civil actions and proceedings arising out of the pledge or sale transaction filed by either a resident or nonresident plaintiff;
    2. An appointment of the secretary of state by any nonresident of this state as that person's lawful attorney and agent upon whom may be served all process in suits pertaining to the actions and proceedings arising out of the sale, pledge, or delivery; and
    3. An agreement by any nonresident that any process in any suit so served has the same legal force and validity as if personally served in this state.
  5. When an appropriate law enforcement official has probable cause to believe that property in the possession of a pawnbroker is misappropriated or stolen, the official shall, upon expiration of the ten-day period required by subdivision (b)(2), place a written hold order on the property. The written hold order shall impose a holding period not to exceed ninety (90) days unless extended by court order. The appropriate law enforcement official may rescind, in writing, any hold order. An appropriate law enforcement official may place only one (1) hold order on the property.
  6. Upon the expiration of the holding period, the pawnbroker shall notify, in writing, the appropriate law enforcement official by certified mail, return receipt requested, that the holding period has expired. If, on the tenth day after the written notice has been received by the appropriate law enforcement official, the pawnbroker has not received from a court an extension of the hold order on the property and the property is not the subject of a proceeding under this subsection (g), title to the property shall vest in and be deemed conveyed by operation of law to the pawnbroker, free of any liability for claims but subject to any restrictions contained in the pawn transaction contract and subject to this section.
  7. A hold order must specify:
    1. The name and address of the pawnbroker;
    2. The name, title, and identification number of the representative of the appropriate law enforcement official or the court placing the hold order;
    3. If applicable, the name and address of the appropriate law enforcement official or court to which such representative is attached and the number, if any, assigned to the claim regarding the property;
    4. A complete description of the property to be held, including model number and serial number if applicable;
    5. The name of the person reporting the property to be misappropriated or stolen unless otherwise prohibited by law;
    6. The mailing address of the pawnbroker where the property is held;
    7. The expiration date of the holding period.
  8. The pawnbroker or the pawnbroker's representative must sign and date a copy of the hold order as evidence of receipt of the hold order and the beginning of the ninety-day holding period.
    1. Except as provided in subdivision (j)(2), a pawnbroker may not release or dispose of property subject to a hold order except pursuant to a court order, a written release from the appropriate law enforcement official, or the expiration of the holding period of the hold order.
    2. While a hold order is in effect, the pawnbroker shall, upon request, release the property subject to the hold order to the custody of the appropriate law enforcement official for use in a criminal investigation. The release of the property to the custody of the appropriate law enforcement official is not considered a waiver or release of the pawnbroker's property rights or interest in the property. Upon completion of the criminal proceeding, the property must be returned to the pawnbroker unless the court orders other disposition. When such other disposition is ordered, the court shall additionally order the conveying customer to pay restitution to the pawnbroker in the amount received by the conveying customer for the property together with reasonable attorney's fees and costs.

Acts 1988, ch. 724, § 13; 1995, ch. 186, § 10; 2012, ch. 874, § 1; 2016, ch. 862, §§ 2-4.

Attorney General Opinions. T.C.A. § 45-6-213(b), by authorizing a law enforcement officer to seize and dispose of property in a pawnbroker's possession without any prior notice and opportunity for the pawnbroker to defend its ownership of the property, violates the due process requirements of the Tennessee and United States Constitutions, OAG 02-090, 2002 Tenn. AG LEXIS 96 (8/27/02).

In light of the opinions of the United States Court of Appeals for the 10th Circuit, there is a risk that the defense of qualified immunity might not be available for a law enforcement official sued by a pawnbroker for violating its due process rights by enforcing T.C.A. § 45-6-213, OAG 02-090, 2002 Tenn. AG LEXIS 96 (8/27/02).

NOTES TO DECISIONS

1. Duty to Report Theft.

Upon locating and inspecting rugs he believed were his at defendant's pawn shop, plaintiff gained knowledge of sufficient facts to lead him to believe that the rugs had been disposed of without his consent. Because, six months later, after his suit had been filed, plaintiff admitted that he had never reported the rugs as being stolen, he lost his rights to recover possession of them under the Pawnbrokers Act. Alsafi Oriental Rugs v. American Loan Co., 864 S.W.2d 41, 1993 Tenn. App. LEXIS 348 (Tenn. Ct. App. 1993).

2. Prosecution for Tampering With Evidence.

Because the court determined that the legislature did not intend for a pawnbroker such as defendant to be prosecuted for tampering with evidence where a law enforcement official did not place a written hold order on an item that they believed to have been stolen and the pawnbroker sold the item, even if the pawnbroker knew that the item was subject to an investigation. State v. Cabe, 579 S.W.3d 343, 2018 Tenn. Crim. App. LEXIS 879 (Tenn. Crim. App. Sept. 18, 2018).

45-6-214. Right to redeem.

Except as otherwise provided by this part, any person presenting a pawn ticket to the pawnbroker may be presumed to be entitled to redeem the pledged goods described in the pawn ticket.

Acts 1988, ch. 724, § 14.

45-6-215. Safekeeping of pledges — Insurance coverage.

Every pawnbroker licensed under this part shall provide a safe place for the keeping of the pledges provided by the pawnbroker, and shall have sufficient insurance coverage on the property held on the pledge for the benefit of the pledgor, to pay the stated value as recited on the pawn stub of the pawned article, in case of destruction by fire or other catastrophe, and the policy shall be made payable, in the case of loss, to the city or county clerk for the benefit of the pledgor, as the pledgor's interest may appear, which policy shall be deposited with the city or county clerk. “Pawn value,” for the purposes of this section, means the amount of money loaned on the particular article, as stated on the pawn ticket and in the stub book, as recited under § 45-6-209(b)(3).

Acts 1988, ch. 724, § 15.

45-6-216. Information concerning suppliers.

Upon request from any law enforcement agency, whether city, county, or state, a pawnbroker shall furnish the names of all suppliers from whom the pawnbroker has purchased merchandise for resale. This information is not to be recorded nor sent to any law enforcement agency but shall be maintained at the pawnshop for a period of at least one (1) year from the date of purchase.

Acts 1988, ch. 724, § 16.

45-6-217. Sign over entrance.

Every licensee under this part shall cause the name of the pawnbroker, firm or corporation, with the words, “Licensed Pawnbroker” to be printed or painted, in large, legible characters, and placed over the outside of the door or entrance of the shop, office, or place of business.

Acts 1988, ch, 724, § 17.

45-6-218. Penalties.

  1. Every person, firm or corporation, or agents or employees thereof, who knowingly violates any of this part, on conviction, commits a Class A misdemeanor. If the violation is by an owner or major stockholder and/or managing partner of the pawnshop, and the violation is knowingly committed by the owner, major stockholder or managing partner of the pawnshop, then the license of the pawnbroker or pawnbrokers may be suspended or revoked at the discretion of the city or county clerk.
  2. Subsection (a) does not apply to violations of § 45-6-212(7) relating to the taking of any article in pawn, pledge or as security under any buy-sell agreement from any person that is known to the pawnbroker to be stolen. Any violation under § 45-6-212(7) shall be prosecuted pursuant to § 39-14-103.

Acts 1988, ch. 724, § 18; 1989, ch. 591, §§ 1, 6; 1996, ch. 675, § 47.

Code Commission Notes.

The misdemeanor 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. Classification of offenses, § 40-35-110.

Penalty for Class A misdemeanor, § 40-35-111.

Attorney General Opinions. Constitutionality, OAG 89-53, 1989 Tenn. AG LEXIS 41 (4/10/89).

NOTES TO DECISIONS

1. Evidence Sufficient.

Evidence was sufficient to support defendant's conviction of acting as a pawnbroker without a license because it showed that the victim went to defendant's shop and pawned a tablet for $70 with the agreement that she could buy it back for $90, the victim called defendant at least four times to get her property back, a receipt for the transaction and a business card were admitted at trial, and an investigator testified that the local clerk's office had no record of defendant having procured a license to operate a pawnbroker's business. State v. Schmitz, — S.W.3d —, 2019 Tenn. Crim. App. LEXIS 674 (Tenn. Crim. App. Oct. 22, 2019).

45-6-219. Authority of counties, incorporated municipalities, cities and taxing districts to regulate.

    1. Counties, incorporated municipalities, cities and taxing districts in this state have the authority by ordinance to adopt provisions of this part and have the authority to adopt further rules and regulations that the legislative bodies of the counties, incorporated municipalities, cities and taxing districts may deem right and proper. No county, incorporated municipality, city or taxing district has the authority to:
      1. Regulate interest, fees and insurance charges;
      2. Regulate hours;
      3. Regulate the nature of the business or types of pawn transactions;
      4. Regulate license requirements;
      5. Require reports or pawn tickets providing identification, information or descriptions different from that required in § 45-6-209; or
      6. Require a pawnbroker to hold over-the-counter purchase of goods that the seller does not intend to buy back for a period of more than twenty (20) business days before offering the merchandise for resale.
    2. Counties shall have no more authority than incorporated municipalities, cities and taxing districts have under this subsection (a) in regulating pawnbrokers.
  1. A law enforcement official from any county, municipality, city or taxing district may not charge a pawnbroker, firm or corporation a fee for receiving, reviewing or processing daily reports or pawn tickets as defined in § 45-6-209, or any other information required by the law enforcement official.

Acts 1988, ch. 724, § 19; 1995, ch. 186, §§ 11, 12; 1996, ch. 885, §§ 1, 2; 1997, ch. 409, § 2.

Attorney General Opinions. A city may not adopt an ordinance requiring the pledgor in a pawn transaction to place a thumbprint on the pawnbroker's copy of the pawn transaction, OAG 00-071, 2000 Tenn. AG LEXIS 73 (4/11/00).

A city does not have authority, by ordinance, to require the pledgor in a pawn transaction to place a thumbprint on a form separate from the pawn ticket to be maintained by the pawnbroker and made available to law enforcement authorities, OAG 00-167, 2000 Tenn. AG LEXIS 170 (10/26/00).

45-6-220. Existing licensees — Renewals.

  1. Notwithstanding any provision of this part to the contrary, the license of any person, firm, or corporation licensed as a pawnbroker on July 1, 1988, shall continue in force until the natural expiration thereof, and all other provisions of this part shall apply to the licensee.
  2. The pawnbroker shall be eligible for renewal of the license upon its expiration or the expiration of subsequent renewals; provided, that the licensee complies with the requirements for renewal that were in effect immediately prior to July 1, 1988.

Acts 1988, ch. 724, § 20.

45-6-221. Electronic information transfer.

  1. Each licensed pawnbroker shall have a computer system in operation, if so requested by the appropriate law enforcement agency, that is capable of electronically transferring information, and shall electronically transfer the information in text file format on pledged goods to the appropriate law enforcement agency where the pawnshop is located. A pawnbroker who is electronically transferring information on pledged goods to the appropriate law enforcement agency, as of July 1, 2012, shall be deemed in compliance with the requirements set forth in this section.
  2. In the event the pawnbroker transfers pawn transactions electronically, the pawnbroker is not required to also deliver to the appropriate law enforcement official the original or copies of the pawnbroker transaction forms. The appropriate law enforcement official may, for the purposes of a criminal investigation, request that the pawnbroker produce an original of a transaction form that has been electronically transferred. The pawnbroker shall deliver this form to the appropriate law enforcement official within twenty-four (24) hours or the next business day following the request.

Acts 1994, ch. 935, § 2; 1997, ch. 409, § 5; 2012, ch. 778, § 1.

45-6-222. Procedure for subpoena for production of fingerprint.

  1. The following procedure shall be employed when a law enforcement officer, as defined in § 39-11-106, seeks to obtain a subpoena for the production of a thumbprint taken and maintained pursuant to § 45-6-209(b)(7) for the purpose of establishing, investigating or gathering evidence for the prosecution of a criminal offense.
  2. If the officer has reason to believe that a criminal offense has been committed or is being committed and that requiring the production of a thumbprint in the possession of a pawnbroker is necessary to establish who committed or is committing the offense or to aid in the investigation and prosecution of the person or persons believed to have committed or believed to be committing the offense, the officer shall prepare an affidavit in accordance with subsection (c).
  3. An affidavit in support of a request to compel the production of a thumbprint from a pawnbroker shall state with particularity the following:
    1. A statement that a specific criminal offense has been committed or is being committed and the nature of the offense;
    2. The articulable reasons why the law enforcement officer believes the production of the thumbprint requested will materially assist in the investigation of the specific offense committed or being committed;
    3. The name and address of the pawnbroker maintaining the thumbprint; and
    4. The nexus between the thumbprint requested and the criminal offense committed or being committed.
    1. Upon preparing the affidavit, the law enforcement officer shall submit it to a magistrate, as defined in §§ 40-5-101 and 40-5-102. The magistrate shall examine the affidavit and may examine the affiants under oath. The magistrate may grant the request for a subpoena to produce the thumbprint requested if the magistrate finds that the affiants have presented a reasonable basis for believing that:
      1. A specific criminal offense has been committed or is being committed;
      2. Production of the requested thumbprint will materially assist law enforcement in the establishment or investigation of such offense;
      3. There exists a clear and logical nexus between the thumbprint requested and the offense committed or being committed; and
      4. The scope of the request is not unreasonably broad or the thumbprint unduly burdensome to produce.
    2. If the magistrate finds that all of the criteria set out in subdivision (d)(1) do not exist as to the thumbprint requested, the magistrate shall deny the request for subpoena.
  4. The affidavit filed in support of any request for the issuance of a subpoena pursuant to this section shall be filed with and maintained by the magistrate's office. If a subpoena is issued as the result of the affidavit, the affidavit shall be kept under seal by the magistrate until a copy is requested by the district attorney general, criminal charges are filed in the case, or the affidavit is ordered released by a court of record for good cause.
  5. A subpoena granted pursuant to this section by a magistrate of a court of record shall issue to any part of the state and shall command the pawnbroker to whom it is directed to produce any thumbprint that is specified in the subpoena to the law enforcement officer and at a reasonable time and place designated in the subpoena. A subpoena granted pursuant to this section by any other magistrate shall in all respects be like a subpoena granted by the magistrate of a court of record but shall issue only within the county in which the magistrate has jurisdiction. The magistrate shall prepare or cause to be prepared the subpoena and it shall describe the specific thumbprint requested and set forth the date and manner it is to be delivered to the officer.
  6. If the subpoena is issued by a magistrate of a court of record, it may be served by the officer in any county of the state by personal service, certified mail, return receipt requested, or by any other means with the consent of the person named in the subpoena. If the subpoena is issued by any other magistrate it shall be served by an officer with jurisdiction in the county of the issuing magistrate but may be served by personal service, certified mail, return receipt requested, or by any other means with the consent of the person named in the subpoena. The officer shall maintain a copy of the subpoena and endorse thereon the date and manner of service as proof thereof.
  7. No pawnbroker shall be excused from complying with a subpoena for the production of a thumbprint maintained by the pawnbroker issued pursuant to this section on the ground that production of the requested thumbprint may tend to incriminate the pawnbroker. Any pawnbroker claiming a privilege against self incrimination must assert the claim before the magistrate issuing the subpoena promptly and before the time designated for compliance therewith. If the district attorney general thereafter certifies to the magistrate that the interests of justice demand the production of the thumbprint for which the claim of privilege is asserted, then the magistrate shall order the production of the thumbprint and the pawnbroker shall not be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning the requested thumbprint the pawnbroker was compelled to produce.
  8. No subpoena for the production of a thumbprint as authorized by this section shall be directed to, or served upon, any defendant, or defendant's counsel, in a criminal action in this state, any person who is suspected of committing a criminal offense or any person who is the subject of a criminal investigation.
  9. If any pawnbroker, without cause, refuses to produce the requested thumbprint within the time and manner designated for compliance by the issuing magistrate, the district attorney general shall seek a writ of attachment from the issuing magistrate to seize the pawnbroker within the state and that pawnbroker may be held in civil contempt and committed to jail therein to remain without bail until willing to comply with the subpoena as the law directs.

Acts 2001, ch. 429, § 2; 2005, ch. 225, §§ 1-7.

45-6-223. Racial profiling prohibited — Violations — Penalty.

  1. No law enforcement officer or agency shall use any thumb or other print obtained pursuant to § 45-6-222 for the purpose of racial profiling.
    1. Any person residing within the jurisdiction of the law enforcement officer or agency alleged to have violated this section may petition the chancery or circuit court of the county for injunctive relief under this section. The court in which the petition is filed shall conduct a show cause hearing to determine if thumb or other prints obtained pursuant to § 45-6-222 have been used by a law enforcement officer or agency for the purpose of racial profiling.
    2. If the court finds by a preponderance of evidence that a violation of this section has occurred, it shall grant an injunction prohibiting the officer or agency from obtaining thumb or other prints pursuant to § 45-6-222 for the period specified in subsection (c).
    3. If the court finds by a preponderance of evidence that a violation of this section has not occurred, it shall deny the petition for an injunction.
    1. A law enforcement officer or agency who violates this section for the first time shall be enjoined from requesting subpoenas for the production of thumb or other prints pursuant to § 45-6-222 for a period of six (6) months.
    2. A law enforcement officer or agency who violates this section for the second time shall be enjoined from requesting subpoenas for the production of thumb or other prints pursuant to § 45-6-222 for a period of one (1) year.
    3. A law enforcement officer or agency who violates this section for a third or subsequent time shall be permanently enjoined from requesting subpoenas for the production of thumb or other prints pursuant to § 45-6-222.

Acts 2001, ch. 429, § 2.

45-6-224. Notice of requirement for fingerprinting — Failure of pawnbroker to comply.

  1. All pawnshops that are required to take and maintain thumb or other prints pursuant to § 45-6-209(b)(7) shall be required to place a sign at least ten inches by fourteen inches (10" X 14") in a prominent location reasonably close in proximity to the place where the pawn transaction will occur. The sign shall contain language in bold type substantially similar to the following:

    WARNING! IF YOU CONDUCT A PAWN TRANSACTION AT THIS ESTABLISHMENT YOU WILL BE REQUIRED TO GIVE A THUMBPRINT BEFORE SUCH TRANSACTION MAY BE COMPLETED AND YOUR THUMBPRINT MAY BE OBTAINED AND USED BY THE POLICE.

  2. Any pawnbroker who fails to comply with this section shall be subject to a civil penalty of one hundred dollars ($100) and noncompliance shall be grounds for the suspension of the pawnbroker's license.

Acts 2001, ch. 429, § 2.

Chapter 7
Money Transmitters

45-7-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Money Transmitter Act of 1994.”

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-201.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

Cross-References. Check cashing regulations, § 45-17-102.

Check cashing, title 45, ch. 18.

Law Reviews.

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

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).

45-7-102. License required.

  1. No person except those exempt pursuant to § 45-7-104, shall engage in the business of money transmission without a license or other compliance as provided in this chapter.
  2. A licensee may conduct its business in Tennessee at one (1) or more locations, directly or indirectly owned, or through one (1) or more authorized agents, or both, pursuant to the single license granted to the licensee.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-202.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-103. Chapter definitions.

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

  1. “Applicant” means a person filing an application for a license under this chapter;
  2. “Authorized agent” means an entity designated by the licensee under this chapter to sell or issue payment instruments or engage in the business of transmitting money on behalf of a licensee;
  3. “Commissioner” means the commissioner of financial institutions;
  4. “Control” means ownership of, or the power to vote, twenty-five percent (25%) or more of the outstanding voting securities of a licensee or controlling person. For purposes of determining the percentage of a licensee controlled by any person, there shall be aggregated with the person's interest the interest of any other person controlled by the person or by any spouse, parent, or child of the person;
  5. “Controlling person” means any person in control of a licensee;
  6. “Executive officer” means the licensee's president, chair of the executive committee, executive vice president, treasurer, chief financial officer or any other person who performs similar functions;
  7. “Key shareholder” means any person (or group of persons acting in concert) who is the owner of ten percent (10%) or more of any class of any applicant's stock;
  8. “Licensee” means a person licensed under this chapter;
  9. “Material litigation” means any litigation that, according to generally accepted accounting principles, is deemed significant to a person's financial health and would be required to be referenced in annual audited financial statements, report to shareholders or similar documents;
  10. “Money transmission” means the sale or issuance of payment instruments or engaging in the business of receiving money for transmission or transmitting money within the United States or to locations abroad by any and all means, including, but not limited to, payment instrument, wire, facsimile or electronic transfer;
  11. “Outstanding payment instrument” means any payment instrument issued by the licensee that has been sold in the United States directly by the licensee or any payment instrument issued by the licensee that has been sold and reported to the licensee as having been sold by an authorized agent of the licensee in the United States, and that has not yet been paid by or for the licensee;
  12. “Payment instrument” means any check, draft, money order, travelers check or other instrument or written order for the transmission or payment of money, sold or issued to one (1) or more persons, whether or not the instrument is negotiable. “Payment instrument” does not include any credit card voucher, any letter of credit or any instrument that is redeemable by the issuer in goods or services;
  13. “Permissible investments” means:
    1. Cash;
    2. Certificates of deposit or other debt obligations of a financial institution, either domestic or foreign;
    3. Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers' acceptances, that are eligible for purchase by member banks of the federal reserve system;
    4. Any investment bearing a rating of one (1) of the three (3) highest grades as defined by a nationally recognized organization that rates the securities;
    5. Investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest by the United States, or any obligations of any state, municipality or any political subdivision thereof;
    6. Receivables that are due any licensee from its authorized agents that are not past due or doubtful of collection;
    7. Shares in any mutual fund in which the assets of the mutual fund would constitute permissible investments, interest-bearing bills, notes or bonds, debentures or stock traded on any national over-the-counter market;
    8. Any demand borrowing agreement or agreements made to a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange; or
    9. Any other investments approved by the commissioner;
  14. “Person” means any individual, partnership, association, joint-stock association, trust or corporation; and
  15. “Remit” means either to make direct payment of the funds to the licensee or its representatives authorized to receive those funds, or to deposit the funds in a bank, credit union or savings and loan association or other similar financial institution in an account in the name of the licensee.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-203; Acts 2020, ch. 730, § 1.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

Amendments. The 2020 amendment substituted “ten percent (10%)” for “twenty-five percent (25%)” in the definition of “key shareholder”.

Effective Dates. Acts 2020, ch. 730, § 6. June 22, 2020.

45-7-104. Exemptions.

This chapter does not apply to:

  1. The United States or any department or agency of the United States;
  2. The state of Tennessee or any political subdivision of the state;
  3. Banks, trust companies, credit unions, building and loan associations, savings and loan associations, savings banks or mutual banks organized under the laws of any state or the United States; and
  4. Transactions governed by title 56, or the rules and regulations promulgated solely under title 56.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-204.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-105. License qualifications.

  1. Each applicant for a license must demonstrate, and each licensee must maintain a net worth of not less than one hundred thousand dollars ($100,000) computed according to generally accepted accounting principles. Persons transmitting or proposing to transmit money shall have an additional net worth of twenty-five thousand dollars ($25,000) per additional location or agent located in Tennessee, as applicable, to a maximum of five hundred thousand dollars ($500,000).
  2. Every corporate applicant, at the time of filing of an application for a license under this chapter and at all times after a license is issued, shall be in good standing in the state of its incorporation. All noncorporate applicants shall, at the time of the filing of an application for a license under this chapter and at all times after a license is issued, be qualified to do business in the state.
  3. Subject to the commissioner's discretion, no person shall be licensed under this chapter to do business in the state if the person has been adjudged guilty of any felony within the last ten (10) years or if an executive officer, key shareholder or director of the person has been so adjudged.
  4. The applicant must demonstrate experience, character, and general fitness to command the confidence of the public and warrant the belief that the business to be operated will be operated lawfully and fairly.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-205.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

Law Reviews.

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

45-7-106. Permissible investments.

Each licensee under this chapter must at all times possess permissible investments having an aggregate market value, calculated in accordance with generally accepted accounting principles, of not less than the aggregate face amount of all outstanding payment instruments issued or sold by the licensee in the United States. This requirement may be waived by the commissioner if the dollar volume of a licensee's outstanding payment instruments does not exceed the bond or other security devices posted by the licensee pursuant to § 45-7-108.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-206.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-107. License application — Criminal history records check and fingerprint sample.

  1. Each application for a license under this chapter shall be made in writing, under oath, and in a form prescribed by the commissioner. Each application shall contain:
    1. For all applicants:
      1. The exact name of the applicant, the applicant's principal address, any fictitious or trade name used by the applicant in the conduct of its business, and the location of the applicant's business records;
      2. The history of the applicant's material litigation and criminal convictions for the ten-year period prior to the date of the application;
      3. A description of the activities conducted by the applicant and a history of operations;
      4. A description of the business activities in which the applicant seeks to be engaged in the state;
      5. A list identifying the applicant's authorized agents in the state, if any, at the time of the filing of the license application;
      6. A sample authorized agent contract, if applicable;
      7. A sample form of payment instrument, if applicable;
      8. The location or locations at which the applicant and its authorized agents, if any, propose to conduct the licensed activities in the state;
      9. The name and address of the clearing bank or banks on which the applicant's payment instruments will be drawn or through which the payment instruments will be payable; and
      10. Other information that the commissioner may deem appropriate;
    2. If the applicant is a corporation, the applicant must also provide:
      1. The date of the applicant's incorporation and state of incorporation;
      2. A certificate of good standing from the state in which the applicant was incorporated;
      3. A description of the corporate structure of the applicant, including the identity of any parent or subsidiary of the applicant, and the disclosure of whether any parent or subsidiary is publicly traded on any stock exchange;
      4. The name, business and residential address and employment history for the past ten (10) years of the applicant's executive officers and the officer or officers or managers who will be in charge of the applicant's activities to be licensed hereunder;
      5. If the applicant is not a publicly traded corporation or a direct or indirect subsidiary of such a corporation, the name, business and residential addresses, and employment history of each of the applicant's directors for the ten-year period preceding the date of the application;
      6. The name, business and residential address, and employment history of any current key shareholder of the applicant for the period ten (10) years prior to the date of the application;
      7. The history of material litigation and criminal convictions of every current director, executive officer, or key shareholder of the applicant for the ten-year period prior to the date of the application;
      8. Copies of the applicant's unconsolidated audited financial statements, including balance sheet, statement of income or loss, statement of changes in shareholder equity and statement of changes in financial position, for the current year and, if available, for the immediately preceding three-year period. However, if the applicant is a wholly owned subsidiary of a corporation publicly traded in the United States, the applicant shall also provide the most recent audited financial statement of the parent of the applicant or the parent's most recent 10K report filed with the United States securities and exchange commission. The requirements of this subsection (a) may be satisfied by the applicant providing a copy of the consolidated audited financial statement of the applicant's parent corporation that includes the balance sheet, statement of income or loss, statement of changes in shareholder equity and statement of changes in financial position of the applicant for the current year and, if available, for the immediately preceding three-year period. If the applicant is a wholly owned subsidiary of a corporation publicly traded outside the United States, similar documentation filed with the parent corporation's non-United States regulator may be submitted to satisfy this provision; and
      9. Copies of all filings, if any, made by the applicant with the United States securities and exchange commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application; and
    3. If the applicant is not a corporation, the applicant must also provide:
      1. The name, business and residential address, personal financial statement and employment history, for the past ten (10) years, of each principal and any other person or persons who will be in charge of the applicant's activities to be licensed hereunder;
      2. The place and date of the applicant's qualification to do business in this state;
      3. The history of material litigation and criminal convictions for the ten-year period prior to the date of the application for each individual having any ownership interest in the applicant and each individual who exercises supervisory responsibility with respect to the applicant's activities; and
      4. A copy of the applicant's audited financial statement, including balance sheet, statement of income or loss, and statement of changes in financial position, for the current year and, if available, for the immediately preceding two-year period.
  2. Every person engaged in activities within this state encompassed by this chapter on May 1, 1995, at the time of the chapter's adoption shall file an application in accordance with this chapter within three (3) months after May 1, 1995. No person shall be deemed to be in violation of this chapter for operating without a license if the person files an application within the three-month period, unless and until the application is denied. Persons licensed to issue money orders on May 1, 1995, who apply for a license under this chapter, are not required to pay the application fee required by § 45-7-109.
  3. If an applicant for licensure under this part was engaged in the business of selling or issuing money orders on April 30, 1995, at not more than four (4) locations, and if the applicant possessed a duly issued license to engage in the business as was required at that time by [former] § 45-7-102, and if the applicant currently engages in the business of money transmission at not more than four (4) locations, then the applicant shall not be required to submit audited financial statements pursuant to this section.(d)  (1)  The commissioner may require an applicant for licensure to consent to a criminal history records check and to provide a fingerprint sample in a form acceptable to the commissioner. The commissioner may require consent to a criminal history records check and a fingerprint sample from any individual who is an executive officer, key shareholder, or director of the applicant, as well as from any other individual associated with the applicant, as is reasonably necessary to meet the purposes of this part. An application for licensure is incomplete until the commissioner receives consent to a criminal history records check and a fingerprint sample required under this subsection (d). The commissioner may deny licensure to an applicant if:

The applicant refuses to consent to a criminal history records check or to provide a fingerprint sample; or

An executive officer, key shareholder, or director of the applicant, or any other individual associated with the applicant, refuses to consent to a criminal history check or to provide a fingerprint sample.

Any criminal history records check conducted pursuant to this subsection (d) must be conducted by the Tennessee bureau of investigation, the federal bureau of investigation, or both, and the results of the criminal history records check must be forwarded to the commissioner. An applicant shall pay all costs incurred in conducting a criminal history records check in addition to any other fees required by this part.

Acts 1994, ch. 715, § 1; 1996, ch. 737, § 1; T.C.A., § 45-7-207; Acts 2020, ch. 730, § 2.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

Amendments. The 2020 amendment added (d).

Effective Dates. Acts 2020, ch. 730, § 6. June 22, 2020.

45-7-108. Bond or other security device.

  1. Each application must be accompanied by a surety bond, irrevocable letter of credit or other similar security device, referred to as “security device” in this section, acceptable to the commissioner in the amount of fifty thousand dollars ($50,000). If the applicant proposes to engage in business under this chapter at more than one (1) location, through authorized agents or otherwise, then the amount of the security device will be increased by ten thousand dollars ($10,000) per additional location, up to a maximum of eight hundred thousand dollars ($800,000). The security device shall be in a form satisfactory to the commissioner and shall run to the state of Tennessee for the benefit of any claimants against the licensee to secure the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission, and payment of money in connection with the sale and issuance of payment instruments and/or transmission of money. In the case of a bond, the aggregate liability of the surety in no event shall exceed the principal sum of the bond. Surety bonds shall be obtained for a term of not less than one (1) year and evidence of the renewal of the surety bond shall be provided to the commissioner not less than thirty (30) days before the bond expiration date. Claimants against the licensee or its authorized agents may themselves bring suit directly on the security device, or the commissioner may bring suit on behalf of the claimants, either in one (1) action or in successive actions. In the case of an irrevocable letter of credit, licensees shall obtain letters of credit for terms of not less than three (3) years and renew the letters of credit annually.
  2. The security device shall remain in effect until cancellation, which may occur only after thirty (30) days' written notice to the commissioner. Cancellation shall not affect any liability incurred or accrued during that period.
  3. The security device shall remain in place for three (3) years after the licensee ceases money transmission operations in the state. However, notwithstanding this provision, the commissioner may permit the security device to be reduced or eliminated prior to that time to the extent that the amount of the licensee's payment instruments outstanding in this state are reduced. The commissioner may also permit a licensee to substitute a letter of credit or other form of security device acceptable to the commissioner for the security device in place at the time the licensee ceases money transmission operations in the state.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-208.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-109. Application fee.

Each application must be accompanied by a nonrefundable application fee in the amount of two hundred fifty dollars ($250) for those applicants proposing four (4) or fewer agents and five hundred dollars ($500) for those applicants proposing five (5) or more agents.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-209.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-110. Issuance of license.

  1. Upon the filing of a complete application, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character and general fitness of the applicant. The commissioner may conduct an on-site investigation of the applicant, the reasonable cost of which shall be borne by the applicant. If the commissioner finds that the applicant's business will be conducted honestly, fairly and in a manner commanding the confidence and trust of the community, and that the applicant has fulfilled the requirements imposed by this chapter and has paid the required license fee, the commissioner shall issue a license to the applicant authorizing the applicant to engage in the licensed activities in this state until the next license renewal period established by § 45-7-111. If these requirements have not been met, the commissioner shall deny the application in a writing setting forth the reasons for the denial.
  2. The commissioner shall approve or deny every application for an original license within one hundred eighty (180) days from the date a complete application is submitted, which period may be extended by the written consent of the applicant. The commissioner shall notify the applicant of the date when the application is deemed complete. In the absence of approval or denial of the application, or consent to the extension of the one hundred eighty-day period, the application is deemed approved and the commissioner shall issue the license effective as of the first day after the one hundred eighty-day or extended period has elapsed.
  3. Any applicant aggrieved by a denial issued by the commissioner under this section may, at any time within thirty (30) days from the date of receipt of written notice of the denial, contest the denial by requesting a public hearing.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-210.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-111. Renewal of license and annual report — Exemptions. [Effective until January 1, 2021. See version effective on January 1, 2021.]

  1. The commissioner shall, by rule, establish an annual fee for renewal of a license under this chapter.
  2. Licenses issued or renewed pursuant to this chapter shall expire on December 31. Each license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the requirements of § 45-7-105, including the security device adjusted in accordance with § 45-7-108, and the payment of the license renewal fee to the commissioner.
  3. Licenses issued or renewed under the former provisions of this chapter shall instead expire on December 31, 2013.
  4. The licensee must include in its renewal application:
    1. A copy of its most recent audited unconsolidated annual financial statement (including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position), except that a licensee may provide the most recent audited consolidated annual financial statement of the parent corporation if the statement separately includes the balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes of financial position of the licensee. A licensee who does not transmit money in this state through more than an aggregate of four (4) locations may provide a financial statement certified by the owner or manager of the licensee;
    2. For the most recent quarter for which data is available prior to the date of the filing of the renewal application, but in no event more than one hundred twenty (120) days prior to the renewal date, the licensee must provide the number of payment instruments sold by the licensee in the state, the dollar amount of those instruments and the dollar amount of those instruments currently outstanding;
    3. Any material changes to any of the information submitted by the licensee on its original application that have not previously been reported to the commissioner on any other report required to be filed under this chapter;
    4. A list of the licensee's permissible investments;
    5. A list of the locations within this state at which business regulated by this part is conducted by either the licensee or its authorized agent;
    6. Notification of material litigation or litigation relating to money transmission; and
    7. Other information the commissioner may deem appropriate for the proper enforcement of this chapter.
  5. Failure to pay the renewal fee or to submit a completed renewal application between November 1 and December 31 shall cause the license to expire at the close of business on December 31.
  6. If an applicant for license renewal under this chapter was engaged in the business of selling or issuing money orders on April 30, 1995, at not more than four (4) locations, and if the applicant possessed a duly issued license to engage in the business as was required at the time by [former] § 45-7-102, and if the applicant currently engages in the business of money transmission at not more than four (4) locations, then the applicant shall not be required to submit an audited financial statement pursuant to this section.

Acts 1994, ch. 715, § 1; 1996, ch. 737, § 2; 2013, ch. 103, § 1; T.C.A., § 45-7-211.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-111. Renewal of license and annual report — Exemptions. [Effective on January 1, 2021. See version effective until January 1, 2021.]

  1. The commissioner shall, by rule, establish an annual fee for renewal of a license under this chapter.
  2. Licenses issued or renewed pursuant to this chapter shall expire on December 31. Each license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the requirements of § 45-7-105, including the security device adjusted in accordance with § 45-7-108, and the payment of the license renewal fee to the commissioner.
  3. Licenses issued or renewed under the former provisions of this chapter shall instead expire on December 31, 2013.
  4. The licensee must include in its renewal application:
    1. A copy of its most recent audited unconsolidated annual financial statement (including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position), except that a licensee may provide the most recent audited consolidated annual financial statement of the parent corporation if the statement separately includes the balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes of financial position of the licensee. A licensee who does not transmit money in this state through more than an aggregate of four (4) locations may provide a financial statement certified by the owner or manager of the licensee;
    2. [Deleted by 2020 amendment.]
    3. Any material changes to any of the information submitted by the licensee on its original application that have not previously been reported to the commissioner on any other report required to be filed under this chapter;
    4. [Deleted by 2020 amendment.]
    5. [Deleted by 2020 amendment.]
    6. Notification of material litigation or litigation relating to money transmission; and
    7. Other information the commissioner may deem appropriate for the proper enforcement of this chapter.
  5. Failure to pay the renewal fee or to submit a completed renewal application between November 1 and December 31 shall cause the license to expire at the close of business on December 31.
  6. If an applicant for license renewal under this chapter was engaged in the business of selling or issuing money orders on April 30, 1995, at not more than four (4) locations, and if the applicant possessed a duly issued license to engage in the business as was required at the time by [former] § 45-7-102, and if the applicant currently engages in the business of money transmission at not more than four (4) locations, then the applicant shall not be required to submit an audited financial statement pursuant to this section.

Acts 1994, ch. 715, § 1; 1996, ch. 737, § 2; 2013, ch. 103, § 1; T.C.A., § 45-7-211; Acts 2020, ch. 730, § 3.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

Amendments. The 2020 amendment deleted (d)(2), (d)(4) and (d)(5) which read: “(2) For the most recent quarter for which data is available prior to the date of the filing of the renewal application, but in no event more than one hundred twenty (120) days prior to the renewal date, the licensee must provide the number of payment instruments sold by the licensee in the state, the dollar amount of those instruments and the dollar amount of those instruments currently outstanding; (4) A list of the licensee's permissible investments; (5) A list of the locations within this state at which business regulated by this part is conducted by either the licensee or its authorized agent;”.

Effective Dates. Acts 2020, ch. 730, § 6, January 1, 2021.

45-7-112. Extraordinary reporting requirements.

  1. Within fifteen (15) days of the occurrence of any one (1) of the events listed in subdivisions (a)(1)–(5), a licensee shall file a written report with the commissioner describing the event and its expected impact on the licensee's activities in the state:
    1. The filing for bankruptcy or reorganization by the licensee;
    2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority with regard to the licensee's money transmission activities;
    3. Any felony indictment of the licensee or any of its officers, directors or principals related to money transmission activities;
    4. Any felony conviction of the licensee or any of its officers, directors or principals related to money transmission activities; and
    5. Other events that the commissioner may determine.
  2. An authorized agent shall report to the licensee the theft or loss of payment instruments valued at five thousand dollars ($5,000) or more within twenty-four (24) hours from the time the agent knew or should have known of the theft or loss. Upon the receipt of the report, the licensee shall immediately provide the information to the commissioner.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-212.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-113. Changes in control of a licensee.

  1. A change in control of a licensee shall require prior notice to the commissioner. In the case of a publicly traded corporation, notification shall be made in writing within fifteen (15) days of a change or acquisition of control of a licensee. Upon notification, the commissioner may require information deemed necessary to determine whether an application for a license is required. The commissioner may waive the filing of an application if, in the commissioner's discretion, the change in control does not pose any risk to the interests of the public.
  2. Whenever control of a licensee is acquired or exercised in violation of this section, the license of the licensee shall be deemed revoked as of the date of the unlawful acquisition of control. The licensee, or its controlling person, shall surrender the license to the commissioner on demand.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-213.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-114. Examinations.

  1. The commissioner may conduct periodic on-site examinations of a licensee. The commissioner may also examine a licensee's authorized or apparent agents. At the commissioner's discretion, written notice of the examination may be provided to the licensee or agents. In conducting the examination, the commissioner or the commissioner's staff has full and free access to all the books, papers and records of the licensee and its agents and may summon and qualify as witnesses, under oath, and examine the directors, officers, members, agents and employees of any licensee or agent, and any other person concerning the condition and affairs of the licensee. The licensee shall pay all reasonably incurred costs of the examination. The on-site examination may be conducted in conjunction with examinations to be performed by representatives of agencies of another state or states. The commissioner, in lieu of an on-site examination, may accept the examination report of an agency of another state, or a report prepared by an independent accounting firm, and reports so accepted are considered for all purposes as an official report of the commissioner.
  2. Upon reasonable cause, the commissioner may conduct an on-site examination of any unlicensed person to determine whether violations of this chapter have occurred or are occurring. In conducting the examination, the commissioner has the applicable powers provided pursuant to [former] § 45-1-207.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-214.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-115. Maintenance of records.

  1. Each licensee shall make, keep and preserve the following books, accounts and other records for a period of three (3) years:
    1. A daily record or records of payment instruments sold;
    2. A general ledger containing all assets, liabilities, capital, income and expense accounts, which general ledger shall be posted at least monthly;
    3. Settlement sheets received from authorized agents;
    4. Bank statements and bank reconciliation records;
    5. Records of outstanding payment instruments;
    6. Records of each payment instrument paid within the three-year period; and
    7. A list of the names and addresses of all of the licensee's authorized agents, as well as copies of each authorized agent contract.
  2. Maintenance of the documents as is required by this section in a photographic or other similar form shall constitute compliance with this section.
  3. Records may be maintained at a location other than within this state as long as they are made accessible to the commissioner.
  4. Nothing in this section shall prohibit a licensee from adhering to state or federal record retention requirements for a period greater than three (3) years.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-215.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-116. Confidentiality of data submitted to the commissioner.

  1. Notwithstanding any other provision of law, all information or reports obtained by the department of financial institutions from an applicant, licensee or authorized agent, whether obtained through reports, applications, examination, audits, investigation, or otherwise, including, but not limited to:
    1. All information contained in or related to examination, investigation, operating, or condition reports prepared by, on behalf of, or for the use of the department; or
    2. Financial statements, balance sheets, or authorized agent information;

      are confidential and may not be disclosed or distributed outside the department by the commissioner or any officer or employee of the department, except that the commissioner is authorized to disclose confidential information to any local, state or federal agency in a manner the commissioner deems proper and to the Conference of State Bank Supervisors and the Money Transmitter Regulators Association; provided, that these associations have entered into confidentiality agreements with the commissioner. A licensed money transmitter is entitled to access to a copy of the report of examination on the money transmitter prepared by the commissioner or the commissioner's designee. The report of examination in the possession of a licensee shall remain confidential and shall not be subject to subpoena.

  2. Nothing in this section shall prohibit the commissioner from releasing to the public a list of persons licensed under this chapter or from releasing aggregated financial data on the licensees.

Acts 1994, ch. 715, § 1; 2011, ch. 100, § 1; T.C.A., § 45-7-216.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

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

45-7-117. Suspension or revocation of licenses.

After notice and an opportunity for a hearing, the commissioner may suspend or revoke a licensee's license if the commissioner finds that:

  1. Any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying the application;
  2. The licensee's net worth becomes inadequate and the licensee, after ten (10) days' written notice from the commissioner, fails to take steps the commissioner deems necessary to remedy the deficiency;
  3. The licensee knowingly violates any provision of this chapter or any rule or order validly promulgated or issued by the commissioner under authority of this title;
  4. An agent or agents of a licensee knowingly violates any provision of this chapter or any rule or order validly promulgated or issued by the commissioner under authority of this title, without the licensee making reasonable efforts to correct the violations known to the licensee to exist;
  5. The licensee is conducting business in an unsafe or unsound manner;
  6. The licensee is insolvent;
  7. The licensee has demonstrated a pattern of failure or refusal to promptly pay obligations on payment instruments or transmissions of money or has made an assignment for the benefit of its creditors;
  8. The licensee has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any bankruptcy;
  9. The licensee refuses to permit the commissioner to make any examination authorized by this chapter;
  10. The licensee willfully fails to make any report or pay any fee required by this chapter;
  11. The licensee has been found guilty of any fraudulent act or practice; or
  12. The licensee has made any material false representation to the commissioner in any application or report filed with the commissioner.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-217.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-118. Authorized agent contracts.

Licensees desiring to conduct licensed activities through authorized agents shall authorize each agent to operate pursuant to an express written contract, which shall, at a minimum, provide the following:

  1. That the licensee appoints the person as its agent with authority to sell payment instruments or transmit money on behalf of the licensee in compliance with state and federal law;
  2. That neither a licensee nor an authorized agent may authorize sub-agents without the written consent of the commissioner;
  3. That licensees are subject to supervision and regulation by the commissioner;
  4. An acknowledgment that the authorized agent consents to the commissioner's inspection, with or without prior notice to the licensee or authorized agent or agents, of the books and records of authorized agent or agents of the licensee; and
  5. That an authorized agent is under a duty to act only as authorized under the contract with the licensee and that an authorized agent who exceeds its authority is subject to cancellation of its contract by the licensee and disciplinary action by the commissioner.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-218.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-119. Authorized agent conduct.

  1. An authorized agent shall not make any fraudulent or false statement or misrepresentation to a licensee or to the commissioner.
  2. All money transmission or sale or issuance of payment instrument activities conducted by authorized agents shall be strictly in accordance with the licensee's written procedures provided to the authorized agent.
  3. An authorized agent shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized agent. The failure of an authorized agent to remit all money owing to a licensee within the contractual time period shall result in liability of the authorized agent to the licensee for three (3) times the licensee's actual damages. The commissioner shall have the discretion to set, by regulation, the maximum remittance time.
  4. All funds, less fees, received by an authorized agent of a licensee from the sale or delivery of a payment instrument issued by a licensee or received by an authorized agent for transmission shall, from the time the funds are received by the authorized agent until the time when the funds or an equivalent amount are remitted by the authorized agent to the licensee, constitute trust funds owned by and belonging to the licensee. If an authorized agent commingles the funds with any other funds or property owned or controlled by the authorized agent, all commingled proceeds and other property shall be impressed with a trust in favor of the licensee in an amount equal to the amount of the proceeds due the licensee.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-219.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-120. Termination or suspension of authorized agent activity.

    1. The commissioner may issue an order suspending or barring the authorized agent from continuing to be or becoming an authorized agent of any licensee during the period for which the order is in effect, if, after notice and an opportunity for a hearing, the commissioner finds that any authorized agent of a licensee or any director, officer, employee, or controlling person of the authorized agent has:
      1. Violated any provision of this chapter or any rule or regulation or order issued under this chapter;
      2. Engaged or participated in any unsafe or unsound act with respect to the business of selling or issuing payment instruments of the licensee or the business of money transmission; or
      3. Made or caused to be made in any application or report filed with the commissioner or any proceeding before the commissioner, any statement that was at the time and in the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in the application or report any material fact that is required to be stated in the application or report.
    2. Upon issuance of the order, the licensee shall terminate its relationship with the authorized agent according to the terms of the order.
  1. Any authorized agent to whom an order is issued under this section may apply to the commissioner to modify or rescind the order. The commissioner shall not grant the application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when the person is permitted to resume being an authorized agent of a licensee, comply with all applicable provisions of this chapter and any regulation or order issued under this title.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-220.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-121. Licensee liability.

A licensee's responsibility to any person who purchases a payment instrument or money transmission transaction from a licensee or a licensee's authorized agent shall be limited to the face amount of the payment instrument or money transmission transaction purchased.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-221.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-122. Hearings — Procedures.

The Uniform Administrative Procedures Act, compiled in title 4, chapter 5, applies to any hearing afforded pursuant to this chapter.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-222.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-123. Civil penalties.

If, after notice and an opportunity for a hearing, the commissioner finds that a person has violated this chapter or a rule adopted under this chapter, the commissioner may order the person to pay to the commissioner a civil penalty in an amount specified by the commissioner, not to exceed one thousand dollars ($1,000) for each violation or, in the case of a continuing violation, one thousand dollars ($1,000) for each day that the violation continues.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-223.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-124. Consent orders — Emergency orders.

  1. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order must be signed by the person to whom it is issued or a duly authorized representative, and must indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation or order promulgated or issued thereunder has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this chapter or any rule, regulation or order promulgated or issued thereunder.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken, which is filed with the commissioner within twenty (20) days of the receipt of the notice of the commissioner's emergency action.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-224

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-125. Criminal penalties — Reports.

  1. Any person who knowingly and willfully violates any provision of this chapter or any order or rule pursuant thereto for which a penalty is not specifically provided commits a Class C misdemeanor; provided, that each day the violation occurs constitutes a separate offense.
  2. Any person who knowingly and willfully makes a material, false statement in any document filed or required to be filed under this chapter with the intent to deceive the recipient of the document commits a Class E felony.
  3. Any person who knowingly and willfully fails to file a document required to be filed under this chapter commits a Class E felony.
  4. Any person who carries on an unauthorized money transmitter business commits a Class E felony.
  5. Any person who obstructs or endeavors to obstruct a lawful examination of a licensee or agent commits a Class E felony.
  6. It is the duty of the commissioner to submit to the district attorneys general for the respective counties of the state any criminal violation of this chapter known by the commissioner to have occurred in the county. The commissioner shall also report the violation to the appropriate division of the Tennessee bureau of investigation. The commissioner may provide the information to the attorney general and reporter or the appropriate federal authorities, or both, as the commissioner deems proper. Confidential information that is communicated by the commissioner pursuant to this section remains confidential in the hands of the agency to which the information is reported, and does not become a matter of public record by virtue of this communication.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-225.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

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

Penalties for Class E felony and Class C misdemeanor, § 40-35-111.

45-7-126. Promulgation of rules.

All rules and regulations promulgated by the commissioner pursuant to authority conferred by this chapter or this title will be in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In addition, at the time the commissioner files a notice of proposed adoption, amendment or repeal of a rule for public comment, a copy of the notice shall be sent by regular United States mail, postage prepaid, to all then current licensees under this chapter.

Acts 1994, ch. 715, § 1; T.C.A., § 45-7-226.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-127. Requirement of licensing through a multi-state automated licensing system.

  1. In addition to any other powers imposed upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be licensed through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate whatever rules and regulations are reasonably necessary for participation in, transition to or operation of a multi-state automated licensing system;
    2. Establish relationships or enter into agreements that are reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements, and technology licensing agreements;
    3. Require that applications for licensing under this chapter and renewals of such licenses be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning licensees to a multi-state automated licensing system. The commissioner has the authority to deny any applications or renewal applications not filed with a multi-state automated licensing system after such deadlines have passed, notwithstanding any dates established elsewhere in this chapter. The commissioner shall, however, provide reasonable notice of any transition deadlines to licensees; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section shall authorize the commissioner to require a person who is not subject to this chapter to submit information to, or to participate in, a multi-state automated licensing system that is operated or participated in pursuant to this chapter.
  3. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter to its fullest extent. Nothing in this section shall be deemed to be a reduction or derogation of that authority and discretion.
  4. Applicants for, and holders of, licenses issued under this chapter shall pay all costs associated with submitting an application to or transitioning a license to a multi-state automated licensing system, as well as all costs required by a multi-state automated licensing system for maintaining and renewing any license issued by the commissioner on a multi-state automated licensing system.

Acts 2013, ch. 103, § 2; T.C.A., § 45-7-227.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-128. Use of multi-state automated licensing system as agent for channeling information.

The commissioner is authorized to use a multi-state automated licensing system as an agent for channeling information, whether criminal or noncriminal in nature, whether derived from or distributed to the United States department of justice or any other state or federal governmental agency, or any other source, that the commissioner is authorized to request or distribute under this chapter.

Acts 2013, ch. 103, § 3; T.C.A., § 45-7-228.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

45-7-129. More effective regulation and reduction of regulatory burden through supervisory information sharing.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to the information or material after the information or material has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with money transmission oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law, including the protection available under §§ 45-1-120 and 45-7-116;
  2. For purposes of subdivision (1), the commissioner is authorized to enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors or other associations representing governmental agencies as established by rule, regulation or order of the commissioner;
  3. Information or material that is subject to a privilege or confidential under subdivision (1) shall not be subject to:
    1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or any agency of the federal government or the respective state; or
    2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless with respect to any privilege held by a multi-state automated licensing system applicable to such information or material, the person to whom such information or material pertains waives that privilege, in whole or in part, in the discretion of such person;
  4. This section shall supersede any inconsistent provisions of title 10, chapter 7, part 5, pertaining to the records open to public inspection;
  5. This section shall not apply with respect to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.

Acts 2013, ch. 103, § 4; T.C.A., § 45-7-229.

Code Commission Notes.

Former part 2 of chapter 7, §§ 45-7-201 to 45-7-229, was renumbered as chapter 7, §§ 45-7-101 to 45-7-129, by the authority of the Code Commission in 2020.

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

45-7-130. Submission of multi-state automated licensing system reports of condition.

Each licensee shall, pursuant to an order or direction of the commissioner, submit to a multi-state automated licensing system reports of condition in the form and containing the information the commissioner requires.

Acts 2020, ch. 730, § 4.

Effective Dates. Acts 2020, ch. 730, § 6. June 22, 2020.

Chapter 8
Small Business Investment Development

Part 1
Small Business Investment Companies

45-8-101. Functions and powers — Supervision.

Small business investment companies chartered by the secretary of state and licensed by the small business administration shall be authorized to perform all the functions and exercise all the powers in this state and be subject to all the limitations as prescribed by the Small Business Investment Act of 1958, Public Law 85-699, 85th Congress, second session, 72 Stat. 689 (15 U.S.C. § 661 et seq.),  and all rules and regulations promulgated under that act. So long as the company is licensed, regulated, supervised and inspected by the small business administration, it shall not be subject to supervision by agencies of the state, except by the department of commerce and insurance under title 48, chapter 1, part 1.

Acts 1959, ch. 22, § 1 (T.C.A. (Supp.), § 48-827); impl. am. Acts 1971, ch. 137, § 1; T.C.A., § 45-2501.

Compiler's Notes. Acts 1959, ch. 22 contained a preamble which read:

“Whereas, the 85th Congress enacted Public Law 85-699, known as the ‘Small Business Investment Act of 1958’ effective August 21, 1958, entitled, ‘An Act to make long-term credit more readily available for small business concerns and for other purposes,’ providing for the chartering, licensing and regulation of small business investment companies under the supervision of the small business administration; and

“Whereas, small business investment companies licensed under the act are authorized to provide equity capital and long-term loan funds that small business concerns need for the sound financing of their business operations and for their growth, expansion and modernization; and

“Whereas, it is important to the economic development and growth of communities, towns, cities and counties throughout Tennessee that the purposes of the act of Congress be fully implemented in this state.

“Now, therefore,”

Former chapter 8 has been designated as part 1 of this chapter in view of the addition of part 2 of this chapter in 1989.

Cross-References. Business enterprise office, title 4, ch. 26.

Capital preplanning accounts, § 12-4-109.

Community-based development organizations, title 13, ch. 14, part 2.

Development credit corporations, title 48, ch. 101, part 1.

Economic and community development, title 4, ch. 3, part 7.

Local development authority, title 4, ch. 31.

Minority owned, women owned and small business procurement and contracting, title 12, ch. 3, part 8.

Small business development center, § 49-8-603.

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).

45-8-102. Purchase of stock by state banks authorized.

State banks under the supervision of the department of financial institutions shall be authorized to purchase stock in a small business investment company in the same manner and subject to the same restrictions and limitations as national banks under the Small Business Investment Act of 1958, Public Law 85-699, 85th Congress, second session, 72 Stat. 689 (15 U.S.C. § 661 et seq.), including any amendments thereto hereafter adopted.

Acts 1959, ch. 22, § 2 (T.C.A. (Supp.), § 48-828); T.C.A., § 45-2502.

45-8-103. Purchase of companies' negotiable obligations by authorized companies.

Secured negotiable obligations of the small business investment companies and negotiable obligations endorsed with recourse by the companies when adequately secured shall be eligible for purchase by insurance companies, investment companies and industrial development corporations, by the board of trustees administering any employee or profit-sharing trust, by the board of trustees of eleemosynary institutions and corporations, and by trustees and other fiduciaries. The same degree of care shall be exercised in making purchases of the obligations by fiduciaries as is required in making investments under § 35-3-117.

Acts 1959, ch. 22, § 3 (T.C.A. (Supp.), § 48-829); T.C.A., § 45-2503.

Part 2
Business and Industrial Development Corporations

45-8-201. Short title.

This part shall be known and may be cited as the “Tennessee BIDCO Act.”

Acts 1989, ch. 124, § 1.

Cross-References. Business enterprise office, title 4, ch. 26.

Community-based development organizations, title 13, ch. 14, part 2.

Contracts for state services, § 12-4-109.

Development credit corporations, title 48, ch. 101, part 1.

Economic and community development, title 4, ch. 3, part 7.

Local development authority, title 4, ch. 31.

Minority owned, women owned and small business procurement and contracting, title 12, ch. 3, part 8.

Small business development center, § 49-8-603.

45-8-202. Purpose — Construction.

  1. It is determined and declared as a matter of legislative finding by the general assembly that:
    1. The availability of financial and management assistance is an important resource to small and medium size businesses to locate, remain and expand in the state, which, in time, will result in increased employment opportunities in the state;
    2. There is a need for financial and management resource alternatives to small and medium size businesses in the state due to a lack of bank financing in situations, including, but not limited to, start-ups, under-collateralization, management problems, and above-average risk projects;
    3. Many small and medium size businesses, although in a growth mode, do not meet the investment criteria of venture capital firms; and
    4. In order to increase employment opportunities and commercial transactions in the state, there is a need to encourage the development of resources directed at small and medium size businesses, which will help the businesses locate, remain and expand in the state.
  2. It is further determined and declared that the purposes of this part shall be to:
    1. Promote economic development by encouraging the formation of private financial institutions known as BIDCOs to help meet the financing assistance and management assistance needs of growth-oriented small and medium size businesses in the state; and
    2. Provide for the licensing and regulation of BIDCOs to prevent fraud, conflict of interest, and mismanagement, in order to encourage:
      1. Private equity investments in BIDCOs; and
      2. Pension funds, insurance companies, foundations, utilities and other institutions to lend funds to BIDCOs.
  3. This part shall be liberally construed to accomplish its purpose.

Acts 1989, ch. 124, § 2.

45-8-203. Part definitions.

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

  1. “Affiliate” means, if used with respect to a specified person other than a natural person, a person controlling or controlled by the specified person, or a person controlled by a person who also controls the specified person;
  2. “Applicant” means a Tennessee corporation that has submitted an application for a license under this part;
  3. “Associate” means, if used with respect to a licensee:
    1. A controlling person, director, officer, agent, or advisor of that licensee. As used in this subdivision (3)(A), “controlling person” means a person or any combination of persons acting in concert, owning or controlling, directly or indirectly, a twenty percent (20%) or greater equity interest; or
    2. A relative of any person referred to in subdivision (3)(A);
  4. “BIDCO” means a business and industrial development corporation licensed under this part;
  5. “Business firm” means a person that transacts business on a regular basis, or that proposes to transact business on a regular and continual basis;
  6. “Capital” means equity investments evidenced by stock, paid-in capital (amounting to, but not less than, fifty percent (50%) of its stock) and undivided profits;
  7. “Commissioner” means the commissioner of financial institutions;
  8. “Control” means, if used with respect to a specified person, the power to direct or cause the direction of, directly or indirectly through one (1) or more intermediaries, the management and policies of the specified person, whether through the ownership of voting securities, by contract, other than a commercial contract for goods or nonmanagement services. A natural person shall not be considered to control another person solely on account of being a director, officer, or employee of the other person;
  9. “Controlling person” means, if used with respect to a specified person, a person who controls the specified person, directly or indirectly through one (1) or more intermediaries;
  10. “Corporate name” means the name of a corporation as set forth in the charter of the corporation;
  11. “Insolvent” means a licensee that ceases to pay its debts in the ordinary course of business, that cannot pay its debts as they become due, or whose liabilities exceed its assets;
  12. “Interest” is compensation for the use or detention of or forbearance to collect money over a period of time, and does not include compensation for other purposes including, but not limited to, time price differentials, loan charges, brokerage commissions, management fees or commitment fees;
  13. “Interests of a licensee” includes the interests of shareholders of the licensee;
  14. “License” means a license issued under this part authorizing a Tennessee corporation to transact business as a BIDCO;
  15. “Licensee” means a Tennessee corporation that is licensed under this part;
  16. “Officer” means:
    1. If used with respect to a corporation, a person appointed or designated as an officer of the corporation by or pursuant to applicable law or the charter or bylaws of the corporation, or a person who performs, with respect to the corporation, functions usually performed by an officer of a corporation; and
    2. If used with respect to a specified person other than a natural person or a corporation, a person who performs, with respect to the specified person, functions usually performed by an officer of a corporation with respect to the corporation;
  17. “Order” includes an approval, authorization, consent, exemption, denial, prohibition, or other official act taken by the commissioner;
  18. “Person” includes an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, cooperative, government, agency of a government, or any other entity or organization. If used with respect to acquiring control of or controlling a specified person, “person” includes a combination of two (2) or more persons acting in concert;
  19. “Principal shareholder” means a person that owns, directly or indirectly, of record or beneficially, securities representing ten percent (10%) or more of the outstanding voting securities of a corporation;
  20. “Relative” means parent, legal guardian, child, sibling, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, sister-in-law, grandparent, grandchild, nephew, niece, uncle or aunt;
  21. “State” means the state of Tennessee;
  22. “Subject person” means a controlling person, subsidiary, or affiliate of a licensee, a director, officer, or employee of a licensee or of a controlling person, subsidiary, or affiliate of a licensee, or any other person who participates in the conduct of the business of a licensee;
  23. “Subsidiary” means, if used with respect to a licensee, a company or business firm that the licensee holds control of as permitted by § 45-8-212(a)(2), (3), (4) or (5);
  24. “Tennessee corporation” means a corporation, whether for profit or nonprofit, incorporated under Tennessee law;
  25. “Uniform Administrative Procedures Act” refers to title 4, chapter 5; and
  26. “Well capitalized” means, in the case of a licensee under this part, a licensee that has stockholders' equity at least equal to the greater of ten million dollars ($10,000,000) or fifteen percent (15%) of total assets, that is not subject to any administrative enforcement action or order and the condition of which was considered as satisfactory in its last examination in the opinion of the commissioner.

Acts 1989, ch. 124, § 3; 1997, ch. 131, § 1.

45-8-204. Relation to other acts.

A corporation licensed under and pursuant to this part shall be known as a BIDCO, shall be subject to regulation by the commissioner, and shall be deemed subject to the Tennessee Business Corporation Act, compiled in title 48, chapters 11-27, or the Tennessee Nonprofit Corporation Act, compiled in title 48, chapters 51-68, to the extent that the law is not inconsistent with the express provisions of this part.

Acts 1989, ch. 124, § 4.

45-8-205. Corporate names.

  1. Except as otherwise provided in subsection (b), a person transacting business in this state, other than a licensee, shall not use a name or title that indicates that the person is a business and industrial development corporation, including, but not limited to, use of the term “BIDCO,” and shall not otherwise represent that the person is a business and industrial development corporation or a licensee.
  2. Before being issued a license under this part, a Tennessee corporation that proposes to apply for a license or that applies for a license may perform, under a name that indicates that the corporation is a business and industrial development corporation, the acts necessary to apply for and obtain a license and to otherwise prepare to commence transacting business as a licensee. The corporation shall not represent that it is a licensee until after the license has been obtained.
  3. A BIDCO licensed under this part shall not use a name or title that would indicate that it is a bank or trust company.

Acts 1989, ch. 124, § 5; 1997, ch. 131, § 2.

45-8-206. Authority and powers of commissioner.

  1. The commissioner shall administer this part and shall have supervision responsibility for all BIDCOs incorporated under the laws of this state.
  2. The commissioner may issue orders and promulgate rules and regulations pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.
  3. Whenever the commissioner issues an order or license under this part, the commissioner may impose conditions that are deemed necessary or appropriate to effectuate the purposes of this part.
  4. Every final order, decision or license action of the commissioner under subsections (b) and (c) is subject to administrative review under the Uniform Administrative Procedures Act.
  5. In the event a person does not comply with an order issued pursuant to subsections (b) and (c), 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 (e).

Acts 1989, ch. 124, § 6.

45-8-207. Schedule of fees.

The commissioner shall establish by regulation a schedule of fees that the commissioner determines to be reasonable and necessary to effectuate the purposes of this chapter, in connection with the licensing, administration, examination and supervision of BIDCOs. The schedule shall be subject to amendment by the commissioner by regulation from time to time.

Acts 1989, ch. 124, § 7.

45-8-208. Licenses — Application — Approval — Issuance — Expiration.

  1. A Tennessee corporation may apply to the commissioner for a license to form and conduct business as a BIDCO. A person other than a Tennessee corporation may not apply for the license.
  2. An application filed with the commissioner under this part shall be in the form and contain the information that the commissioner may require, but shall contain, at a minimum, the following:
    1. A detailed business plan setting forth the services to be provided by the proposed BIDCO to business firms located within or outside of the state;
    2. A summary of the geographical business markets of the proposed BIDCO;
    3. Information concerning the experience of the management of the proposed BIDCO and how the experience relates to the execution of the business plan referred to in subdivision (b)(1);
    4. Location of the proposed main office of the BIDCO and any branch offices, or the vicinity thereof;
    5. A detailed summary of how the management of the proposed BIDCO intends to implement a reasonable and prudent policy for conserving and investing the capital of the BIDCO;
    6. A summary of the types of business firms to be assisted by the proposed BIDCO; and
    7. Three (3) years of detailed financial projections.
  3. After a review of an application and receipt and review of any additional or supplemental information requested by the commissioner, the commissioner shall approve the application for a license under this part if the commissioner determines that:
    1. The applicant has, or has firm financing commitments from equity investors or debt sources for, cash or similar liquid assets sufficient to demonstrate that prior to the time the applicant is authorized to transact business as a BIDCO, the applicant will have liquid assets available to provide financing assistance to business firms in an amount adequate for the applicant to transact business as a BIDCO;
      1. Each director, officer, and controlling person of the applicant is of good character and sound financial standing;
      2. Each director and officer of the applicant is competent to perform the director's functions with respect to the applicant; and
      3. The directors and officers of the applicant are collectively able to manage the business of the applicant as a BIDCO;
    2. It is reasonable to believe that the applicant, if licensed, will comply with this part; and
    3. The applicant has reasonable prospects of being a viable, ongoing BIDCO and of satisfying the basic objectives of its business plan.
  4. The commissioner shall require a BIDCO to have a capital structure that the commissioner deems necessary for the transaction of business, but not less than one million dollars ($1,000,000).
    1. If an application for a license under this part is approved and all conditions precedent to the issuance of the license are fulfilled, the commissioner shall issue a license to the applicant.
    2. A licensee shall post the license, or a copy thereof, in a conspicuous place in each of the main and branch offices of the licensee.
    3. A license shall not be transferable or assignable.
    4. Each license shall expire on December 31 of each year, and be subject to an annual renewal.
  5. If the commissioner denies an application, the commissioner shall provide the applicant with a written statement explaining the basis for the denial.

Acts 1989, ch. 124, § 8.

45-8-209. Surrender of license.

  1. Upon approval of a two-thirds (2/3) vote of its board of directors and after complying with subsection (b), a licensee may apply to the commissioner to have the commissioner accept the surrender of the license of the licensee. If the commissioner determines that the requirements of this section have been satisfied, the commissioner shall approve the application, unless in the opinion of the commissioner the purpose of the application is to evade a current or prospective action by the commissioner under this part.
  2. Not less than sixty (60) days before filing an application with the commissioner under subsection (a), a licensee shall notify each of its shareholders of its intention to file an application. Each shareholder shall be notified of the right to file with the licensee an objection to the proposed surrender of the license within the sixty-day period and shall be advised that, if the shareholder files an objection, the shareholder should send a copy of the objection to the commissioner. If shareholders holding twenty percent (20%) or more of the outstanding voting securities of the licensee file  objections, the licensee shall not proceed with the application under subsection (a) unless the application is approved by a vote of shareholders holding two-thirds (2/3) of the outstanding voting securities of the licensee.

Acts 1989, ch. 124, § 9.

45-8-210. Licensee — Business and powers.

  1. The business of a licensee shall be the business of providing financing assistance and management assistance to business firms. A licensee shall not engage in a business other than the business of providing financing assistance and management assistance to business firms.
  2. The powers of a licensee include, but are not limited to, all of the following:
    1. To borrow money and otherwise incur indebtedness for purposes authorized herein, including issuance of corporate bonds, debentures, notes, or other evidence of indebtedness;
      1. A licensee may determine the form and the terms and conditions for financing assistance provided by that licensee to a business firm including, but not limited to:
        1. Forms such as loans;
        2. Purchase of debt instruments;
        3. Straight equity investments such as purchase of common stock or preferred stock;
        4. Debt with equity features such as warrants to purchase stock, convertible debentures, or receipt of a percent of net income or sales;
        5. Royalty based financing;
        6. guaranteeing of debt; or
        7. Leasing of property;
      2. A licensee may purchase securities of a business firm either directly or indirectly through an underwriter; and
      3. A licensee may participate in any government program for which the licensee is eligible and that has as one (1) of its functions the provision or facilitation of financing assistance or management assistance to business firms;
    2. Management assistance provided by a licensee to a business firm may encompass both management or technical advice and management or technical services;
    3. Financing assistance or management assistance provided by a licensee to a business firm shall be for the business purposes of that business firm;
    4. A licensee may exercise the incidental powers that are necessary or convenient to carry on the business of, or are reasonably related to the business of, providing financing assistance and management assistance to business firms;
      1. In connection with an extension of credit by a licensee, a licensee may charge or receive interest at any rate that does not exceed the maximum rate that may be charged or received by any other lender in Tennessee, that is chartered or licensed by the state of Tennessee or any agency or instrumentality of the state of Tennessee, or charged or received by a small business investment company licensed by the small business administration, subject only to those terms and conditions stipulated in this part;
      2. As used in subdivision (b)(6)(A), “interest” does not include anything of value that is contingent on performance or value of the borrower, including, but not limited to, a percentage of net income of the borrower, royalties, stock in the borrower, warrants to purchase stock in the borrower and convertibility of debentures; and
    5. In connection with funding its operations, a licensee may sell small business loans, other securities and related collateral to special purpose corporations, including subsidiaries of the licensee, grantor or other trusts or similar entities that purchase the loans and resell or pledge the loans to third parties in connection with securitizations and similar transactions, and the entities may collect principal, interest, and fees with respect to loans originated by a licensee without being required to be licensed under this part.
    1. A licensee shall transact its business in a prudent business manner and shall maintain itself in a viable condition.
    2. In determining whether a licensee is transacting business in a prudent business manner, the commissioner shall not consider the risk of the financing assistance provided by the licensee to a business firm, unless the commissioner determines that the risk is so great compared with the realistically expected return as to demonstrate mismanagement of the licensee.
    3. Subsection (a) shall not limit the authority of the commissioner to do any of the following:
      1. Determine that a licensee's financing assistance to a single business firm or a group of affiliated business firms is in violation of this subsection (c) if the amount of financing assistance is unduly large in relation to the total assets or the total shareholders' equity of the licensee;
      2. Require that a licensee maintain a reserve in the amount of anticipated losses unless the loans have been marked to market value pursuant to applicable accounting standards; or
      3. Require that a licensee have in effect a written financing assistance policy, approved by its board of directors, including credit evaluation criteria and other matters. The commissioner shall not require that a licensee adopt a financing assistance policy that contains standards that prevent the licensee from exercising needed flexibility in evaluating and structuring financing assistance to business firms on a deal-by-deal basis.

Acts 1989, ch. 124, § 10; 1997, ch. 131, §§ 3-5.

45-8-211. Offices — Personnel.

  1. A licensee shall maintain not less than one (1) office in the state.
  2. Each office of a licensee, whether within or outside of the state, shall be located in a place that is reasonably accessible to the public.
  3. A licensee shall maintain at each of its offices personnel who are competent to conduct the business of the office.
  4. Upon written notice to and consent from the commissioner, a licensee may establish, relocate or close an office, except that no consent shall be required if the licensee is well capitalized.

Acts 1989, ch. 124, § 11; 1997, ch. 131, § 6.

45-8-212. Control of business firms.

  1. One (1) or more other licensees, or one (1) or more directors, officers, principal shareholders, or affiliates of another licensee or licensees, either by itself or in concert with one (1) or more of its directors, officers, principal shareholders, or affiliates, shall not hold control of a business firm, except as follows:
    1. If and to the extent necessary to protect the interests of a licensee as a creditor of, or investor in, a business firm, a licensee that has provided financing assistance to a business firm may acquire and hold control of the business firm. Unless the commissioner approves a longer period, a licensee holding control of a business firm under this subdivision (a)(1) shall divest itself of the interest that constitutes holding control as soon as practicable or within three (3) years after acquiring the interest, whichever is earlier;
    2. With the approval of the commissioner, a licensee may acquire and hold control of a corporation that is licensed as a small business investment company under the United States Small Business Investment Act of 1958, (15 U.S.C. § 661 et seq.), as amended;
    3. With the approval of the commissioner, a licensee may acquire and hold control of a company that is a development company, whether or not the development company has been or may become certified by the United States small business administration pursuant to the United States Small Business Investment Act of 1958;
    4. With the approval of the commissioner, a licensee may acquire and hold control of another business firm that is engaged in no business other than the business of providing financing assistance or management assistance to business firms; and
    5. With the approval of the commissioner, a licensee may acquire and hold control of a business firm not referred to in subdivisions (a)(1)-(4). The commissioner shall not approve an application under this subdivision (a)(5) unless the commissioner determines that the acquisition will promote the purposes of this part.
  2. If a licensee anticipates acquiring and holding control of a business firm under subdivision (a)(1), the licensee shall file with the commissioner a plan for acquiring and holding control of the business firm, which shall include, at a minimum, the following:
    1. The reasons it is necessary for the licensee to acquire and hold control of the business firm;
    2. The percentage of outstanding voting securities of the business firm that the licensee anticipates acquiring and holding;
    3. The licensee's proposed course of action upon obtaining control of the business firm; and
    4. The length of time the licensee anticipates it will be necessary to hold control of the business firm.
  3. The commissioner may require a licensee to demonstrate the necessity for the licensee to hold control of a business firm under subdivision (a)(1).
  4. For the purposes of this section, “hold control” means ownership, directly or indirectly, of record or beneficially, of voting securities greater than:
    1. For a business firm with outstanding voting securities held by fewer than fifty (50) shareholders, forty percent (40%) of the outstanding voting securities; and
    2. For a business firm with outstanding voting securities held by fifty (50) or more shareholders, twenty-five percent (25%) of the outstanding voting securities.

Acts 1989, ch. 124, § 12.

Compiler's Notes. The United States Small Business Investment Act of 1958, referred to in this section, is primarily codified in 15 U.S.C. § 631 et seq., and also in 12 U.S.C. § 371.

45-8-213. Conflicts of interest.

  1. If a licensee provides financing assistance to a business firm or engages in another business transaction, and if that financing assistance or transaction involves a potential conflict of interest, the terms and conditions under which the licensee provides the financing assistance or engages in the transaction shall not be less favorable to the licensee than the terms and conditions that would be required by the licensee in the ordinary course of business if the transaction did not involve a potential conflict of interest. Each person who participates in the decision of the licensee relating to a transaction described in this section and has knowledge of a potential conflict of interest involving that transaction shall take care that the potential conflict of interest is disclosed in the documents of the transaction or, for a business transaction not involving financing assistance, in appropriate documents.
  2. For the purposes of subsection (a), transactions engaged in by a licensee that involve a potential conflict of interest include, but are not limited to, the following:
    1. Providing financing assistance to a principal shareholder of the licensee, to a person controlled by a principal shareholder of the licensee, or to a director, officer, partner, relative, controlling person, or affiliate of a principal shareholder of the licensee;
    2. Providing financing assistance to a business firm that is a principal shareholder of the licensee, or to a director, officer, partner, relative, controlling person, or affiliate of a principal shareholder of the licensee, or to a person controlled by a principal shareholder of the licensee that provides or plans to provide contemporaneous financing assistance;
    3. Providing financing assistance to a business firm that has or is expected to have a substantial business relationship with another business firm that has a director, officer, or controlling person who is also a director, officer or controlling person of the licensee or who is the spouse of a director, officer, or controlling person of the licensee;
    4. Providing financing assistance to a business firm if that business firm, or a director, officer or controlling person of that business firm, contemporaneously, has loaned or will loan money to an associate of the licensee;
    5. Providing financing assistance for the purchase of property of an associate or principal shareholder of the licensee; and
    6. Selling or otherwise transferring any of its assets to an associate or principal shareholder of the licensee.
  3. Nothing in this section or in any other section of this part limits the authority of the commissioner to determine that an act involves a conflict of interest and, therefore, is an unsafe or unsound act.
  4. Except with the approval of the commissioner, a licensee shall not provide a lien on or security interest in any of its property for the purpose of securing an obligation of, or an obligation incurred for the benefit of, another person, other than a direct or indirect subsidiary thereof.

Acts 1989, ch. 124, § 13; 1997, ch. 131, § 7.

45-8-214. Merger, acquisition or sale of business assets.

  1. Without the prior approval of the commissioner, a licensee shall not consummate a transaction involving a merger, acquisition of control, or a sale of all or substantially all of its business assets, where the licensee is a principal party to the transaction.
  2. The commissioner shall not approve the merger of a licensee with another corporation unless:
    1. The licensee is the surviving corporation; or
    2. If the licensee is the disappearing corporation, the surviving corporation is also a licensee.
  3. The commissioner shall approve an application by a licensee for approval of a proposed transaction involving a merger, acquisition of control or a sale of all or substantially all of the licensee's business assets, only upon a finding by the commissioner that:
    1. The merger, acquisition, or sale will be on a sound financial basis with respect to the acquiring licensee;
    2. Upon consummation of the merger, acquisition, or sale, it is reasonable to believe that the acquiring licensee will comply with this part; and
    3. The merger, acquisition, or sale will not have a major detrimental impact upon competition in the providing of financing assistance or management assistance to business firms, or if there will be a major detrimental impact, the merger, acquisition, or sale is necessary in the interests of the financial soundness of any of the parties to the merger, acquisition, or sale, or is otherwise, on balance, in the public interest.

Acts 1989, ch. 124, § 14.

45-8-215. Records and reports.

  1. A licensee shall make and keep books, accounts, and other records in a form and manner that the commissioner may require. The records shall be kept at the place and shall be preserved for the length of time that the commissioner may specify.
  2. Not more than ninety (90) days after the close of each fiscal year of a licensee, or a longer period if specified by the commissioner, a licensee shall file with the commissioner an audited report containing the following:
    1. Financial statements, including balance sheet, statement of income or loss, statement of changes in capital accounts, and statement of changes in financial position;
    2. A report, certificate, or opinion of an independent certified public accountant or independent public accountant who performs the audit, stating that the financial statements were prepared in accordance with generally accepted accounting principles; and
    3. Other information that the commissioner may require.
  3. In addition to the audited report required by subsection (b), a licensee shall file with the commissioner other reports and at times that the commissioner may require. Any report required by the commissioner under this section shall be in a form and shall contain information that the commissioner may specify.

Acts 1989, ch. 124, § 15.

Cross-References. Annual report of accomplishments, § 45-8-225.

Report of criminal violations, § 45-8-224.

45-8-216. Examination by commissioner.

  1. The commissioner shall visit and examine each licensee as frequently as the commissioner deems it necessary or expedient. On the occasion of every visit and examination, the commissioner shall, in company with one (1) or more of the officers of the licensee, if requested by the licensee, be given free access to every part of the office or place of business and to the assets, securities, books, papers and records of the licensee.
  2. If, in the commissioner's opinion, it is necessary for a thorough examination of a licensee, the commissioner may retain one (1) or more accountants, attorneys, appraisers, or other third parties to assist the commissioner in the examination. Within ten (10) days after receipt of a statement from the commissioner, the licensee shall pay or reimburse the fees, costs and expenses of any third parties retained by the commissioner under this subsection (b).
  3. The commissioner shall also have the power to examine or cause to be examined subsidiary corporations of BIDCOs subject to the commissioner's supervision under this part.
  4. Any examination under this section may be made by any person or persons designated by the commissioner, and in that case, all the powers vested in the commissioner by this section shall be possessed by the person or persons so designated. The commissioner shall furnish to each examiner a commission under the signature of the commissioner and official seal of the department, which the examiner shall exhibit to the officer or officers of the BIDCO proposed to be examined as the examiner's authority for making the examination.

Acts 1989, ch. 124, § 16.

45-8-217. Investigations.

  1. The commissioner may make the investigations within or without the state as the commissioner may consider necessary or appropriate for determining whether to approve an application filed with the commissioner under this part, or for determining whether a licensee or other person has violated or is about to violate this part, to aid in the enforcement of this part, or to aid in issuing an order or promulgating a rule or regulation pursuant to this part.
  2. Any investigation under this section may be made by any person or persons designated by the commissioner, and in that case, all the powers vested in the commissioner by this section shall be possessed by the person or persons so designated. When the investigation is made without the presence of the commissioner, the commissioner shall furnish to the person or persons conducting the investigation a commission under the signature of the commissioner and official seal of the department, which shall be exhibited to any person contacted in the course of the investigation.
  3. For purposes of an investigation under this section, the commissioner may administer oaths and affirmations, subpoena witnesses, including, but not limited to, the officers, directors, trustees, partners, managers and employees of any entity being examined, compel the attendance of witnesses, take evidence, and require the production of books, papers, correspondence, memoranda, agreements, or other documents or records that the commissioner considers relevant to the investigation.
  4. If any person fails to comply with a subpoena or subpoena duces tecum issued by the commissioner under this section or fails to testify with respect to a matter concerning which the person may be lawfully questioned, the chancery court, upon application of the commissioner, may issue an order requiring the attendance of the person and the giving of testimony or production of evidence.

Acts 1989, ch. 124, § 17.

45-8-218. Issuance of orders — Notice — Hearings.

  1. The commissioner may issue an order, setting forth an appropriate remedy, including, but not limited to, a cease-and-desist order, an order removing any person from office with a licensee, or prohibiting any person from further participating in any manner in the conduct of the business of the licensee, upon a finding by the commissioner that the licensee, subject person or other person:
    1. Has violated, is violating, or is about to violate any provision of this part or other applicable law, rule or regulation;
    2. Has engaged or participated, or is engaging or participating, or is about to engage or participate, detrimentally with respect to the business of the licensee;
    3. Has been indicted or convicted for a crime involving dishonesty or breach of trust; or
    4. Is conducting acts that threaten the interests of the licensee or may threaten to impair public confidence in the licensee.
  2. Notice and hearing shall be provided in advance of any action authorized in subsection (a). 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.
  3. The licensee, subject person or other person to whom an order is issued under subsection (a), is entitled to an administrative review of the order pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 1989, ch. 124, § 18.

45-8-219. Civil penalties.

  1. Should the commissioner find that any person has violated this part or has violated an order issued pursuant to § 45-8-218, the commissioner may order the person to pay to the state a civil penalty in an amount that the commissioner may specify. However, the amount of the civil penalty shall not exceed ten thousand dollars ($10,000) for each violation, or in the case of a continuing violation, ten thousand dollars ($10,000) for each day for which the violation continues. 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 as justice may require.
  2. A person assessed a penalty under subsection (a) shall be afforded an opportunity for a hearing upon request 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 as provided in the Uniform Administrative Procedures Act, compiled in title 4, chapter 5; provided, that the original order shall not be reviewable in a proceeding initiated under this subsection (b).
  3. Subsection (a) is in addition to, and not an alternative to, other provisions of this part that authorize the commissioner to issue orders or to take other action on account of a violation of this part.
  4. Subsection (a) is in addition to, and not an alternative to, any criminal penalties that may be available under § 45-8-223 or any other criminal laws.

Acts 1989, ch. 124, § 19.

Cross-References. Intentional violations, penalties, § 45-8-223.

45-8-220. Show cause order — Appointment of receiver.

  1. If the commissioner finds that a licensee is insolvent, or the licensee is transacting business without authority or in violation of this part or any other law, or it is contrary to the purposes of this part for the licensee to continue business, the commissioner shall communicate the facts to the attorney general and reporter who shall file in the chancery court, in any county where the licensee is doing business, a complaint setting forth the facts and applying for an order requiring the licensee to show cause why its business should not be closed.
  2. In a proper case made, the chancery court shall have the power to appoint a receiver to take charge of, settle and wind up the affairs of a licensee under the direction of the court, to enjoin the licensee from doing business, or to make other orders or decrees as the circumstances warrant and the court deems proper.

Acts 1989, ch. 124, § 20.

45-8-221. Privileged and confidential information — Disclosures.

  1. The information that is obtained by the commissioner, or any financial institutions examiner, in making an examination into the affairs of the BIDCO, shall be for the purpose of ascertaining the true condition of the affairs of the BIDCO, shall be privileged and confidential, shall not be subject to subpoena, and shall not be disclosed by the party making the examination to any person, except that the examiner shall report the condition of the affairs of the BIDCO to the commissioner, and except that the commissioner is authorized to make the following disclosures from reports of examinations and any information related to the examination of the BIDCO:
    1. Within the department in the course of official duties;
    2. To the United States department of justice, federal bureau of investigation, Tennessee bureau of investigation or state district attorneys general in the case of any criminal violation discovered during the course of an examination;
    3. In any administrative proceeding or court action initiated by the commissioner or the department or to which the commissioner is an actual party;
    4. To the directors of a BIDCO;
    5. To the comptroller of the treasury or the comptroller's designee for the purpose of an audit of the department; provided, that neither this section nor § 10-7-508 shall allow the comptroller or the comptroller's designee a right of access to the names of debtors or other persons listed in the report of an examination of a BIDCO;
    6. To the state treasurer, commissioner of finance and administration, and commissioner of economic and community development when disclosure is in the best interest of the state; and
    7. To other states' financial institutions' regulatory agencies that have authority to regulate BIDCOs in their states.
  2. Disclosures made under subsection (a) shall be made under safeguards designed to prevent further dissemination of confidential information. If any agency or department that has received confidential information under subsection (a) receives a valid subpoena to produce documents of the department of financial institutions, or desires to use the documents in litigation including, but not limited to, discovery proceedings, in which it is involved, the agency or department shall notify the department for permission to produce the documents. The commissioner has the discretion to authorize the requesting agency or department to use the documents under a protective order approved by the commissioner and designed to prevent the unnecessary further dissemination of the documents.
    1. A BIDCO may reproduce all, or any part of, a report of examination and send or deliver the reproduction to a holding company of which it is a subsidiary.
    2. As used in this section, “subsidiary” means:
      1. Any company twenty-five percent (25%) or more of whose voting shares, excluding shares owned by the United States or by any company wholly owned by the United States, is directly or indirectly owned or controlled by the holding company, or is held by it with power to vote;
      2. Any company the election of a majority of whose directors is controlled in any manner by the holding company; or
      3. Any company with respect to the management or policies of which the holding company has the power, directly or indirectly, to exercise a controlling influence, as determined by the commissioner, after notice and opportunity for hearing.
  3. Notwithstanding any provision of this section to the contrary, the commissioner may, in the commissioner's discretion and in the interest of justice, and when under a validly issued subpoena, waive the privilege created herein and produce examination reports of BIDCOs and other related documents under a protection order entered by a court or administrative tribunal of competent jurisdiction where the order is designed to protect the confidential nature of the information so disclosed from public dissemination.

Acts 1989, ch. 124, § 21; 2013, ch. 211, § 7.

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

45-8-222. Prohibited acts.

  1. For the purposes of this section:
    1. A person who is in a relationship referred to in this section within six (6) months before or after a licensee provides financing assistance shall be considered to be in that relationship as of the date that licensee provides that financing assistance; and
    2. If a licensee, in order to protect its interest, designates a person to serve as a director of, officer of, or in any capacity in the management of a business firm to which that licensee provides financing assistance, that person shall not, on that account, be considered to have a relationship with that business firm.
  2. A person shall not willfully make an untrue statement of a material fact in an application or report filed with the commissioner under this part, or willfully omit to state in the application or report a material fact required to be stated in the application or report.
  3. A person having custody of any of the books, accounts, or other records of a licensee shall not willfully refuse to allow the commissioner, upon request, to inspect or make copies of any of those books, accounts or other records.
  4. A person shall not, with intent to deceive a director, officer, employee, auditor or attorney of a licensee, the commissioner, or a governmental agency:
    1. Make a false entry in the books, accounts or other records of the licensee;
    2. Omit to make an entry in those books, accounts or other records that the person is required to make; or
    3. Alter, conceal, or destroy any of those books, accounts or other records.
  5. A licensee shall not provide, directly or indirectly, financing assistance to an associate of the licensee.
  6. A licensee shall not provide, directly or indirectly, financing assistance to discharge, or to free other money for use in discharging, in whole or in part, an obligation to an associate of that licensee. This subsection (f) does not apply to a transaction effected by an associate of a licensee in the normal course of that associate's business involving a line of credit or short-term financing assistance.
  7. It is unlawful for any person to serve as an officer or director of a BIDCO who:
    1. Has been convicted of an offense constituting a violation of the BIDCO laws, a felony or a breach of trust in the jurisdiction where the judgment was rendered;
    2. Is indebted to the BIDCO for more than thirty (30) days upon a judgment that has become final.
  8. It is unlawful for an affiliate of a BIDCO, or for an officer, director or employee of a BIDCO or affiliate of a BIDCO, to willfully and knowingly and without authority from the board of directors or governing body of the BIDCO, to receive, consent to receive, or agree to receive, any commission, emolument, gratuity, or reward, or any promise of any commission, emolument, or reward, property or thing of value or of personal advantage, for procuring or endeavoring to procure for any person a loan or any other investment by the BIDCO.
  9. Any director of a BIDCO who concurs in any vote or act of the directors of the BIDCO by which it is intended to:
    1. Make a dividend except from the surplus profits arising from the business of the BIDCO;
    2. Divide, withdraw or in any manner pay to the stockholders or any of them any part of the stock of the BIDCO, or to reduce the stock except in pursuance of law;
    3. Discount or receive any note, or other evidence of debt in payment of stock required to be paid or with intention to provide the means of making the payment;
    4. Receive or discount any note or other evidence of debt with the intent to enable any stockholder to withdraw any part of the money paid in as consideration for the purchase of stock; or
    5. Apply any portion of the funds of the BIDCO except as allowed by law, directly or indirectly, to the purchase of shares of its own stock.

Acts 1989, ch. 124, § 22.

Compiler's Notes. The language in subsection (i) reads as enacted by Acts 1989, ch. 124, § 22.

45-8-223. Intentional violators — Penalties.

  1. A person who knowingly commits an act that violates § 45-8-222 commits a Class A misdemeanor.
  2. This section does not apply to an act committed or omitted in good faith in conformity with an order or rule of the commissioner, notwithstanding that order or rule is later amended, rescinded, or repealed, or determined by judicial or other authority to be invalid for any reason.
  3. Nothing in this part limits the power of the state to punish a person for an act that constitutes a crime under any statute.

Acts 1989, ch. 124, § 23; 1989, ch. 591, § 1.

Code Commission Notes.

The misdemeanor 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 specifications as to category is a Class A misdemeanor. See also § 39-11-114.

Cross-References. Civil penalties, § 45-8-219.

Penalty for Class A misdemeanor, § 40-35-111.

45-8-224. Report of criminal violations.

It is the duty of the BIDCO to submit to the commissioner a report of any apparent criminal violation known by it to have occurred. The commissioner shall submit to the district attorneys general of the respective judicial districts reports of apparent violations of laws. The commissioner shall also report the violation to the appropriate division of the Tennessee bureau of investigation.

Acts 1989, ch. 124, § 24.

45-8-225. Report of accomplishments.

The commissioner shall publish annually and provide to the governor and to each member of the general assembly a report that summarizes the department's accomplishments under this part in promoting economic development in this state. At the minimum, the information shall include aggregate statistics on each of the following:

  1. The number and dollar amount of provisions of financing assistance made by licensees to business firms;
  2. The number and dollar amount of provisions of financing assistance made by licensees to business firms classified in broad categories of industry such as divisions of the standard industrial classification manual;
  3. The number and dollar amount of provisions of financing assistance made by licensees to minority owned business firms and to female owned business firms; and
  4. Estimates of the number of jobs created or retained.

Acts 1989, ch. 124, § 26.

Cross-References. Reporting requirement satisfied by notice to general assembly members of publication of report, § 3-1-114.

45-8-226. Inapplicability of § 45-8-212 to well capitalized licensee.

The requirements of § 45-8-212 shall not be applicable to a well capitalized licensee; provided, that within thirty (30) days of ceasing to be well capitalized, a licensee must apply for commissioner approval in order to retain any business acquired without the commissioner's prior approval.

Acts 1997, ch. 131, § 8.

Chapter 9
International Banking

45-9-101. Legislative intent.

The general assembly declares that it is the purpose of this chapter to provide for the establishment of international banking and financial corporations chartered and operating under Tennessee law with powers sufficiently broad to enable them to compete effectively with similar institutions organized under other jurisdictions and laws, specifically institutions organized under § 25(a) of the Federal Reserve Act.

Acts 1983, ch. 104, § 2.

Compiler's Notes. The Federal Reserve Act, referred to in this section, is codified throughout 12 U.S.C.

Law Reviews.

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

45-9-102. Certificate of authority by commissioner.

The commissioner of financial institutions (hereinafter “the commissioner”) may grant a certificate of authority to any Tennessee corporation organized under this chapter for the purpose of engaging in international or foreign banking or other international or foreign financial operations; provided, that the corporation's charter is sufficiently limited so that no corporation organized under this chapter may carry on any part of its business in Tennessee or in the United States, except business that, in the opinion of the commissioner, is incidental to its international or foreign business.

Acts 1983, ch. 104, § 3; impl. am., 1983, ch. 216, §§ 1-9.

Law Reviews.

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

45-9-103. Corporate charter.

To the extent that the charter of a corporation organized under this chapter is more limited or restrictive than this chapter otherwise permits, the corporation shall be bound by the terms of its charter until such time or times as that charter is amended, subject to the approval and acceptance of the commissioner, to incorporate any other provision or provisions permitted by this chapter.

Acts 1983, ch. 104, § 4.

Law Reviews.

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

45-9-104. Applicability of other laws.

  1. Chapters 1 and 2 of this title apply to any corporation organized under this chapter unless and to the extent the commissioner, exercising discretion, deems the provision or provisions or part of the provisions to be inconsistent with the purpose or purposes of this chapter or otherwise inapplicable to corporations organized under this chapter.
  2. All other laws of  Tennessee, except to the extent expressly inconsistent herewith, shall apply to corporations organized under this chapter.

Acts 1983, ch. 104, § 5.

Law Reviews.

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

45-9-105. Rules and regulations.

The commissioner has the authority to issue rules and regulations that the commissioner, who has sole discretion with regard to the rules and regulations, deems necessary to carry out the purpose or purposes of this chapter.

Acts 1983, ch. 104, § 6.

Law Reviews.

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

Chapter 10
Financial Records Privacy Act

45-10-101. Short title.

This chapter shall be known and may be cited as the “Financial Records Privacy Act.”

Acts 1983, ch. 224, § 1.

Cross-References. Confidential records, § 10-7-504.

Confidentiality, disclosure and reproduction of banking information, § 45-2-1603.

Confidentiality of savings and loan records, § 45-3-807.

Confidentiality of writings, records or tangible objects obtained by attorney general, § 8-6-407.

Disclosure of savings and loan information, reports as evidence, § 45-3-814.

Record kept under seal, confidential records, access to certain records, preservation of records, § 36-1-126.

Unlawful disclosure of savings and loan information, § 45-3-1308.

Textbooks. Tennessee Forms (Robinson, Ramsey and Harwell), No. 1-45.01-1.

Law Reviews.

Administrative Subpoenas and the Grand Jury: Converging Streams of Criminal and Civil Compulsory Process (Graham Hughes), 47 Vand. L. Rev. 573 (1994).

NOTES TO DECISIONS

1. Constitutionality.

To the extent this chapter conflicts with a bank's obligation to comply with the command of a federal grand jury, it is invalid and void under the supremacy clause of U.S. Const., art. 6, clause 2. In re Grand Jury Subpoena, 688 F. Supp. 319, 1988 U.S. Dist. LEXIS 15423 (W.D. Tenn. 1988).

2. Discovery Proceedings.

Where federal court jurisdiction is based on other than diversity, the limited statutory privilege in the financial records privacy act does not apply to discovery proceedings. Delozier v. First Nat'l Bank, 109 F.R.D. 161, 1986 U.S. Dist. LEXIS 30499 (E.D. Tenn. 1986).

3. Amendment of Other Provisions.

Sections 67-1-1301, 67-1-1302, and 67-1-1437 are less specific and less restrictive than this chapter, and thus have been impliedly amended by this chapter. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

To the extent that the procedures for obtaining financial records from a financial institution are more protective, exacting and restrictive than § 67-1-1437, this chapter impliedly amends previously enacted title 67, chapter 1, part 14 regardless of § 67-1-1402. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

4. Subpoena Requirements.

This chapter, having more specific and restrictive requirements for issuing subpoenas than title 67, chapter 1, part 14, requires that the commissioner or his delegate must comply with its provisions when issuing an investigative summons to a financial institution. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

Whether issued pursuant to §§ 67-1-1301, 67-1-1302, 67-1-1437, or this chapter, if the subpoenaed party is of the opinion the requests contained in the demand are unreasonable, he can refuse to comply with the demand and raise the issue as a defense to any action brought by the issuer to enforce compliance, and where contested, the production of documents pursuant to an administrative subpoena cannot be compelled without approval of the chancellor. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

5. Custodian Affidavit.

Appellate court rejected the corporate directors'  claims that the bank records admitted at trial were inaccurate or incomplete because the records were presented for admission through a records custodian affidavit, pursuant to T.C.A. § 45-10-101 et seq., that required that the records custodian's affidavit be admissible in evidence and the matters stated therein be presumed true in the absence of a preponderance of the evidence to the contrary. There was no indication that the directors were denied an opportunity to subpoena the records custodian to testify on their behalf, nor wthat there any indication that the directors attempted to conduct their own discovery regarding the bank records; rather when asked about the bank records, one director testified that there was no basis to believe the records were distorted. McRedmond v. Estate of Marianelli, — S.W.3d —, 2006 Tenn. App. LEXIS 634 (Tenn. Ct. App. Sept. 29, 2006), rehearing denied, — S.W.3d —, 2006 Tenn. App. LEXIS 772  (Tenn. Ct. App. 2006), appeal denied, McRedmond v. Milano Corp., — S.W.3d —, 2007 Tenn. LEXIS 285 (Tenn. Mar. 12, 2007), overruled in part, House v. Estate of Edmondson, 245 S.W.3d 372, 2008 Tenn. LEXIS 16 (Tenn. Jan. 25, 2008).

6. Bank's Duties.

When a bank transacts business with a depositor or other customer, it has no special duty to counsel the customer and inform him of every material fact relating to the transaction — including the bank's motive, if material, for participating in the transaction — unless special circumstances exist, the as where the bank knows or has reason to know that the customer is placing his trust and confidence in the bank and is relying upon the bank so to counsel and inform him. Macon County Livestock Market, Inc. v. Kentucky State Bank, Inc., 724 S.W.2d 343, 1986 Tenn. App. LEXIS 3564 (Tenn. Ct. App. 1986).

45-10-102. Chapter definitions.

As used in this chapter, and in any subpoena issued pursuant to this chapter, unless the context otherwise requires:

  1. “Custodian” means either the “immediate custodian,” or any person to whom the “immediate custodian” reports, the auditor or any other person designated by a corporation's board of directors to respond to a subpoena issued pursuant to this chapter. “Immediate custodian” means the person preparing, preserving, using, supervising the using or preparation of the financial records, and also includes any person to whom the person reports who is familiar with the preparation, use and maintenance of the records;
  2. “Customer” means a depositor, borrower, member, lessee, other person, or the personal or legal representative or estate thereof, who has, has had, or has contemplated a relationship with the financial institution that caused the financial institution to create, obtain, preserve or maintain financial records pertaining to the person or the person's affairs;
  3. “Financial institution” means a bank, savings and loan association, industrial loan and thrift company, credit union, mortgage broker, mortgage banker, or leasing company accepting deposits, making or arranging loans and making or arranging leases;
  4. “Financial records” or “records” means any original document, any copy of an original document, or any information contained in the document, other than a customer's name, address, and account number, held by or in the custody of a financial institution, where the document, copy or information is identifiable as pertaining to one (1) or more customers of the institution;
  5. “Government authority” means an agency or department of the state, or any officer, employee, or agent thereof;
  6. “Issuer” means any person that causes to be issued a subpoena for the production of records;
  7. “Person” means any individual, partnership, corporation, association, trust or any other legal entity organized under the laws of this state, including any department or agency of this state, any county or municipal corporation located in this state, and any court of this state or of the United States;
  8. “Subpoena” means any writ, order, or other writing directed to a financial institution, or an officer thereof, and requiring the production of a financial record or records; and
  9. “Supervisory agency” means:
    1. The federal deposit insurance corporation;
    2. The national credit union administration;
    3. The federal reserve board;
    4. The United States comptroller of the currency;
    5. The department of financial institutions; and
    6. Any other agency of this state or the United States that is empowered to regulate financial institutions.

Acts 1983, ch. 224, § 2; 1984, ch. 616, §§ 1-3; 1995, ch. 309, §§ 1, 2.

NOTES TO DECISIONS

1. “Person” Defined.

United States department of agriculture was not a “person” for purposes of the Tennessee Financial Records Privacy Act. Walker v. White, 89 S.W.3d 573, 2002 Tenn. App. LEXIS 434 (Tenn. Ct. App. 2002).

2. Financial Records Defined.

Debtors failed to establish a violation of the Tennessee Financial Records Privacy Act, T.C.A. § 45-10-104(a), based on emails from the lender of their home construction loan, which discussed their property as a potential foreclosure property because the information disclosed in the email did not concern financial records, as defined in T.C.A. § 45-10-102(4). Renasant Bank v. Ericson, 801 F. Supp. 2d 690, 2011 U.S. Dist. LEXIS 75772 (M.D. Tenn. July 13, 2011).

45-10-103. Permissible acts.

The following acts are expressly permitted by, but are not otherwise subject to, this chapter:

  1. The preparation, examination, handling or maintenance of any financial records:
    1. By any attorney, officer, employee or agent of a financial institution having custody of the records; or
    2. By a certified public accountant engaged by the financial institution to perform an independent audit;
  2. The examination of any financial records by, or the furnishing of financial records by a financial institution to, any officer, employee or agent of a supervisory agency for use solely in the exercise of the person's duties as an officer, employee or agent of the agency;
  3. The publication of data furnished from financial records relating to customers where the data cannot be identified to any particular customer or account;
  4. The making of reports or returns required under the tax laws and/or regulations of this state or the United States;
  5. The furnishing of information permitted to be disclosed under article 3 of the Uniform Commercial Code, compiled in title 47, chapter 3, concerning the dishonor of any negotiable instrument;
  6. The exchange in the regular course of business of credit information between a financial institution and other financial institutions or commercial enterprises, directly or through a credit reporting agency;
  7. The furnishing of information or records deemed by a financial institution to be necessary or incidental to the performance of the duties of a federal, state or local official or agency;
  8. The furnishing of information or records to a state or local official or agency in response to a subpoena lawfully issued by the official or agency. A financial institution may presume that a subpoena that appears valid on its face has been lawfully issued, if the subpoena shows on its face that it is in compliance with:
    1. The notice requirements of § 45-10-106;
    2. The delay provisions of § 45-10-117; or
    3. An administrative subpoena issued by the department of human services pursuant to § 45-10-119;
  9. The furnishing of information or records as a part of a financial institution's answer, or other pleading, in any action wherein the financial institution is a party, including being a garnishee;
  10. The furnishing of information or records to any federal officer or agency as long as furnishing the information is not prohibited by the federal Right to Financial Privacy Act of 1978;
  11. The furnishing of information or records in response to any allegation made by a customer;
  12. The furnishing of information or records where deemed necessary to comply with or to preserve rights under:
    1. Any statute, ordinance, or regulation; or
    2. Any contract to which the customer, or any person serving as surety, guarantor, or the like, is a party;
  13. The furnishing of a copy of any negotiable, nonnegotiable or nontransferable instrument to any person named therein as a remitter, party, obligor, or obligee;
    1. The furnishing of records concerning a loan or other obligation, and the obligor or obligors thereon, held by a financial institution to a purchaser or prospective purchaser of the obligation or a participation or interest therein; provided, that:
      1. The purchaser, if a financial institution, shall hold the records subject to this chapter, to the same extent as if the obligor or obligors were customers of the purchaser; or
      2. The purchaser, if not a financial institution, shall undertake not to disclose the records to any person, except:
  1. To or with the consent of the obligors or the obligor's agent;
  2. Pursuant to legal process served on the purchaser; or
  3. As would be permitted under this section if the purchaser were a financial institution;

This subdivision (14) shall not be construed to impose or create a duty of disclosure on the part of a financial institution to a purchaser;

(A)  The furnishing by a financial institution of information or records to an affiliate of the financial institution;

As used in this subdivision (15), “affiliate of a financial institution” is:

A corporation, eighty percent (80%) of any class of voting stock of which is owned, directly or indirectly, by the financial institution or by a corporation that, directly or indirectly, also owns eighty percent (80%) of any class of voting stock of the financial institution; or

A corporation that owns, directly or indirectly, eighty percent (80%) of any class of voting stock of the financial institution;

The affiliate to whom the records and information are furnished shall hold the records or information subject to this chapter as if the affiliate were the financial institution furnishing the records or information; and

The furnishing by a financial institution of information or records to the extent permitted by the Gramm-Leach-Bliley Act of 1999 (Public Law 106-102); provided, the financial institution complies with the consumer disclosure requirements and opt-out provisions of the act.

Acts 1983, ch. 224, § 3; 1984, ch. 616, § 4; 1993, ch. 91, § 1; 1995, ch. 309, § 3; 2001, ch. 156, § 1; 2017, ch. 264, § 2; 2019, ch. 340, § 18; 2020, ch. 605, § 6.

Compiler's Notes. The Right to Financial Privacy Act of 1978, referred to in this section, is codified as 12 U.S.C. § 3401 et seq.

The Gramm-Leach-Bliley Act of 1999, referred to in this section, is codifed in various sections of 12 U.S.C. and as 15 U.S.C. § 6801 et seq.

Amendments. The 2020 amendment deleted “federal,” preceding “state” in the first sentence of (8).

Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020.

Law Reviews.

Administrative Subpoenas and the Grand Jury: Converging Streams of Criminal and Civil Compulsory Process (Graham Hughes), 47 Vand. L. Rev. 573 (1994).

Attorney General Opinions. Access to bank and telephone records for commercial purposes, OAG 98-160, 1998 Tenn. AG LEXIS 160 (8/24/98).

NOTES TO DECISIONS

1. Response to Subpoena.

All subdivision (8) does is permit a financial institution to rely on and respond to a subpoena properly issued and served under this statute, but this subdivision clearly permits an institution to contest the process in good faith. The provision does not create an exception to the subpoena requirements of this chapter. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

2. Unreasonable Demand.

Whether issued pursuant to §§ 67-1-1301, 67-1-1302, 67-1-1437, or this chapter, if the subpoenaed party is of the opinion the requests contained in the demand are unreasonable, he can refuse to comply with the demand and raise the issue as a defense to any action brought by the issuer to enforce compliance, and where contested, the production of documents pursuant to an administrative subpoena cannot be compelled without approval of the chancellor. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

45-10-104. Requisites for disclosure — Effect of disclosure.

  1. Except as provided in § 45-10-103, a financial institution may not disclose to any person, except to the customer or the customer's agent, any financial records relating to that customer unless:
    1. The customer has authorized disclosure to that person as provided in § 45-10-105; or
    2. The financial records are disclosed in response to a lawful subpoena that meets the requirements of §§ 45-10-106 and 45-10-107.
  2. Nothing in this chapter shall preclude any financial institution, or any officer, employee, or agent of a financial institution, from notifying a government authority that the institution, or officer, employee, or agent has information that the financial institution or its representative believes may be relevant to a possible violation of any statute or regulation. The information may include the name or other identifying or descriptive information concerning any individual, corporation, or account involved in any suspected illegal activity, and a description of the activity. The information may be disclosed notwithstanding any law or regulation of this state to the contrary. Nothing in this section shall create any duty to provide any information to a governmental authority except in accordance with subsection (a), nor relieve any duty to provide information to a governmental authority when otherwise required by law. Any financial institution, or officer, employee, or agent thereof making a disclosure of information pursuant to this subsection (b), shall not be liable to any person under any law or regulation of this state or political subdivision thereof, for disclosure or for any failure to disclose information required or permitted under this section.

Acts 1983, ch. 224, § 4; 1995, ch. 309, § 4; 2003, ch. 98, § 1.

Attorney General Opinions. Access to bank and telephone records for commercial purposes, OAG 98-160, 1998 Tenn. AG LEXIS 160 (8/24/98).

NOTES TO DECISIONS

1. Application.

Debtors failed to establish a violation of the Tennessee Financial Records Privacy Act, T.C.A. § 45-10-104(a), based on emails from the lender of their home construction loan, which discussed their property as a potential foreclosure property because the information disclosed in the email did not concern financial records, as defined in T.C.A. § 45-10-102(4). Renasant Bank v. Ericson, 801 F. Supp. 2d 690, 2011 U.S. Dist. LEXIS 75772 (M.D. Tenn. July 13, 2011).

2. Discovery Proceedings.

Where federal court jurisdiction is based on other than diversity, the limited statutory privilege in the financial records privacy act does not apply to discovery proceedings. Delozier v. First Nat'l Bank, 109 F.R.D. 161, 1986 U.S. Dist. LEXIS 30499 (E.D. Tenn. 1986).

45-10-105. Authorization by customer.

  1. A customer may authorize disclosure of financial records pertaining to the customer by signing and dating a statement authorizing the disclosure; or, if acceptable to the financial institution, a customer may provide authorization orally. The authorization may specify:
    1. The name of the person to which disclosure is authorized;
    2. The financial records that are authorized to be disclosed; and
    3. The period of time during which the authorization is effective.
  2. No authorization shall be required by a financial institution as a condition of doing business with the financial institution.

Acts 1983, ch. 224, § 5.

Cross-References. Agricultural production input security interests, title 43, ch. 31.

Attorney General Opinions. Access to bank and telephone records for commercial purposes, OAG 98-160, 1998 Tenn. AG LEXIS 160 (8/24/98).

45-10-106. Service of subpoena on financial institution.

A subpoena authorizing the production of financial records may be served upon a financial institution only if:

  1. A copy of the subpoena has been served upon the customer, if the customer is available for service, in the manner provided by law for the service of subpoena, or, in any judicial proceeding in which the customer is a named party, a copy of the subpoena has been served on the customer in the manner provided for the service of pleadings subsequent to the original complaint by the Tennessee Rules of Civil Procedure; and
  2. The customer, in the case of a judicial subpoena issued in a proceeding in which the customer is not a named party, has not moved to quash the subpoena within ten (10) days after service of a copy of the subpoena on the customer; or in the case of a nonjudicial subpoena, the customer has not notified the issuer, within ten (10) days after service of a copy of the subpoena on the customer, that the customer objects to the subpoena, in which case the issuer must petition an appropriate court and obtain approval of the court before issuing the subpoena. The appropriate court shall be any court of record in the county where the customer is located, if a resident of Tennessee; otherwise the county where the financial institution is located.

Acts 1983, ch. 224, § 6; 1984, ch. 616, § 5; 1995, ch. 309, § 5.

Cross-References. Investigative grand jury subpoenas to banks exempt from notice requirements, § 40-12-214.

NOTES TO DECISIONS

1. Order Not Subject to Judicial Review.

An order approving the issuance of a subpoena in connection with the investigation of financial institutions was not a final order subject to judicial review. State v. First Trust Money Servs., 931 S.W.2d 226, 1996 Tenn. App. LEXIS 225 (Tenn. Ct. App. 1996).

2. Summary Judgment.

Trial court did not err in dismissing a limited liability company's Financial Records Privacy Act claim because the subpoena issued to a bank represented on its face that it had been served; the bank was allowed to rely on such a representation when producing records, even if it was a false one, unless production somehow violates a court order. Nationwide Invs., LLC v. Pinnacle Bank, — S.W.3d —, 2019 Tenn. App. LEXIS 458 (Tenn. Ct. App. Sept. 16, 2019).

45-10-107. Requisites of subpoena.

  1. A financial institution shall not be required to produce financial records in response to a subpoena unless:
    1. The subpoena indicates that the requirements of § 45-10-106 have been met;
    2. The subpoena describes with specificity the financial records to be produced, including:
      1. The name and address of the customer to whom the records relate;
      2. The name or functional description of the records;
      3. The time period covered by the records; and
      4. Any additional information necessary to identify the records sought;
    3. The subpoena has been served upon the financial institution on a date that allows adequate time, which shall not be less than fifteen (15) days, within which to locate, copy and deliver the records; and
    4. In civil actions, the subpoena contains a bond for costs incident to the subpoena as provided in § 45-10-108.
  2. By agreement between the financial institution and the issuer or upon proper application to the appropriate court and after notice to the affected person, the fifteen-day period may be shortened where fifteen (15) days are not required, or may be lengthened where fifteen (15) days are not sufficient. Nothing herein shall restrict the power of the appropriate court for good cause shown to cause subpoenas to be issued or responses thereto to be made in less than any of the time periods set forth herein, including instanter.
  3. A financial institution shall not be deemed to violate this chapter because it produces financial records in response to a subpoena containing the representation required under subdivision (a)(1), even if the representation is false and a claim to that effect is made to the financial institution, unless the production violates a court order duly served on the financial institution.
  4. A financial institution refusing to comply with a subpoena that fails to meet all applicable requirements of subsection (a) need not file a motion to quash the subpoena, but shall notify the issuer of the grounds of its refusal within a reasonable time after being served with the subpoena.
    1. A financial institution may file with the appropriate court a copy of the notice of refusal to comply with a subpoena that was conveyed to the issuer as provided in subsection (d). The copy shall contain a notice to the clerk of court, which shall be prominently on the face of the copy in substantially the following form:

      Case / Docket No.

      Notice to the clerk of court: Pursuant to Tennessee Code Annotated § 45-10-107, this notice shall suspend issuance of any order to show cause or compel a response to the subpoena issued to the financial institution filing this copy of a notice of refusal to comply with a subpoena.

    2. Receipt of a copy of the notice submitted under subdivision (e)(1) by the clerk of the appropriate court shall serve as notice to the court that the court shall not issue an order to show cause or compel the financial institution to respond to a subpoena that the financial institution has determined fails to meet all the applicable requirements of subsection (a), unless the court deems that the requirements have been satisfied. The notice shall not prevent the court from issuing an order once a subpoena meets the requirements of subsection (a).

Acts 1983, ch. 224, § 7; 1995, ch. 309, § 6; 2008, ch. 788, § 1.

Cross-References. Investigative grand jury subpoenas to banks exempt from notice requirements, § 40-12-214.

NOTES TO DECISIONS

1. Summary Judgment.

Trial court did not err in dismissing a limited liability company's Financial Records Privacy Act claim because the subpoena issued to a bank represented on its face that it had been served; the bank was allowed to rely on such a representation when producing records, even if it was a false one, unless production somehow violates a court order. Nationwide Invs., LLC v. Pinnacle Bank, — S.W.3d —, 2019 Tenn. App. LEXIS 458 (Tenn. Ct. App. Sept. 16, 2019).

45-10-108. Bond.

On motion of any affected party, and for good cause shown, the court may require the person requesting the production of any records of a financial institution in a civil action to execute a bond, with sufficient surety, in an amount deemed sufficient by the court.

Acts 1983, ch. 224, § 8.

45-10-109. Expenses to be taxed as costs.

In all judicial proceedings, the reasonable expenses of a financial institution in producing records in response to a subpoena shall be taxed as costs, without regard to the amount of any bond, and in all other instances, the issuer shall pay the financial institution's reasonable expenses incurred in complying with the subpoena. The financial institution shall submit to the issuer, either with the records or within thirty (30) days after delivering the records, a statement as to its charges for preparing and delivering the records. Charges by the financial institution at rates that do not exceed those established by the financial institution’s published fee schedule shall be deemed reasonable unless otherwise determined by the appropriate court after notice and a hearing.

Acts 1983, ch. 224, § 9; 2017, ch. 264, § 4.

NOTES TO DECISIONS

1. Construction with Other Laws.

The provisions of § 67-1-1305 and this section, relating to bearing expenses of the production of records subject to a subpoena, are not necessarily inconsistent. State, Dep't of Revenue v. Moore, 722 S.W.2d 367, 1986 Tenn. LEXIS 846 (Tenn. 1986).

45-10-110. Compliance with subpoena duces tecum.

Except as hereinafter provided, when a subpoena duces tecum is served upon a custodian of records of any financial institution in an action or proceeding in which the financial institution is not a party, and the subpoena requires the production of all or any part of the records of the financial institution relating to any customer of the financial institution, it shall be sufficient compliance with the subpoena if the custodian within fourteen (14) days after being served with a subpoena duces tecum, files with the court clerk or the issuer, either by personal delivery or certified or registered mail, a true and correct copy, which may be a copy reproduced on film or other reproducing material by microfilming, photographing, photostating or other approximate process, or a facsimile, exemplification or copy of the reproduction or copy of all records specifically described in the subpoena.

Acts 1983, ch. 224, § 10.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-10-111. Wrapping and delivery of copy of records.

The copy of the records shall be separately enclosed in an inner envelope or wrapper, sealed, with the title and number of the action, name of custodian and date of subpoena clearly inscribed on the sealed envelope or wrapper. The sealed envelope or wrapper shall then be enclosed in an outer envelope or wrapper, sealed, and directed as follows:

  1. If the subpoena directs attendance in court, to the clerk of the court or to the judge of the court;
  2. If the subpoena directs attendance at a deposition, to the officer before whom the deposition is to be taken, at the place designated in the subpoena for the taking of the deposition or at the officer's place of business; or
  3. In other cases, to the issuer.

Acts 1983, ch. 224, § 11.

45-10-112. Opening of sealed envelope.

Unless the sealed envelope or wrapper is returned to a witness who is to appear personally, the copy of the records shall remain sealed and shall be opened only at the time of trial, deposition, or other hearing, upon the direction of the judge, court, officer, body, tribunal or other issuer conducting the proceeding, in the presence of all parties who have appeared in person or by counsel at the trial, deposition, hearing or other proceeding.

Acts 1983, ch. 224, § 12.

45-10-113. Affidavit of custodian.

  1. The records shall be accompanied by an affidavit of a custodian stating in substance that:
    1. The affiant is duly authorized custodian of the records and has authority to certify the records;
    2. The copy is a true copy of all the records described in the subpoena; and
    3. The records were prepared by the personnel of the financial institution's business at or near the time of the act, condition or event reported therein.
  2. If the financial institution has none of the records described, or only part of the records, the custodian shall so state in the affidavit and file the affidavit and the records that are available in the manner prescribed in this chapter. The filing of an affidavit with respect to reasonable charges shall be sufficient proof of the expense, which shall be taxed as costs of court.

Acts 1983, ch. 224, § 13.

45-10-114. Copy and affidavit as evidence.

The copy of the record shall be admissible in evidence to the same extent as though the original thereof were offered and the custodian had been present and testified to the matters stated in the affidavit. The affidavit shall be admissible in evidence and the matters stated therein shall be presumed true in the absence of a preponderance of evidence to the contrary. When more than one (1) person has knowledge of the facts, more than one (1) affidavit may be made.

Acts 1983, ch. 224, § 14.

45-10-115. Personal attendance of custodian — Form of subpoena.

  1. Where the personal attendance of the custodian is required, the subpoena duces tecum shall contain a clause that reads:

    “The procedure authorized pursuant to the Financial Records Privacy Act §§ 45-10-11045-10-113 will not be deemed sufficient compliance with this subpoena.”

  2. Where both the personal attendance of the custodian and the production of the original record are required, the subpoena duces tecum shall contain a clause that reads:

    “Original records are required, and the procedure authorized pursuant to the Financial Records Privacy Act §§ 45-10-11045-10-113 will not be deemed sufficient compliance with this subpoena.”

  3. Where the personal attendance of the custodian is required, the immediate custodian or immediate custodians of the records required shall appear, and the custodian or custodians shall be compensated as witnesses, in addition to the reasonable cost of producing the records being taxed as costs of court.

Acts 1983, ch. 224, § 15.

45-10-116. Substitution of copies for original records.

In view of the property right of the financial institution in its records, original records may be withdrawn after introduction into evidence and copies substituted, unless otherwise directed for good cause by the court, judge, officer, body or tribunal conducting the hearing. The custodian may prepare copies of original records in advance of testifying for the purpose of making substitution of the original records, and the reasonable charges for making the copies shall be taxed as costs of court. If copies are not prepared in advance, they can be made and substituted at any time after introduction of the original record, and the reasonable charges for making the copies shall be taxed as costs of court.

Acts 1983, ch. 224, § 16.

45-10-117. Delay of customer notice — Required findings — Filing by court — Disclosure.

  1. Upon application of a government authority, the customer notice required under § 45-10-106 may be delayed by an order of the chancery court of Davidson County, or the court issuing a lawful subpoena, if the presiding chancellor or judge finds that:
    1. The investigation being conducted is within the lawful jurisdiction of the government authority seeking the financial records;
    2. There is reason to believe that the records being sought are relevant to a legitimate law enforcement, investigative or administrative inquiry;
    3. There is reason to believe that the notice will result in:
      1. Endangering life or physical safety of any person;
      2. Flight from prosecution;
      3. Destruction of or tampering with evidence;
      4. Intimidation of potential witnesses;
      5. Jeopardizing an investigation or official proceeding or unduly delaying a trial or ongoing official proceeding; or
      6. The public health, safety or welfare is threatened; and
    4. The application for delay is made with reasonable specificity.
    1. If the court makes the findings required in subdivisions (b)(1)-(4), it shall enter an ex parte order granting the requested delay for a period not to exceed ninety (90) days and an order prohibiting the financial institution from disclosing that records have been obtained or that a request for records has been made.
    2. One (1) extension of the delay notice provided in subdivision (b)(1), of up to ninety (90) days, may be granted by the court upon application, but only in accordance with this section.
    3. Upon expiration of the period of delay of notification under subdivision (b)(1) or (2), the customer shall be served with or mailed a copy of the subpoena by the government authority, together with the following legend specifying the nature of the law enforcement inquiry:

      “Records or information concerning your transactions, which are held by the financial institution named in the attached process or request were supplied to or requested by the government authority named in the process or request on (date). Notification was withheld pursuant to a determination by (title of court so ordering) under the Financial Records Privacy Act that such notice might (state reason). The purpose of the investigation or official proceeding was  .”

  2. When access to financial records is obtained pursuant to § 45-10-107 (b), under emergency access, the government authority shall, unless a court has authorized delay of notice pursuant to subsections (a) and (b), as soon as practical after the records are obtained, serve upon the customer or mail by registered or certified mail to the customer's last known address a copy of the subpoena or other documents noting the judicial proceedings in which the customer is a party.
  3. Any memorandum, affidavit, or other paper filed in connection with a request for delay in notification shall be preserved by the court. Upon petition by the customer to whom the records pertain, the court may order disclosure of the papers to the petitioner. If the petition is prior to the expiration of the period of delay ordered by the court or an extension thereof, the court may order disclosure, unless the court makes the findings required in subsection (a). If the petition is after expiration of the period of delay or an extension thereof, the court shall order disclosure unless the court makes a finding that the record should be sealed in the interest of justice.

Acts 1995, ch. 309, § 7.

Compiler's Notes. The Financial Records Privacy Act, referred to in (b)(3), is compiled in this chapter.

Cross-References. Certified mail instead of registered mail, § 1-3-111.

45-10-118. Disclosure relative to child support enforcement.

  1. Notwithstanding any other provisions of any law or regulation to the contrary, a financial institution shall disclose upon request to any Title IV-D child support agency of this state or any other state or territory or the federal government, their contractors or duly authorized agents, that are seeking to establish, modify, or enforce any child support obligation, any financial information, including, but not limited to, assets and liabilities, relative to any person who is the subject of any judicial or administrative action or process that establishes, modifies or enforces child support obligations.
  2. Access to records upon request of the entities shall include automated access to data bases containing financial information wherever agreements pursuant to § 45-19-101 have been entered between the department of human services and any financial institution.
  3. Notwithstanding any other law or regulation to the contrary, any financial institution or any financial institution's contractor that may process any records pursuant to this section that discloses pursuant to this section any financial record to any Title IV-D child support agency of this state or any other state or territory or the federal government, their contractors or duly authorized agents that are attempting to establish, modify or enforce a child support obligation shall not be liable under any law or regulation of this state to any person for the disclosure, and shall be absolutely immune from any civil or criminal liability for the disclosure in response to the requirements of this section.
  4. A child support enforcement agency that obtains a financial record from a financial institution pursuant to this section or any other provision of law may disclose the information only as permitted pursuant to § 71-1-131.
  5. For purposes of this section, “financial institution” means:
    1. A depository institution, as defined in §  3(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(c));
    2. An institution-affiliated party, as defined in § 3(u) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(u));
    3. Any federal credit union or state credit union, as defined in § 101 of the Federal Credit Union Act (12 U.S.C. § 1752), including an institution-affiliated party of the credit union, as defined in § 206 of the Federal Credit Union Act (12 U.S.C. § 1786); and
    4. Any benefit association, insurance company, safe deposit company, money market mutual fund, securities broker/dealer, or similar entity authorized to conduct business in this state.
  6. For the purposes of this section, “financial record” has the meaning given the term by § 1101 of the Right to Financial Privacy Act of 1978 (12 U.S.C. § 3401).
  7. For the production of financial information or financial records, other than those specifically provided in the data match provisions of ch. 19, part 1 of this title by contract with the financial institution, the department shall pay a reasonable fee not to exceed the actual cost to the financial institution for researching or producing financial records. A reasonable fee shall be deemed to be the lesser of the financial institution's ordinary and customary fees for producing customer records or the fees established by the federal reserve board for the production of records.

Acts 1997, ch. 551, § 13.

45-10-119. Administrative subpoena for records relevant to financial exploitation.

  1. A financial institution shall provide access to or copies of records that are relevant to suspected actual or attempted financial exploitation, as defined in § 45-2-1202, in response to an administrative subpoena that satisfies the requirements of § 45-10-103(8) issued by the department of human services, adult protective services as provided in § 71-6-103(j)(4)(A). The records requested pursuant to this subsection (a) must be limited to historical records as well as records relating to the most recent transaction or transactions that may comprise financial exploitation not to exceed thirty (30) calendar days prior to the first transaction that was reported, or thirty (30) calendar days after the last transaction that was reported.
  2. The administrative subpoena and records provided under this section are exempt from the customer consent and customer notice requirements of §§ 45-10-105 and 45-10-106.
  3. A financial institution has up to fourteen (14) business days to respond to an administrative subpoena described in subsection (a).
  4. The department of human services must provide notice to the customer whose records are requested pursuant to subsection (a) not later than thirty (30) days after receipt of the records from the financial institution. However, the department may delay the notice to the customer by seeking a judicial delay pursuant to § 45-10-117.

Acts 2017, ch. 264, § 3.

Compiler's Notes. Acts 2017, ch. 264, § 6 provided that the  Department of Financial Institutions is encouraged, within existing public or private resources, to consult with financial service providers as defined in this act, the Tennessee Commission on Aging and Disability, and the Department of Human Services to consider distributing public education and information to alert the public to the dangers posed to elderly and vulnerable adults by financial exploitation.

Chapter 11
Financial Institutions Conversion Act

45-11-101. Short title.

This chapter shall be known and may be cited as the “Financial Institutions Conversion Act of 1985.”

Acts 1985, ch. 174, § 1.

Compiler's Notes. Acts 1985, ch. 174, § 9 provided that this chapter was remedial in nature and to be liberally construed to effectuate its purpose.

The “Financial Institutions Conversion Act of 1985” also included amendments to §§ 45-2-1302, 45-2-1303, 45-2-1304, and 45-3-1102.

Cross-References. Volunteer corporate changes by banking institutions, title 45, ch. 2, part 13.

Volunteer corporate changes by savings and loan associations, title 45, ch. 3, part 11.

45-11-102. Chapter definitions.

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

  1. “Capital stock financial institution” means a financial institution, 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 financial institution;
  2. “Converting institution” means a financial institution converting to another type of financial institution;
  3. “Financial institution” means a savings and loan association, bank, savings bank, credit union, or trust company organized under the laws of any state or organized under the laws of the United States;
  4. “Mutual financial institution” means an association or savings bank or credit union, 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 financial institution; and
  5. “Resulting financial institution” means the financial institution resulting from a conversion and having its principal place of business in this state.

Acts 1985, ch. 174, § 2; 1991, ch. 33, §§ 1, 2; 2008, ch. 968, §§ 1, 2; 2018, ch. 741, §§ 1, 2.

45-11-103. Scope.

This chapter shall not be construed to modify, limit or repeal the provisions of chapter 2, part 13 of this title, or chapter 3, part 11 of this title, except as expressly stated in this chapter.

Acts 1985, ch. 174, § 2.

45-11-104. Conversion of charter.

Any financial institution may apply to the commissioner for permission to convert its charter in order to do business as another type of financial institution in accordance with the procedures prescribed in this chapter.

Acts 1985, ch. 174, § 2.

45-11-105. Conversion procedure.

  1. The board of directors of the converting institution shall, by a majority of the entire board, approve a plan of conversion that contains:
    1. The type of financial institution that will result from the conversion;
    2. The proposed name of the resulting institution;
    3. The proposed effective date of conversion;
    4. A copy of the proposed charter of the resulting institution;
    5. A copy of the proposed bylaws of the resulting institution;
    6. The method for converting the current capital structure of the institution to the structure indicated for the resulting institution by the proposed charter;
    7. The name of each director and executive officer, the office held and the director's or officer's experience;
    8. The method and schedule for terminating any activities and disposing of any assets that do not conform to the requirements of the resulting institution, and for meeting any requirements applicable to the resulting institution that the converting institution does not presently satisfy;
    9. Any additional activities the converting institution intends to conduct immediately upon the effective date of the conversion that it does not presently conduct;
    10. A copy of the application for deposit insurance or insurance of accounts;
    11. Provisions for appointment of successors to any fiduciary positions held by the converting institution if the resulting institution will not exercise trust powers;
    12. The competitive impact of the conversion, if any, including any effect on the availability of particular financial services in the community served by the institution;
    13. A statement that the conversion is subject to approval by the commissioner and by the shareholders or members of the financial institution; and
    14. Other provisions that the commissioner requires in order to discharge the commissioner's duties with respect to the conversion.
  2. After approval by the board of directors of the converting financial institution, the plan of conversion shall be submitted to the commissioner for approval, together with a certified copy of the authorizing resolutions of the board of directors showing approval by a majority of the entire board.
  3. The application for conversion pursuant to this chapter shall be accompanied by a nonrefundable fee in the amount established by regulation.
  4. The commissioner shall approve the plan of conversion if it appears that:
    1. The resulting financial institution meets the requirements of law applicable to the resulting institution;
    2. The plan of conversion provides an adequate capital structure in relation to deposit liabilities of the resulting financial institution and its other activities that are to continue or are to be undertaken;
    3. The officers and directors of the resulting institution have sufficient experience, ability, and standing to afford reasonable promise of successful operation;
    4. The proposed name of the resulting institution is not deceptively similar to that of another institution;
    5. The schedule for termination of any nonconforming activities and disposition of any nonconforming assets is timely, and the plan for termination and disposition does not include any unsafe or unsound practice;
    6. The plan of conversion is fair;
    7. The conversion is not contrary to the public interest; and
    8. The resulting institution will be able to obtain federal deposit insurance.
  5. The commissioner, if disapproving a plan of conversion, shall state any objections and give an opportunity to the converting institution to obviate the objections.

Acts 1985, ch. 174, § 2; 1999, ch. 112, § 19; 2008, ch. 968, §§ 3, 4.

45-11-106. Approval by stockholders of converting financial institution.

  1. To be effective, a plan of conversion for a stock-owned financial institution must be approved by the stockholders of the converting financial institution by a majority vote of the outstanding voting stock of each class at a meeting called to consider such action, which vote shall constitute the adoption of the charter and bylaws of the resulting financial institution.
  2. To be effective, a plan of conversion for a mutually-owned financial institution must be approved by a majority vote of those members of the institution qualified to vote in person or by mail ballot at a meeting called to consider such action; provided, however, that a plan of conversion by a credit union shall be approved in accordance with the membership approval process for a federally insured credit union, to the extent such membership approval process is applicable.
  3. Prior to mailing, notice of the meeting of shareholders or members and the proxy statement or mail ballot form shall be submitted to the commissioner for approval. The commissioner may require changes in the disclosures and the proxy or mail ballot provided to the stockholders or members to assure full and adequate disclosure prior to those documents being mailed to stockholders or members.
  4. Notice of the meeting and other disclosures shall be mailed to each stockholder or member thirty (30) days prior to the date of the meeting called to consider the conversion.

Acts 1985, ch. 174, § 2; 2008, ch. 968, § 5.

45-11-107. Effective date of conversion — Certificate of conversion.

  1. The conversion shall, unless a later date is specified in the plan of conversion, become effective upon the filing with the commissioner of the executed plan of conversion, together with a copy of the resolution of the stockholders or members of the converting financial institution approving it, certified by the financial institution's president or a vice president and a cashier.
  2. The commissioner shall thereupon approve the proposed charter of the resulting financial institution for filing with the secretary of state and issue to the resulting financial institution a certificate of conversion.
    1. The certificate of conversion shall be issued after the following conditions have been met:
      1. Provisions of the plan of conversion for successors to fiduciary positions held by the converting institution have been implemented; and
      2. A commitment for federal deposit insurance effective as of the proposed effective date of conversion has been received.
    2. The certificate shall be conclusive evidence of the conversion and correctness of all proceedings therefor in all courts and places, and shall be recorded in the same manner as is provided for recording of a charter of the institution.

Acts 1985, ch. 174, § 2; 2008, ch. 968, § 6.

45-11-108. Continuation of corporate entity.

  1. From and after the effective date of conversion, the resulting institution shall be deemed to be a continuation of the converting institution such that all property of the converting institution, including all right, title and interest in and to all property of whatsoever kind, whether real, personal or mixed, and things and action, and all rights, privileges and interests, and assets of any conceivable value or benefit that are then existing, or pertaining to it, or that would inure to it, shall immediately be vested in and continue to be the property of the resulting institution, by act of law and without any conveyance or transfer or without further act or deed; and the institution shall have, hold and enjoy the property in its own right as fully and to the same extent as the property that was possessed, held and enjoyed by the converting institution; and, as of the effective date of the conversion, the resulting institution shall have and shall succeed to all the rights, obligations and relations of the converting institution.
  2. If the resulting institution is a savings and loan association or bank or a savings bank, it may continue to operate as branch offices all offices of the converting institution in existence or applications filed for branches pending approval by the appropriate authority. For the purpose of § 45-3-301 and chapter 2 of this title, the date chartered will be the date the converting institution was chartered prior to conversion.
  3. Any pending action or other judicial proceeding to which the converting institution is a party shall not be deemed to have been abated or to have been discontinued by reason of the conversion but may be prosecuted to a final judgment, order or decree in the same manner as if the action had not been taken; and the institution resulting from the conversion may continue the action in its new name; and any judgment, order or decree may be rendered for or against it that might have been rendered for or against the converting institution previously involved in the judicial proceeding.
  4. The resulting institution shall be liable for all obligations of the converting institution that existed prior to the action; and the action taken shall not prejudice the right of a creditor of the converting institution to have its debts paid out of the assets throughout, nor shall the creditor be deprived of, or prejudiced in, any action against the officers, directors, incorporators or members of the converting institution for neglect or misconduct.

Acts 1985, ch. 174, § 2; 1985, ch. 268, § 2; 1991, ch. 33, § 3.

Compiler's Notes. Section 45-3-301, referred to in this section, was repealed by Acts 1990, ch. 624, and new provisions were substituted therefor.

45-11-109. Fees, commissions or other forms of consideration prohibited.

A director, officer, committee member, agent or senior management employee of a credit union, and immediate family members of such individuals shall not, directly or indirectly, receive a fee, commission, or other consideration, other than that person's usual salary or compensation for aiding, promoting, or assisting in a conversion under this chapter.

Acts 2008, ch. 968, § 7.

45-11-110. Powers of commissioner — Rules and regulations.

The commissioner is granted the power to promulgate substantive and procedural rules and regulations to carry out the purposes of this chapter. The rules and regulations shall be promulgated in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 2008, ch. 968, § 8.

Chapter 12
Flexible Credit Act

45-12-101. Short title.

This chapter shall be known and may be cited as the “Flexible Credit Act.”

Acts 2014, ch. 969, § 1.

45-12-102. Chapter definitions.

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

  1. “Commissioner” means the commissioner of financial institutions or the commissioner's designee;
    1. “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;
    2. For purposes of this subdivision (2), 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 subdivision (2), the commissioner may determine whether a person, in fact, controls another person;
  2. “Controlling person” means any person in control of a licensee;
  3. “Department” means the department of financial institutions;
  4. “Flex loan” means a loan made pursuant to a flex loan plan;
  5. “Flex loan plan” means a written agreement subject to this chapter between a licensee and a customer establishing an open-end credit plan under which the licensee contemplates repeated noncommercial loans for personal, family, or household purposes, that:
    1. May be unsecured or secured by personal property;
    2. May be without fixed maturities or limitation as to the length of term; and
    3. Are subject to prepayment in whole or in part at any time without penalty;
  6. “Licensee” means a person licensed to offer flex loans pursuant to this chapter; and
  7. “Person” means an individual, group of individuals, partnership, association, corporation, or any other business unit or legal entity.

Acts 2014, ch. 969, § 1.

45-12-103. License required to engage in business of making flex loans — Designation of agent for service of process by nonresident licensees.

  1. No person shall engage in the business of making flex loans unless the person is licensed to make flex loans pursuant to this chapter. A person shall be deemed to be engaged in the business of making flex loans in this state if the person induces a consumer, while located in this state, to enter into a flex loan plan in this state through the use of the internet, facsimile, telephone, or other means. A separate license shall be required for each location from which the business of making flex loans is conducted.
  2. Any nonresident person seeking a license under this chapter shall furnish the commissioner with the name and address of a resident of this state upon whom notices or orders issued by the commissioner, or process affecting a licensee under this chapter, may be served. The nonresident licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, and the change shall not become effective until approved by the commissioner.

Acts 2014, ch. 969, § 1.

45-12-104. Qualifications for licensure — Continuing nature.

  1. To qualify for a license to make flex loans, an applicant shall meet the following requirements:
    1. The applicant has a tangible net worth that comprises tangible assets less liabilities of not less than fifty thousand dollars ($50,000) for each location; and
    2. The financial responsibility, financial condition, business experience, character, and general fitness of the applicant shall reasonably warrant the belief that the applicant's business will be conducted lawfully and fairly. In determining whether this qualification has been met, and for the purpose of investigating compliance with this chapter, the commissioner may review and approve:
      1. The relevant business records and the capital adequacy of the applicant;
      2. The competence, experience, integrity and financial ability of any person who is a director, officer, or ten percent (10%) or more shareholder of the applicant or who owns or controls the applicant; and
      3. Any record, on the part of the applicant or any person referred to in subdivision (a)(2)(B), of any criminal activity; any fraud or other act of personal dishonesty; any act, omission or practice that constitutes a breach of a fiduciary duty; or any suspension, removal or administrative action by any agency or department of the United States or any state, from participation in the conduct of any business.
  2. The requirements set forth in subsection (a) are continuing in nature.

Acts 2014, ch. 969, § 1.

45-12-105. Contents of written application for license.

Each application for a license shall be in writing and made under oath or affirmation to the commissioner, in a form prescribed by the commissioner, and shall include the following:

  1. The legal name, residence and business address of the applicant and, if the applicant is a partnership, association, or corporation, of every member, officer, managing employee and director thereof;
  2. The location in this state where the registered agent of the applicant shall be located; provided, that “registered agent of the applicant” includes a person designated by the applicant for accepting notices or orders by the commissioner, or process affecting the applicant, pursuant to § 45-12-103; and
  3. Other data and information the commissioner may require with respect to the applicant, and its directors, trustees, officers, members, managing employees or agents.

Acts 2014, ch. 969, § 1.

45-12-106. Application requirements.

  1. Each application for a license shall be accompanied by:
    1. A filing fee of five hundred dollars ($500), which shall not be subject to refund but which, if the license is granted, shall constitute the license fee for the first license year or part thereof; provided, however, that if a supervision fee is established pursuant to § 45-1-118, the commissioner shall require applicants under this chapter to, instead, pay the nonrefundable supervision fee in place of the filing fee. The filing fee or supervision fee shall be applicable to each location;
    2. An audited financial statement, including, but not limited to, a balance sheet, a statement of income or loss, and a statement of changes in financial position, for the immediately preceding fiscal year end, prepared in accordance with generally accepted accounting principles by a certified public accountant or public accounting firm, neither of which is affiliated with the applicant. For a newly created entity, the commissioner may accept only a balance sheet prepared by a certified public accountant or public accounting firm, neither of which is affiliated with the applicant, accompanied by a projected income statement demonstrating that the applicant will have adequate capital after payment of start-up costs; and
    3. A surety bond, issued by an insurer regulated under title 56 and not affiliated with the applicant, in the amount of twenty-five thousand dollars ($25,000) for each location. However, in no event shall the aggregate amount of the surety bond required for a single licensee exceed two hundred thousand dollars ($200,000). In lieu of the surety bond, the applicant shall file an irrevocable letter of credit, in the amount of the surety bond, issued by any federally insured bank, savings bank or credit union, none of which is affiliated with the applicant. The surety bond or irrevocable letter of credit shall be in a form satisfactory to the commissioner and shall be payable to the commissioner for the benefit of any person who is injured pursuant to a flex loan plan by the fraud, misrepresentation, breach of contract, financial failure or violation of any provision of this chapter by a licensee. In the case of a surety bond, the aggregate liability of the surety bond shall not exceed the principal sum of the surety bond. In the case of an irrevocable letter of credit, applicants shall obtain letters of credit for terms of not less than three (3) years and renew the letters of credit annually. If the licensee fails to pay a person or the commissioner as required by this chapter, then a person may bring suit against the licensee directly on the surety bond or irrevocable letter of credit in any court of competent jurisdiction, or the commissioner may bring suit in the chancery court of Davidson County on behalf of those persons, in either one (1) or successive actions. The surety bond or irrevocable letter of credit shall be maintained by the licensee for not less than three (3) years following the expiration, revocation, or surrender of the licensee's license.
    1. The commissioner is authorized to require an applicant for a license to consent to a criminal history records check and to provide with the application fingerprints in a form acceptable to the commissioner. The commissioner may require such consent and fingerprints from any individual who is a director, officer, or ten percent (10%) or more shareholder of the applicant or who owns or controls the applicant, as well as from any other individual associated with the applicant as is reasonably necessary to meet the purposes of this chapter. Refusal of any person to consent to a criminal history records check or to provide fingerprints pursuant to this subsection (b) constitutes grounds for the commissioner to deny the applicant a license.
    2. Any criminal history records check conducted pursuant to this subsection (b) shall be conducted by the Tennessee bureau of investigation, the federal bureau of investigation, or both, and the results of the criminal history records check shall be forwarded to the commissioner. All costs incurred in conducting the criminal history records check shall be paid by the applicant, in addition to any other fees required by this chapter.

Acts 2014, ch. 969, § 1.

45-12-107. Investigation of applicants — Issuance of license — Posting of license — Term of license.

  1. Upon the filing of an application in a form prescribed by the commissioner, accompanied by the fee and documents required in § 45-12-106, the commissioner shall investigate to ascertain whether the requirements prescribed by § 45-12-104 have been satisfied. If the commissioner finds that the requirements have been satisfied, and approves the documents, the commissioner shall issue to the applicant a license to engage in the business of making flex loans in this state.
  2. The license shall be kept conspicuously posted in the place of business of the licensee.
  3. A license issued pursuant to this chapter shall remain in force and effective through the remainder of the year ending December 31 after its date of issuance unless earlier surrendered, suspended or revoked pursuant to this chapter.

Acts 2014, ch. 969, § 1.

45-12-108. Denial of application — Hearing.

  1. If the commissioner determines that an applicant is not qualified to receive a license, the commissioner shall notify the applicant in writing that the application has been denied, stating the basis for denial.
  2. If the commissioner denies an application, or if the commissioner fails to act on an application within ninety (90) days after the filing of a properly completed application, the applicant may make a written demand to the commissioner for a hearing before the commissioner on the question of whether the license should be granted.
  3. Any hearing on the denial of a license shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In the hearing, the burden of proving that the applicant is entitled to a license shall be on the applicant. A decision of the commissioner following any hearing on the denial of a license is subject to review under the Uniform Administrative Procedures Act.

Acts 2014, ch. 969, § 1.

45-12-109. Expiration of license — Renewal — Fees — Biennial license arrangement — Criminal history records check.

  1. Licenses issued pursuant to this chapter shall expire on December 31. Each license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the requirements of § 45-12-104 and the payment to the commissioner annually, between November 1 and December 31, of a license renewal fee of five hundred dollars ($500). If a supervision fee is established pursuant to § 45-1-118, the commissioner shall require licensees under this chapter to, instead, pay the nonrefundable supervision fee in place of the license renewal fee.
  2. A licensee making timely and complete application for renewal of its license shall be permitted to continue to operate under its existing license until its application is approved or denied.
  3. The commissioner may establish a biennial license arrangement for the filing of the application for license renewal, but in no case shall the license fee or supervision fee, if established pursuant to § 45-1-118, be payable for more than one (1) year at a time.
    1. In connection with an application for license renewal, the commissioner may require a licensee to consent to a criminal history records check and to provide with the application fingerprints in a form acceptable to the commissioner. The commissioner may require such consent and fingerprints from an individual who is a director, officer, or ten percent (10%) or more shareholder of the licensee, or who owns or controls the licensee, as well as from any other individual associated with the licensee as is reasonably necessary to meet the purposes of this chapter. Failure to provide the consent and fingerprints within thirty (30) days of the commissioner's request shall constitute grounds for the commissioner to deny the application for license renewal.
    2. A criminal history records check conducted pursuant to this subsection (d) shall be conducted by the Tennessee bureau of investigation, the federal bureau of investigation, or both, and the results of the criminal history records check shall be forwarded to the commissioner. All costs incurred in conducting the criminal history records check shall be paid by the licensee, in addition to other fees required by this chapter.

Acts 2014, ch. 969, § 1; 2015, ch. 438, § 1.

45-12-110. License nontransferable and nonassignable — Change in control of licensee — Notification to department of change in place of business.

  1. A license issued pursuant to this chapter is not transferable or assignable.
    1. The prior written approval of the commissioner is required for the continued operation of a flex loan business whenever a change in control of a licensee is proposed. The commissioner may require information deemed necessary to determine whether a new application is required. Reasonable and actual costs incurred by the commissioner in investigating a change of control request shall be paid by the person requesting approval.
    2. Whenever control is acquired or exercised in violation of this section, the license shall be deemed revoked as of the date of the unlawful acquisition of control. The licensee or its controlling person shall surrender the license to the commissioner on demand.
  2. A licensee shall notify the department five (5) days before any change in the licensee's principal place of business, branch office or name.

Acts 2014, ch. 969, § 1.

45-12-111. Interest, fees, and charges.

  1. Notwithstanding any other statutory limitation, a licensee authorized to make flex loans under this chapter may charge and collect interest, fees, and charges in a manner consistent with this section.
  2. A licensee may charge and collect a periodic interest rate not to exceed twenty-four percent (24%) per annum.
    1. In addition to the periodic interest rate authorized under subsection (b), a licensee may also charge and collect a customary fee to defray the ordinary costs of opening, administering, and terminating a flex loan plan, including, but not limited to, costs associated with:
      1. Underwriting and documenting the account;
      2. Securing and maintaining account information;
      3. Validating customer information;
      4. Offering electronic and phone access to accounts;
      5. Processing account transactions;
      6. Responding to customer inquiries;
      7. Providing periodic billing statements;
      8. Inspection, verification, and protection of collateral and establishment, perfection, and release of the security interest; and
      9. All other services or activities conducted by the licensee under the flex loan plan.
    2. The customary fee shall not be deemed interest for any purpose of law and shall not exceed a daily rate of seven-tenths of one percent (0.7%) of the average daily principal balance in any billing cycle.
  3. No flex loan plan under this chapter shall have an outstanding principal balance in excess of four thousand dollars ($4,000) at any time.
  4. Any flex loan plan under this chapter shall require payment on or before the due date of each billing cycle in an amount sufficient to reduce any outstanding principal balance by at least three percent (3%) per calendar month.
    1. In the event a customer defaults under the terms of a flex loan plan and the licensee refers the customer's account to an attorney, including a regular salaried employee of the licensee, for collection, the licensee may:
      1. If the flex loan plan so provides, charge and collect from the customer a reasonable attorney's fee; and
      2. If the flex loan plan, or in the case of secured plans, the security agreement or similar instrument, so provides, recover from the customer all collection and court costs, including, in the case of secured plans, all costs of enforcing the security agreement or similar instrument actually incurred by the licensee, including those incurred on appeal.
    2. A licensee may charge and collect interest following default of the customer or judgment in favor of the licensee at the periodic rate permitted by this section.
    3. Disposition of property after default shall occur in a commercially reasonable manner in accordance with title 47, chapter 9, part 6.
  5. If a check is returned to a licensee from a payer financial institution due to insufficient funds, no licensee shall have the authority to assess a handling charge against the maker or drawer of the returned check.

Acts 2014, ch. 969, § 1.

45-12-112. Licensee to provide to prospective customers written explanation of interest, fees, and charges — Requirements for account-opening statement — Billing statements.

  1. A licensee shall provide each prospective customer, before consummation of a flex loan plan, a written explanation, in clear, understandable language, of the interest, fees, and charges to be charged by the licensee. The style, content and method of executing the required written explanation shall comply with federal truth-in-lending laws and shall contain a statement that the customer may prepay the unpaid balance in whole or in part at any time without penalty. The commissioner may promulgate rules establishing additional requirements in order to assure complete and accurate disclosure of the interest, fees, and charges to be charged by a licensee under a flex loan plan.
  2. The account-opening statement for any flex loan plan shall include, along with other state or federal law requirements:
    1. A next-business-day customer's right of rescission for any requested draw under the flex loan plan; and
    2. A notice informing the customer that complaints may be made to the department, including the department's telephone number and address.
  3. The account-opening statement for any flex loan plan shall not require or provide the licensee the authority to require the customer to draw the full amount of credit available under a flex loan plan at any time.
  4. A licensee shall provide customers with a periodic billing statement in compliance with federal truth-in-lending laws.
  5. If two (2) or more customers having the same residence are authorized to obtain extensions of credit under the flex loan plan, the statement of provisions of the plan shall be provided to one (1) of the customers as may be designated in the plan, and the billing statements required by law shall be rendered to such customer.

Acts 2014, ch. 969, § 1.

45-12-113. Books, accounts and records — Limitations and requirements applicable to operation of business of making flex loans.

  1. Each licensee shall keep and use in its business any books, accounts and records the commissioner may require to effectuate this chapter and the rules promulgated pursuant to this chapter. Every licensee shall preserve the books, accounts and records for at least two (2) years. Any licensee, after receiving the prior written approval of the commissioner, may maintain records at a location within or outside this state.
  2. No licensee shall engage in unfair or deceptive acts, practices or advertising in the conduct of the licensed business.
    1. No customer may have outstanding more than one (1) flex loan plan under this chapter at any one (1) time. Each licensee shall inquire of any customer seeking a flex loan plan under this chapter regarding the customer's outstanding flex loan plans.
    2. If the customer represents in writing that the customer has no outstanding flex loan plans, a licensee may offer the customer a flex loan plan.
    3. If the customer represents in writing that the customer has one (1) or more outstanding flex loan plans, a licensee shall not offer a flex loan plan to the customer until the customer represents to the licensee in writing that the customer qualifies to open a new flex loan plan in accordance with this subsection (c).
    4. Each licensee may rely on a written representation of a customer regarding the existence of any outstanding indebtedness with any other lender other than the licensee receiving the representation.
  3. A licensee shall not use any device or agreement, including agreements with affiliated licensees, with the intent to obtain greater charges than otherwise would be authorized by this chapter.
  4. A licensee shall comply with any state or federal law, rule, or regulation applicable to any business authorized or conducted under this chapter, including, but not limited to, the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.), the federal Equal Credit Opportunity Act (15 U.S.C. §§ 1691-1691f), and the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.).
    1. No flex loan plan subject to this chapter shall:
      1. Provide that the law of a jurisdiction other than this state applies;
      2. Provide that the customer consents to the jurisdiction of another state or foreign country;
      3. Fix venue; or
      4. Waive any provision of this chapter.
    2. Any provision described in subdivision (f)(1) that is contained in a flex loan plan subject to this chapter shall be void and not enforceable as a matter of public policy.

Acts 2014, ch. 969, § 1.

45-12-114. Law applicable to business of making flex loans — Licensees legally exercising powers under this chapter not in violation of statutory provisions.

The business of making flex loans in accordance with this chapter shall not be subject to or controlled by any other statute governing the imposition of interest, fees or loan charges, including, but not limited to, § 47-14-104. A licensee shall not have the powers enumerated in this chapter without first complying with the law regulating the particular transaction involved, but licensees legally exercising any of the powers set forth in this chapter shall not be deemed in violation of §§ 47-14-112, 47-14-115, and 47-14-117.

Acts 2014, ch. 969, § 1.

45-12-115. Promulgation of rules — Investigation and examination of licensees — Payment of expenses of investigation or examination — Exception.

  1. The commissioner may promulgate rules in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the enforcement of this chapter. A copy of any rule adopted by the commissioner shall be mailed to the principal place of business of each license holder at least thirty (30) days before the date it takes effect.
  2. To assure compliance with this chapter, the commissioner may examine the relevant business, books and records of any licensee. Further, for the purposes of discovering violations of this chapter and determining whether persons are subject to this chapter, the commissioner may examine or investigate persons licensed under this chapter and persons reasonably suspected by the commissioner of conducting business that requires a license under this chapter by exercising authority that includes, but is not limited to, the power to summon witnesses and examine them under oath or affirmation, and to compel the production of books and records that may be relevant to the examination or investigation.
    1. A licensee or unlicensed person subject to the licensing requirements of this chapter, that is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination. The expenses shall be payable in addition to all other fees, taxes and costs required by law.
    2. If a supervision fee is established pursuant to § 45-1-118, then licensees who pay the supervision fee will no longer be required to pay examination expenses pursuant to this subsection (c) for examinations that occur after payment of the supervision fee.

Acts 2014, ch. 969, § 1.

45-12-116. Grounds for suspension or revocation of license — Revocation or suspension of multiple licenses — Hearing.

  1. The commissioner may, after notice and hearing, suspend or revoke any license if the commissioner finds that the licensee has knowingly or through lack of due care:
    1. Failed to pay any fees, expenses, or costs imposed by the commissioner under the authority of this chapter;
    2. Has committed any fraud, engaged in any dishonest activities or made any misrepresentations;
    3. Has violated any provision of this chapter, any rule issued pursuant to this chapter, or any other law in the course of the licensee's dealings as a licensee;
    4. Has made a false statement in the application for the license or failed to give a true reply to a question in the application; or
    5. Has demonstrated incompetency or untrustworthiness to act as a licensee.
  2. If the reason for revocation or suspension of a licensee's license at any one (1) location is of general application to all locations operated by a licensee, the commissioner may revoke or suspend all licenses issued to a licensee.
  3. A hearing shall be held on written notice given at least twenty (20) days prior to the date of the hearing and shall be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 2014, ch. 969, § 1.

45-12-117. Authorized actions by commissioner upon violation of chapter or rules.

If, after notice and opportunity for a hearing, the commissioner finds that a person has violated this chapter, or any rule issued pursuant to this chapter, the commissioner may take the following actions or any combination of such actions:

  1. Order the person to cease and desist violating the chapter or any rule promulgated pursuant to this chapter;
  2. Require the refund of any fees collected by the person in violation of this chapter; or
  3. Order the person to pay to the commissioner a civil penalty of not more than one thousand dollars ($1,000) for each transaction in violation of this chapter or for each day that a violation occurs or continues.

Acts 2014, ch. 969, § 1.

45-12-118. Grounds to suspend or bar a person from any position of employment, management or control of a licensee.

  1. The commissioner, after notice and opportunity for a hearing, may censure, suspend for a period not to exceed twelve (12) months, or bar a person from any position of employment, management or control of a licensee, if the commissioner finds that the:
    1. Censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this chapter or any rule or order of the commissioner; or
    2. Person has been:
      1. Convicted or pled guilty to, or pled nolo contendere to, any crime; or
      2. Held liable in any civil action by final judgment, or any administrative judgment by any public agency, if the criminal, civil or administrative judgment involved any offense reasonably related to the qualifications, functions, or duties of a person engaged in the business of making flex loans pursuant to this chapter.
  2. Persons suspended or barred under this section are prohibited from participating in any business activity of a licensee and from engaging in any business activity on the premises where a licensee is conducting its business. This subsection (b) shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a licensee.

Acts 2014, ch. 969, § 1.

45-12-119. Consent orders—Emergency actions by commissioner.

  1. The commissioner may enter into a consent order at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained in the order. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule or order promulgated or issued under this chapter has been violated, nor need it constitute a finding by the commissioner that the person has violated this chapter, or any rule or order promulgated or issued under this chapter.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken that is filed with the commissioner within twenty (20) days after receipt of the notice of the commissioner's emergency action.

Acts 2014, ch. 969, § 1.

45-12-120. Complaints against licensees to be filed with commissioner — Investigative powers — Enforcement.

  1. Any person aggrieved by the conduct of a licensee under this chapter in connection with the licensee's regulated activities may file a written complaint with the commissioner who may investigate the complaint.
  2. In the course of the investigation of the complaint, the commissioner may:
    1. Subpoena witnesses;
    2. Administer oaths;
    3. Examine any individual under oath or affirmation; and
    4. Compel the production of records, books, papers, contracts or other documents relevant to the investigation.
  3. If any person fails to comply with a subpoena of the commissioner under this chapter or to testify concerning any matter about which the person may be interrogated under this chapter, the commissioner may petition any court of competent jurisdiction for enforcement.
  4. The license of any licensee under this chapter who fails to comply with a subpoena of the commissioner may be suspended pending compliance with the subpoena.
  5. The commissioner shall have exclusive administrative power to investigate and enforce any and all complaints relating to the business of making flex loans filed by any person that are not criminal in nature.

Acts 2014, ch. 969, § 1.

45-12-121. Events requiring notification by licensee to commissioner.

Within fifteen (15) days of the occurrence of any one (1) of the events listed in subdivisions (1)-(6), a licensee shall file a written report with the commissioner describing the event and its expected impact on the activities of the licensee in this state:

  1. The filing for bankruptcy or reorganization by the licensee;
  2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;
  3. The denial of the opportunity to engage in the business of making loans by any state or governmental authority;
  4. Any felony indictment of the licensee or any of its directors, officers or principals;
  5. Any felony conviction of the licensee or any of its directors, officers or principals; and
  6. Other events that the commissioner may determine and identify by rule.

Acts 2014, ch. 969, § 1.

45-12-122. Annual report by licensee — Confidentiality of information.

  1. Each licensee shall file an annual report with the commissioner on the date of the renewal application required in § 45-12-109 containing the following information:
    1. The names and addresses of persons owning a controlling interest in each licensee;
    2. The location of all places of business operated by the licensee and the nature of the business conducted at each location;
    3. The names and addresses of all affiliated entities regulated under this title doing business in this state;
    4. An audited financial statement, including, but not limited to, a balance sheet, statement of income or loss, and statement of changes in financial position, for the immediately preceding fiscal year end, prepared in accordance with generally accepted accounting principles by a certified public accountant or public accounting firm, neither of which is affiliated with the licensee; and
    5. If the licensee is a corporation, the names and addresses of its officers and directors; if the licensee is a partnership, the names and addresses of the partners; or if the licensee is a limited liability company, the names and addresses of the board of governors or managers of the limited liability company.
  2. If the licensee holds two (2) or more licenses or is affiliated with other licensees, a composite report may be filed, but may not be required.
  3. The reports shall be filed in a form that may reasonably be required by the commissioner and shall be sworn to by a responsible officer of the licensee.
  4. The information submitted by licensees pursuant to this section shall be afforded the same degree of confidentiality by the department and the commissioner as is applicable to reports filed by industrial loan and thrift companies pursuant to § 45-5-503.
  5. The commissioner shall prepare and submit to the governor and general assembly, annually, an analysis and recapitulation of the reports for the preceding calendar year for the purpose of reflecting the general results of operations under this chapter.

Acts 2014, ch. 969, § 1.

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

45-12-123. Multi-state automated licensing system.

  1. In addition to any other powers conferred upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be licensed through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate rules that are reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system;
    2. Establish relationships or enter into agreements that are reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements and technology licensing agreements;
    3. Require that applications for licensing under this chapter and renewals of such licenses be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning licensees to a multi-state automated licensing system. The commissioner has the authority to deny any applications or renewal applications not filed with a multi-state automated licensing system after such deadlines have passed, notwithstanding any dates established elsewhere in this chapter; provided, however, the commissioner shall provide reasonable notice of any transition deadlines to licensees; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section shall authorize the commissioner to require a person who is not subject to this chapter to submit information to, or to participate in, a multi-state automated licensing system that is operated, or participated in, pursuant to this chapter.
  3. Notwithstanding this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter to its fullest extent. Nothing in this section shall be deemed to be a reduction or derogation of that authority and discretion.
  4. Applicants for and holders of licenses issued under this chapter shall pay all costs associated with submitting an application to or transitioning a license to a multi-state automated licensing system, as well as all costs required by a multi-state automated licensing system for maintaining and renewing any license issued by the commissioner on a multi-state automated licensing system.

Acts 2014, ch. 969, § 1.

45-12-124. [Reserved.]

  1. In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:
    1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court with respect to such information or material, shall continue to apply to the information or material after the information or material has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with consumer credit oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law, including the protection available under § 45-1-120;
    2. For purposes of subdivision (a)(1), the commissioner is authorized to enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies as established by rule or order of the commissioner;
    3. Information or material that is subject to a privilege or confidential under subdivision (a)(1) shall not be subject to:
      1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or any agency of the federal government or the respective state; or
      2. Subpoena, discovery, or admission into evidence in any private civil action or administrative process, unless with respect to any privilege held by a multi-state automated licensing system applicable to such information or material, the person to whom such information or material pertains waives that privilege, in whole or in part, in the discretion of such person;
    4. This section shall supersede any inconsistent provisions of title 10, chapter 7, part 5 pertaining to the records open to public inspection; and
    5. This section shall not apply with respect to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.
  2. Notwithstanding any other provision in this chapter, the commissioner shall not use a multi-state automated licensing system for sharing any federal bureau of investigation criminal history background information, unless authorized to do so by the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §§ 5101-5116), as amended, or other federal law.

Acts 2014, ch. 969, § 1; 2015, ch. 438, § 3.

45-12-126. Allocation of certain fees.

The department may, in the department's sole discretion, allocate a portion of the total amount collected in fees pursuant to §§ 45-12-106 and 45-12-109 to the Tennessee financial literacy commission, created by § 49-6-1702.

Acts 2014, ch. 969, § 1.

45-12-125. Disclosure and sharing of information and material provided to multi-state automated licensing system.

Chapter 13
Tennessee Residential Lending, Brokerage and Servicing Act

Part 1
General Provisions

45-13-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Residential Lending, Brokerage and Servicing Act.”

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Cross-References. Duties of mortgagee or lender, title 47, ch. 23.

Home equity conversion mortgages, title 47, ch. 30.

Interest on home loans, title 47, ch. 15.

Interest rates generally, title 47, ch. 14.

Open-end mortgages and mortgages securing future advances, title 47, ch. 28.

Residential Closing Funds Distribution Act of 2005, title 47, ch. 32.

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

45-13-102. Purpose.

The origination or offering of financing for residential real property has a direct, valuable and immediate impact upon Tennessee's consumers, Tennessee's economy, the neighborhoods and communities of this state and the housing and real estate industry. The general assembly finds that accessibility to mortgage credit is vital to the state's citizens. It is the purpose of this chapter to ensure a sound system of making residential mortgage loans through the licensing, examination and regulation of mortgage lenders, mortgage loan brokers, mortgage loan servicers and mortgage loan originators. It is also the purpose of this chapter to carry out the purposes and to be compliant with the requirements of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. § 5101 et seq.).

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-103. Administrative authority.

The commissioner is granted broad administrative authority to administer, interpret and enforce this chapter and to promulgate reasonable substantive and procedural rules and regulations to carry out the purposes of this chapter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-104. Provisions remedial.

This chapter is declared to be remedial in nature, and this chapter shall be liberally construed to effectuate the purpose of this chapter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-105. Chapter definitions.

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

  1. “Branch manager” means the individual whose principal office is physically located in, who is in charge of and who is responsible for the business operations of a branch office of a mortgage lender or mortgage loan broker licensed under this chapter;
  2. “Branch office” means an office of a licensed mortgage lender or mortgage loan broker that is separate and distinct from the licensee's principal place of business;
  3. “Commissioner” means the commissioner of financial institutions or the commissioner's designated representative;
  4. “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;
  5. “Depository institution” has the same meaning as in § 3 of the Federal Deposit Insurance Act (12 U.S.C. § 1813), and includes any credit union;
  6. “Federal banking agencies” means the board of governors of the federal reserve system, the comptroller of the currency, the director of the office of thrift supervision, the national credit union administration and the federal deposit insurance corporation;
  7. “Immediate family member” means a spouse, child, sibling, parent, grandparent or grandchild. This includes stepparents,  stepchildren,  stepsiblings and adoptive relationships;
  8. “Individual” means a natural person;
  9. “License” means a license issued to a mortgage lender, mortgage loan broker, mortgage loan servicer or mortgage loan originator under this chapter, as applicable;
  10. “Licensee” means a person to whom a license has been issued under this chapter, whether a mortgage lender, mortgage loan broker, mortgage loan servicer or mortgage loan originator, as applicable, but “licensee” also applies to any person holding a certificate of registration on July 31, 2009, for so long as the certificate is still valid;
    1. In general, “loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of a person licensed or exempt from licensing under § 45-13-201;
    2. For purposes of subdivision (11)(A), “clerical or support duties” includes, subsequent to the receipt of an application:
      1. The receipt, collection, distribution and analysis of information common for the processing or underwriting of a residential mortgage loan; and/or
      2. Communicating with a consumer to obtain the information necessary for the processing or underwriting of a 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;
  11. “Loss mitigation specialist” means an individual employed by a mortgage lender or mortgage loan servicer licensed under this chapter, or by a registrant authorized to make residential mortgage loans under the Industrial Loan and Thrift Companies Act, compiled in chapter 5 of this title, whose activities are confined to the negotiation of terms of an existing residential mortgage loan owned or being serviced by that licensee or registrant for purposes of modifying the terms of the loan, such as by reducing the interest rate or extending the term of the loan, when the modification is done for purposes of avoiding or curing default; provided, that “negotiates terms of an existing residential mortgage loan” as used in this subdivision (12) shall not include the negotiation of the refinancing of the loan;
  12. “Managing principal” means an individual who agrees to be primarily responsible for the operations of a licensed mortgage lender or mortgage loan broker;
  13. “Mortgage lender” means any person who makes a residential mortgage loan or holds the person out as able to make a residential mortgage loan;
  14. “Mortgage loan broker” means any person who for compensation or other gain, paid directly or indirectly, or in expectation of compensation or other gain, solicits, places, negotiates or originates a residential mortgage loan for another person or offers to solicit, place, negotiate or originate a residential mortgage loan for another person or who closes a residential mortgage loan that may be in the mortgage loan broker's own name with funds provided by another person and which loan is thereafter assigned to the person providing the funding of the loan, regardless of whether the acts are done directly or indirectly, through contact by telephone, by electronic means, by mail or in person with the borrower or borrowers or potential borrower or borrowers;
    1. In general, “mortgage loan originator”:
      1. Means an individual who for compensation or gain or in the expectation of compensation or gain:
  1. Takes a residential mortgage loan application; or
  2. Offers or negotiates terms of a residential mortgage loan;

Does not include an individual engaged solely as a loan processor or underwriter except as otherwise provided in § 45-13-301(d);

Does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Tennessee law, unless the person or entity is compensated by a mortgage lender, mortgage loan broker, or other mortgage loan originator or by any agent of the mortgage lender, mortgage loan broker or other mortgage loan originator; and

Does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as defined in 11 U.S.C. § 101(53D);

For purposes of subdivision (16)(A), “real estate brokerage activities” means any activity that involves offering or providing real estate brokerage services to the public, including:

Acting as a real estate agent or real estate broker for a buyer, seller, lessor or lessee of real property;

Bringing together parties interested in the sale, purchase, lease, rental or exchange of real property;

Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental or exchange of real property, other than in connection with providing financing with respect to the transaction;

Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and

Offering to engage in any activity, or act in any capacity, described in subdivision (16)(B)(i), (16)(B)(ii), (16)(B)(iii) or (16)(B)(iv);

“Mortgage loan servicer” means any person who, in the regular course of business, assumes responsibility for servicing and accepting payments for a residential mortgage loan;

“Mortgagor” means any person who grants a mortgage, deed of trust or other equivalent consensual security interest pursuant to a residential mortgage loan transaction;

“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;

“Nontraditional mortgage product” means any mortgage product other than a thirty-year fixed rate residential mortgage loan;

“Origination services” means the activities of a mortgage loan originator performed with regard to a residential mortgage loan;

“Person” means an individual, sole proprietorship, corporation, limited liability company, partnership, trust, association or any other legal entity, however organized;

“Registered mortgage loan originator” means any individual who:

Meets the definition of mortgage loan originator and is an employee of:

A depository institution;

A subsidiary that is:

Owned and controlled by a depository institution; and

Regulated by a federal banking agency; or

An institution regulated by the farm credit administration; and

Is registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry;

“Registrant” has the same meaning as defined in § 45-5-102 of the Industrial Loan and Thrift Companies Act, compiled in chapter 5 of this title;

“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; and

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

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Attorney General Opinions. An individual investment property owner who provides a purchaser with financing that qualifies as a “residential mortgage loan” must be licensed under T.C.A. §§ 45-13-201, et seq., unless a statutory exception applies. Additionally, such an individual who provides such financing for compensation or gain or in the expectation thereof must be licensed under T.C.A. §§ 45-13-301, et seq., unless a statutory exception applies.  OAG 10-93, 2010 Tenn. AG LEXIS 99 (8/24/10).

45-13-106. Certificates of registration and registration certificates.

  1. Any certificate of registration or registration certificate issued by the commissioner under the former provisions of this chapter and outstanding on July 31, 2009, is not renewable, but shall remain valid until and expire on December 31, 2009, unless such authority is extended as provided in subsection (b) or subsection (c), as applicable. Any mortgage lender, mortgage loan broker or mortgage loan servicer holding a certificate of registration shall be considered to hold a license and shall be subject to this chapter as a licensee, except that such persons shall not be required to comply with any of the requirements pertaining to eligibility for a license that were not applicable to their qualification for a certificate, until such time as they are issued a license under this chapter. Any mortgage loan originator holding a valid registration certificate shall be subject to the prohibitions and enforcement mechanisms of this chapter, as well as to investigation and examination under this chapter, including the fingerprint background check provisions under § 45-13-302(f).
  2. A mortgage lender, mortgage loan broker or mortgage loan servicer holding a valid certificate of registration may extend the authority of their certificate; provided, that they have transitioned to the Nationwide Mortgage Licensing System and Registry by any deadline established by the commissioner, by filing on or before December 31, 2009, a licensure renewal application under § 45-13-203(c), including the requisite surety bond and renewal fee [now “supervision fee”. See Compiler's Notes]. If the renewal application is complete and timely filed, the person shall be authorized to continue to act as a mortgage lender, mortgage loan broker or mortgage loan servicer until such time as the commissioner has acted on the person’s renewal application. If the renewal application is not complete and timely filed, the person's certificate of registration shall expire without further notice or process on December 31, 2009. If the application for a license is approved, the license shall be issued for calendar year 2010.
  3. A mortgage loan originator holding a valid registration certificate may extend the authority of the certificate past December 31, 2009, by filing between November 1, 2009, and December 31, 2009, an application for a license under part 3 of this chapter through the Nationwide Mortgage Licensing System and Registry, paying all licensing fees and submitting fingerprints for a criminal background check. If the filing of the application, payment of licensing fees and submission of fingerprints is timely accomplished, the registration certificate shall remain valid until such time as the commissioner has acted on the licensure application, but in no event shall the certificate be valid after July 30, 2010. If the licensure application is approved, the license shall be issued for calendar year 2010. Any mortgage loan originator timely filing a licensure application under this subsection (c) shall be considered to be sponsored for purposes of part 3 of this chapter by the mortgage lender or mortgage loan broker named in the registration certificate upon any successive licensure. If a mortgage loan originator does not timely comply with the licensure application requirements of this subsection (c), the registration certificate shall expire without further notice or process on December 31, 2009. A mortgage loan originator holding a valid registration certificate under this subsection (c) shall not be in violation of the licensing requirements under part 3 of this chapter for origination services performed for or on behalf of the mortgage lender or mortgage loan broker named in the certificate; provided, however, that the registration certificate shall expire without further notice or process if the mortgage loan originator provides origination services for a person other than the one named in the registration certificate.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

As amended by Acts 2014, ch. 736, Section 45-13-203(c) referred to in (b) now requires payment of a “supervision fee” rather than a “renewal fee”.

45-13-107. Lost licenses — Substitutions.

In the event that a license issued under this chapter is lost or destroyed, the person to whom the license was issued may, upon payment of a nonrefundable fee prescribed by the commissioner, obtain a substitute license upon furnishing proof satisfactory to the commissioner that the license has become lost or destroyed.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-108. Filing of written report with commissioner — Events impacting activities of licensee.

Within fifteen (15) days of the occurrence of any one (1) of the following events, a licensee shall file a written report with the commissioner describing the event and its expected impact on the activities of the licensee in this state:

  1. The filing for bankruptcy or reorganization by the licensee;
  2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;
  3. The denial of the opportunity to engage in business by any state or governmental authority;
  4. Any felony indictment of the licensee or any of its officers, directors or principals;
  5. Any felony conviction of the licensee or any of its officers, directors or principals; and
  6. Other events that the commissioner may determine and identify by rule.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Part 2
Licensing of Mortgage Lenders, Mortgage Loan Brokers and Mortgage Loan Servicers

45-13-201. License required — Exceptions.

  1. No person shall act as a mortgage lender, mortgage loan broker or mortgage loan servicer in this state without first obtaining a license under this chapter. Except in the case of sale of real property as provided in subsection (b), no contractor or home improvement contractor or other person who supplies materials and renders services in the improvement of real property shall engage in the business of making residential mortgage loans or of being a mortgage loan servicer or mortgage loan broker in this state.
    1. The requirement of a license under subsection (a) and this chapter do not apply to any of the following, except as provided in subdivision (b)(2):
      1. Any depository institution;
      2. Any subsidiary of a depository institution that is owned and controlled by the depository institution and regulated by a federal banking agency;
      3. Any institution regulated by the farm credit administration;
      4. Any individual who makes a residential mortgage loan to, or offers or negotiates terms of a residential mortgage loan with or on behalf of, an immediate family member of the individual;
      5. An individual who makes a residential mortgage loan, or simply offers or negotiates terms of a residential mortgage loan, when the loan is secured by a dwelling that served as the individual's residence;
      6. A licensed attorney performing activities that do not require licensure under the guidelines set forth in 12 CFR part 1008, appendix D;
        1. Any person, or person under the control of another person who, as seller, receives or makes in any consecutive twelve-month period five (5) or fewer residential mortgage loans and who does not hold themselves out to the public as being in the residential mortgage lending business;
        2. No person shall be exempt from subsection (a) and this chapter pursuant to this subdivision (b)(1)(G) if such person makes more than five (5) residential mortgage loans in a consecutive twelve-month period whether such person makes such loans themselves or through another person over whom such person has control;
      7. Any person, or person under the control of a person, who makes a mortgage loan to an employee of such person as an employment benefit, employment incentive, or relocation package;
      8. Any person, or person under the control of a person, doing any act related to mortgage loans pursuant to an order of a court of competent jurisdiction;
      9. A person that performs only real estate brokerage activities, as defined in § 45-13-105, and is licensed pursuant to the Tennessee Real Estate Broker License Act of 1973, compiled in title 62, chapter 13. Such person is permitted to communicate and include in any contract any mortgage terms agreed upon by the parties for the real property being financed without being required to be licensed under this chapter, so long as the communication does not include the offering or negotiating of any terms of a residential mortgage loan; and
      10. A person that performs land title insurance services in connection with a closing of a sale transaction and is licensed pursuant to title 56, chapter 6 and the rules of the department of commerce and insurance compiled at chapter 0780-1-56. Such person is permitted to communicate and include in any closing documents any mortgage terms agreed upon by the parties for the real property being financed without being required to be licensed under this chapter, so long as the communication does not include the offering or negotiating of any terms of a residential mortgage loan.
    2. This subsection (b) does not exempt a person from licensure as a mortgage loan originator if the United States department of housing and urban development or its duly designated successor has expressly determined that the person is subject to licensure as a mortgage loan originator as the term is defined in the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. § 5101 et seq.).
  2. The requirement of a license to act as a mortgage lender under subsection (a) and the requirements of this chapter pertaining to mortgage lenders, unless otherwise stated, do not apply to any registrant making residential mortgage loans that is authorized to do so under the Industrial Loan and Thrift Companies Act, compiled in chapter 5 of this title; provided, however, that all mortgage loan originators of the registrant must be licensed under part 3 of this chapter.
  3. The commissioner shall be authorized to exempt in whole or in part from the requirements of this chapter additional entities or classes of entities, not including individuals, that the commissioner finds inappropriate to include to effectuate the purposes of this chapter, so long as the exemption is compliant with and does not impede the purposes of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. § 5101 et seq.).
  4. Upon approval or consent by the United States department of housing and urban development, the commissioner shall be authorized to exempt in whole or in part from this chapter additional individuals or classes of individuals, such as those working for bona fide nonprofit corporations and government agencies, that the commissioner finds inappropriate to include to effectuate the purposes of this chapter.

Acts 2009, ch. 499, § 8; 2011, ch. 228, § 1; 2013, ch. 104, §§ 1-4.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Acts 2011, ch. 228, § 2 provided that the secretary of state is directed to deliver a copy of the act, which amended subsections (a), (b) and (d), to the appropriate division of the United States department of housing and urban development having responsibility for administering the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, compiled in 12 U.S.C. § 5101 et seq.

Law Reviews.

1996 Real Estate Legislation: What You Don't Know Can  Hurt You (William R. Bruce), 32 No. 6 Tenn. B.J. 12 (1996).

Attorney General Opinions. An individual investment property owner who provides a purchaser with financing that qualifies as a “residential mortgage loan” must be licensed under T.C.A. §§ 45-13-201, et seq., unless a statutory exception applies. Additionally, such an individual who provides such financing for compensation or gain or in the expectation thereof must be licensed under T.C.A. §§ 45-13-301, et seq., unless a statutory exception applies.  OAG 10-93, 2010 Tenn. AG LEXIS 99 (8/24/10).

45-13-202. Application for license.

  1. The application for a license under § 45-13-201(a) shall be in writing, under oath and in the form prescribed by the commissioner and shall contain the following:
    1. The name and principal business address in this state of the applicant, the principal business address, if any, outside of this state of the applicant and all addresses within this state at which the applicant is conducting or intends to conduct business;
    2. If the applicant is other than a corporation, the form of the legal entity, such as sole proprietorship, general partnership, limited partnership, joint venture, trust or other legal entity, and the name and address, as applicable, of the sole proprietor, general partner or partners, joint venturer, grantor or other principal, as may be defined by and required by the commissioner;
    3. If the applicant is a corporation, the name and address of each executive officer and each director, the registered agent for service of process and each stockholder owning or controlling through voting trust or other agreement ten percent (10%) or more of the outstanding capital stock of the corporation;
    4. Whether the applicant seeks licensure as a mortgage lender, mortgage loan broker, mortgage loan servicer or any combination of mortgage lender, mortgage loan broker and mortgage loan servicer; and
    5. Other information that the commissioner may reasonably request pertaining to the activities of the applicant as a mortgage lender, mortgage loan broker or mortgage loan servicer.
  2. As a condition of licensure under this section, the commissioner may by rule require that each individual who is an officer, partner, managing member, managing principal or branch manager, or possesses control of the applicant as defined in § 45-13-105, or any other individual associated with the applicant as is reasonably necessary to meet the purposes of this chapter, successfully complete prelicensure testing or education courses, or both, approved by the commissioner. This subsection (b) shall not apply to renewals of existing licenses.
  3. The commissioner is authorized to require an applicant for a license under § 45-13-201(a) to consent to a criminal history records check and to provide with the application fingerprints in a form acceptable to the commissioner. The commissioner may require the consent and fingerprints from any individual who is an officer, partner, managing member, managing principal, branch manager or ultimate equitable owner of ten percent (10%) or more of the applicant, as well as from any other individual associated with the applicant as is reasonably necessary to meet the purposes of this chapter. No application shall be deemed complete until the consent and fingerprints have been submitted, and the refusal of any person to consent to a criminal history records check or to provide fingerprints as allowed by this subsection (c) constitutes grounds for the commissioner to deny licensure to the applicant.
    1. Any criminal history records check conducted under subsection (c) shall be conducted by the Tennessee bureau of investigation or the federal bureau of investigation, or both, and the results of the criminal history records check shall be forwarded to the commissioner. The reasonable costs incurred in conducting the criminal history records check shall be paid by the applicant, in addition to any other fees required by this section.
    2. Notwithstanding § 45-13-502 or any other provision in this chapter, the commissioner shall not use a multi-state automated licensing system to share federal bureau of investigation criminal history background information of any individual other than mortgage loan originators, unless authorized to do so by the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §§ 5101 — 5116), as amended, or other federal law.

Acts 2009, ch. 499, § 8; 2014, ch. 736, § 7; 2016, ch. 745, § 2.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-203. Licensing — Posting — Renewal — Abatement of fees — Biennial license fees.

    1. Upon the filing of a complete application for licensure as a mortgage lender, mortgage loan broker and/or mortgage loan servicer and the payment of all applicable fees, the commissioner shall investigate each application to the extent deemed necessary. The commissioner shall deliver a license to the applicant if the commissioner finds that the applicant, including its principals:
      1. Has the financial responsibility, experience and character to warrant the belief that the business of the applicant will be operated lawfully and within the purposes of this chapter;
      2. That the applicant has a tangible net worth (tangible assets less liabilities) of not less than twenty-five thousand dollars ($25,000) and an additional tangible net worth of twenty-five thousand dollars ($25,000) for each additional branch office within this state; and
      3. Has paid a nonrefundable supervision fee, as provided in § 45-1-118(i).
    2. If the commissioner does not find that the applicant and principals have met the requirements of subdivisions (a)(1)(A)-(C), the commissioner shall deny the application and notify the applicant of the denial, give notice of the grounds for the denial and notify the applicant of the right to request a hearing. If the commissioner denies an application or if the commissioner fails to act on an application within ninety (90) days after the filing of a properly completed application, the applicant may make written demand to the commissioner for a hearing on the question of whether the license should be granted. The commissioner shall notify the applicant of the date when the application is deemed complete. Nothing contained in this subdivision (a)(2) shall prohibit an applicant from modifying or amending the application in order to seek approval by the commissioner. If the commissioner denies any application and if the applicant requests a hearing, the commissioner shall conduct the hearing under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5; provided, that the applicant has requested the hearing in writing within thirty (30) days following the denial of the application by the commissioner. At the hearing, the burden of proving that the applicant is entitled to a license is on the applicant.
  1. Each license shall be conspicuously posted in the respective place of business of the licensee for which the license was issued.
    1. On or before December 31 of each year, a person holding a license issued under this part shall pay a nonrefundable supervision fee, as provided in § 45-1-118(i), to the commissioner for the following year, commencing January 1, together with such renewal application as the commissioner may require, including the surety bond adjusted in accordance with § 45-13-204. Failure to timely pay the supervision fee or to timely submit a completed renewal application shall cause the license to expire at the close of business on December 31.
    2. As a condition of licensure renewal, the commissioner may by rule establish continuing education requirements for each of the individuals identified in § 45-13-202(b). The rules for prelicensure and continuing education requirements under this part may include criteria for content, accreditation of sponsors and programs, computation of credit, special cases and exemptions, general compliance procedures and sanctions for noncompliance.
    3. A licensee making timely and proper application for renewal of its license shall be permitted to continue to operate under its existing license until its application is approved or denied. Should the commissioner deny the renewal application, the licensee may make written demand to the commissioner for a hearing on the question of whether the license should be renewed; provided, that the request for hearing be received by the commissioner within thirty (30) days from the date of denial; and provided, further, that the failure to timely request a hearing shall cause the license to be automatically revoked without further notice or hearing at the end of the thirty-day period. If a hearing is timely requested under this subdivision (c)(3), it shall be conducted under the Uniform Administrative Procedures Act, and the license shall not expire until resolution of the appeal in accordance with the Uniform Administrative Procedures Act.
  2. No abatement of the supervision fee shall be made if the license is surrendered, cancelled, revoked or suspended prior to the expiration of the period for which it was issued.
  3. The commissioner may require education and testing providers of any of the educational courses or tests required under this chapter to file information regarding the contents and materials of the proposed courses or tests with the commissioner for review or approval, or both. The commissioner may set fees for the initial and continuing review of courses and tests.
  4. The commissioner may establish a biennial license arrangement for the filing of the application for licensure renewal, but in no case shall the supervision fee be payable for more than one (1) year at a time.

Acts 2009, ch. 499, § 8; 2014, ch. 736, §§ 8-10.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-204. Surety bond required.

  1. At the time of filing an application for a license under § 45-13-201(a), the applicant shall also file with the commissioner a surety bond payable to the state, in a form to be approved by the commissioner, for the benefit of any person injured by the wrongful act, default, fraud or misrepresentation of the licensee. The bond must be issued by a bonding company qualified to do business in this state.
  2. For mortgage loan servicers, the surety bond shall be maintained in the amount of two hundred thousand dollars ($200,000).
  3. For mortgage lenders and mortgage loan brokers, the surety bond shall provide coverage for each mortgage loan originator in an amount in accordance with subsection (d); provided, however, that for the first calendar year of licensing in this state, or for calendar years 2009 and 2010, or both, as applicable, the surety bond for mortgage lenders shall be in the amount of two hundred thousand dollars ($200,000), and the surety bond for mortgage loan brokers shall be in the amount of ninety thousand dollars ($90,000).
  4. The penal sum of the surety bond of any mortgage lender or mortgage loan broker shall be maintained in an amount that reflects the dollar amount of loans originated, as determined by the commissioner.
  5. The bond shall be maintained for not less than twenty-four (24) months following the expiration, revocation, suspension or surrender of the license.
  6. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond to fulfill the requirements of this section.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-205. Change of address or officers — Annual report including past officers and directors.

  1. Each licensed mortgage lender, mortgage loan broker and mortgage loan servicer shall notify the commissioner five (5) days prior to any change in its principal place of business.
  2. Each licensed mortgage lender, mortgage loan broker and mortgage loan servicer shall notify the commissioner in writing within fourteen (14) days of any change of its president, chief executive officer, treasurer or chief financial officer or among the general partners or partners.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Attorney General Opinions. Applicability to real estate brokers, OAG 90-33, 1990 Tenn. AG LEXIS 31 (3/16/90).

45-13-206. Records and financial statements — Deposits and periodic payments — Disclosure.

  1. Every licensed mortgage lender, mortgage loan broker and mortgage loan servicer shall keep and maintain at all times in its principal place of business correct and complete records of all residential mortgage loan transactions arranged by the licensee.
  2. The financial statements furnished to the commissioner by each licensed mortgage lender, mortgage loan broker and mortgage loan servicer shall be prepared in accordance with generally accepted accounting principles consistently applied.
  3. If a deposit is required in connection with an application for a residential mortgage loan, there shall be a written agreement, signed by the parties, pertaining to the disposition of the deposit, whether the loan is finally consummated or not, and the term for which the agreement is to remain in force before return of the deposit for nonperformance can be required. A licensee who receives deposits shall preserve and on request make available to the commissioner all information related to the deposits. The licensee shall further preserve all agreements between the parties involved in the transaction and all contracts, agreements and instructions pertaining to the transaction.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-207. Preservation of records — Reproduction — Maintenance location.

  1. All books and records required to be preserved by any regulation of the commissioner or required by any federal statute, regulation or regulatory guideline, as applicable to each licensed mortgage lender, mortgage loan broker and mortgage loan servicer, shall be preserved and made available to the commissioner, as provided in this chapter, for the time that the commissioner may by rule or regulation require, not to exceed twenty-five (25) months on all rejected applications and not to exceed twenty-four (24) months on loans paid in full. The licensee may cause any or all records at any time in its custody to be reproduced or preserved by itself or by any other person who agrees in writing to submit its operations to the examination of the commissioner to the extent that the operations directly affect the recordkeeping, by any microphotographic process, electronic or mechanical data storage technique or any other means. Any record reproduced or preserved by those processes, techniques or means shall have the same force and effect as the original record and be admitted into evidence equally with the original.
  2. Any licensee, after receiving the prior written approval of the commissioner, may maintain records at any location within or outside of the state.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-208. Minimum information.

The commissioner may prescribe by rules and regulations the minimum information to be shown in the books, accounts and records of each licensee, so that the books, accounts and records will enable the commissioner to determine compliance with this chapter and with the rules and regulations lawfully made under this chapter.

Acts 2009, ch. 499, § 8; 2017, ch. 122, § 1.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-209. Statement of account.

Upon written request from the mortgagor, the holder of a residential mortgage loan shall deliver to the mortgagor, within fourteen (14) days from receipt of the written request, a statement of the mortgagor's account showing the date and amount of all payments credited to the account within the previous twelve-month period and the total unpaid balance. Not more than two (2) statements shall be required in any twelve-month period. If the holder of a residential mortgage loan forwards to the mortgagor an annual payment and escrow analysis, or other such analysis, the submission of the analysis to the mortgagor shall constitute a statement of the mortgagor's account.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-210. Change of control.

  1. A change in control of a person licensed as a mortgage lender, mortgage loan broker, and/or mortgage loan servicer under this chapter shall require thirty (30) days' prior written notice to the commissioner. In the case of a publicly traded corporation, notification shall be made in writing within thirty (30) days of a change or acquisition of control of a licensee.
  2. Upon notification of a change in control, the commissioner may require information deemed necessary to determine whether an application for a license is required. The commissioner may waive the filing of an application if, in the commissioner's discretion, the change in control does not pose any risk to the interests of the public.
  3. Whenever control is acquired or exercised in violation of this section, the license shall be deemed revoked as of the date of the unlawful acquisition of control. The licensee, or its controlling person, shall surrender the license to the commissioner on demand.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-211. Managing principals and branch managers.

  1. Each mortgage lender or mortgage loan broker licensed under this chapter shall have a managing principal who operates the business under that person's full charge, control and supervision. Each principal and branch office of a mortgage lender or mortgage loan broker shall have a manager. The mortgage lender or mortgage loan broker shall have the responsibility of ensuring that the manager has sufficient experience in the mortgage lending industry to operate the business of the mortgage lender or mortgage loan broker lawfully. The managing principal for a mortgage lender's or mortgage loan broker's business may also serve as the branch manager of one (1) of the mortgage lender's or mortgage loan broker's branch offices. Any individual mortgage lender or mortgage loan broker who operates a sole proprietorship shall be considered a managing principal for purposes of this chapter.
  2. Each mortgage lender or mortgage loan broker shall file a form as prescribed by the commissioner indicating the business's designation of managing principal and branch manager for each branch and each individual's acceptance of the responsibility.
  3. Each mortgage lender or mortgage loan broker shall notify the commissioner in writing within fourteen (14) business days of any change in its managing principal or branch manager designated for each branch.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Part 3
Mortgage Loan Originators

45-13-301. Mortgage loan originator — License required.

  1. An individual, unless specifically exempted under subsection (b), shall not engage in the business of a mortgage loan originator with respect to any dwelling located in this state without first obtaining and maintaining annually a license issued by the commissioner and without first being sponsored in accordance with § 45-13-303. Each individual must register with and maintain a valid unique identifier issued by the Nationwide Mortgage Licensing System and Registry in order to qualify for a mortgage loan originator license. The issuance of a mortgage lender or mortgage loan broker license to an individual does not exempt that individual from the requirements of this section.
  2. Registered mortgage loan originators, as defined in § 45-13-105, as well as any individuals described in § 45-13-201(b), are exempt from this chapter.
  3. An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists or other promotional items, that the individual can or will perform any of the activities of a mortgage loan originator.
  4. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless the independent contractor loan processor or underwriter obtains and maintains a mortgage loan originator license issued under this part.
  5. Any individual acting as a loss mitigation specialist shall not be required to comply with the licensing requirements of this section until July 30, 2011, or such other date as may be determined by the commissioner with the approval or consent of the United States department of housing and urban development. A loss mitigation specialist may refer a mortgagor to a mortgage loan originator for purposes of refinancing the residential mortgage loan without the requirement of a license under this part; provided, that the loss mitigation specialist does not receive any compensation or gain for the referral; and provided, further, that the referral is made in accordance with any applicable state and federal law.
  6. A mortgage loan originator license is not required for any individual performing the activities of a manufactured home retailer or a dealer of modular building units; provided, that:
    1. The individual either holds or is employed by a person who holds a manufactured home retailer license or a license to act as a dealer of modular building units that has been issued by the commissioner of commerce and insurance under title 68, chapter 126;
    2. The individual does not in any way offer or negotiate terms of a residential mortgage loan, including by counseling with respect to such terms;
    3. Neither the individual, nor the employing manufactured home retailer or dealer of modular building units, receives compensation or other gain from a mortgage lender, mortgage loan broker or mortgage loan originator, or by any agent of the mortgage lender, mortgage loan broker or mortgage loan originator; and
    4. This subsection (f) shall not apply if the United States department of housing and urban development determines by guideline, rule, interpretative letter or otherwise that the individuals must be licensed under the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. § 5101 et seq.), or that this subsection (f) is otherwise inconsistent with the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Attorney General Opinions. An individual investment property owner who provides a purchaser with financing that qualifies as a “residential mortgage loan” must be licensed under T.C.A. §§ 45-13-201, et seq., unless a statutory exception applies. Additionally, such an individual who provides such financing for compensation or gain or in the expectation thereof must be licensed under T.C.A. §§ 45-13-301, et seq., unless a statutory exception applies.  OAG 10-93, 2010 Tenn. AG LEXIS 99 (8/24/10).

45-13-302. Issuance of mortgage loan originator license.

  1. Individuals applying for a mortgage loan originator license shall complete and file a form as prescribed by the commissioner and shall pay a nonrefundable licensing fee of one hundred dollars ($100). The fee may be decreased or increased by rule of the commissioner, and constitutes the licensing fee for the first year of licensing or part of the first year. Each such application form shall be in writing and under oath and shall contain any information the commissioner deems necessary, including the following:
    1. The individual's name, date of birth, social security number and address;
    2. The name of any person for whom the individual intends to provide origination services and the address of the office at which the individual will be stationed;
    3. Information pertaining to the individual's personal history and experience; and
    4. The individual's authorization for the commissioner or the Nationwide Mortgage Licensing System and Registry, or both, to obtain:
      1. An independent credit report obtained from a consumer reporting agency, as defined in § 603(p) of the Fair Credit Reporting Act (15 U.S.C. § 1681a(p)); and
      2. Information related to any administrative, civil or criminal findings by any governmental jurisdiction.
  2. In connection with an application for a mortgage loan originator license, the applicant shall furnish fingerprints to the commissioner or the commissioner's duly authorized agent, such as the Nationwide Mortgage Licensing System and Registry, for submission to the federal bureau of investigation or any other governmental agency or entity, or both, authorized to receive the information, such as the Tennessee bureau of investigation, for a state, and/or national and/or international criminal history background check, as well as authorization for a criminal history background check. The results of the criminal history background check shall be forwarded to the commissioner. All costs incurred in conducting the criminal history records check shall be paid by the applicant, in addition to any other application and investigative fees.
  3. No mortgage loan originator license shall be issued unless the commissioner makes at a minimum the following findings:
    1. The applicant has never had a mortgage loan originator license revoked in any governmental jurisdiction; provided, that a subsequent formal vacation of the revocation shall not be deemed a revocation;
      1. The applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in any domestic, foreign or military court:
        1. During the seven-year period preceding the date of application for a mortgage loan originator license; or
        2. At any time preceding the date of application, if the felony involved an act of fraud, dishonesty or a breach of trust or money laundering;
      2. Provided, that any pardon of a conviction shall not be a conviction for purposes of subdivisions (c)(2)(A)(i) and (ii);
    2. The applicant has demonstrated the financial responsibility, character and general fitness to command the confidence of the community and to warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of this chapter. An individual has shown that the individual is not financially responsible when the individual has shown a disregard in the management of the individual's own financial condition;
    3. The applicant has completed the prelicensing education requirements set forth in § 45-13-304; and
    4. The applicant has passed a written test that meets the test requirement described in § 45-13-305.
  4. Upon submission of a properly completed application form, including submission of fingerprints and payment of all applicable fees, the commissioner shall investigate the application to determine whether the applicant qualifies for a license. If the commissioner finds the applicant so qualified, the commissioner shall issue the applicant a mortgage loan originator license that shall expire on December 31 in the year it was issued. If the commissioner does not find the applicant so qualified, the commissioner shall notify the applicant in writing, stating the basis for denial. If the commissioner denies an application or fails to act on a complete application within ninety (90) days, the applicant may make a written demand to the commissioner for a hearing on the question of whether the license should be granted. Any hearing requested under this subsection (d) shall be conducted under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5; provided, that the individual has requested the hearing in writing within thirty (30) days following the date of the commissioner's denial. At the hearing, the burden of proving that the individual is entitled to a mortgage loan originator license shall be on the individual.
  5. The commissioner shall keep a current roster showing the names of all licensed mortgage loan originators.
  6. The commissioner shall have the authority to require a criminal history background check under subsection (b) at any time as a condition of continued licensure of a mortgage loan originator. Upon request of the commissioner, a mortgage loan originator shall furnish written consent to a criminal history record check and a set of the mortgage loan originator's fingerprints in a form acceptable to the commissioner. Failure to provide the consent and fingerprints within thirty (30) days of the commissioner's request constitutes grounds for the commissioner to suspend or revoke the mortgage loan originator's license or to deny renewal of the license.
  7. Any costs associated with a credit report pulled under this section shall be paid by the applicant.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-303. Mortgage loan originator sponsorship required.

  1. No mortgage loan originator license issued under this part is considered active unless the individual has also been sponsored by a licensed mortgage lender or mortgage loan broker or by a registrant in accordance with the Industrial Loan and Thrift Companies Act, compiled in chapter 5 of this title. A mortgage loan originator is prohibited from providing origination services with an inactive license. No mortgage loan originator may be sponsored by more than one (1) person at the same time, and the provision of origination services for a person that has not properly sponsored the mortgage loan originator shall constitute a violation of this chapter. Subsections (b)-(e) shall not apply to a mortgage loan originator that is properly sponsored by a registrant under the Industrial Loan and Thrift Companies Act.
  2. To sponsor a mortgage loan originator, a mortgage lender or mortgage loan broker must file with the commissioner the form that the commissioner prescribes and pay to the commissioner a nonrefundable sponsorship fee of one hundred dollars ($100), which fee may be decreased or increased by rule of the commissioner. Upon determining that the individual is duly licensed and not sponsored by any other person, the commissioner shall authorize the sponsorship, which may be done electronically or in writing, or both. A mortgage loan originator sponsorship terminates if the sponsoring mortgage lender or mortgage loan broker's license expires or is revoked or otherwise terminates or if the mortgage loan originator ceases providing services for such company. A mortgage loan originator sponsorship does not terminate if the mortgage loan originator changes from one (1) branch office of the sponsoring mortgage lender or mortgage loan broker to another branch office of the same company. Upon any change in the mortgage loan originator's office, the sponsoring mortgage lender or mortgage loan broker shall notify the commissioner in writing within fourteen (14) days of the change.
  3. Should a mortgage loan originator sponsorship terminate, the mortgage loan originator's license shall become inactive, but shall not expire so long as the mortgage loan originator continues to meet the requirements for licensure and renewal of licensure. An inactive license is reactivated if the mortgage loan originator obtains a new sponsorship under this section or under the Industrial Loan and Thrift Companies Act. The commissioner may not approve a new sponsorship unless and until the commissioner has been notified that any prior sponsorship has terminated.
  4. The sponsoring mortgage lender or mortgage loan broker shall ensure that each application for a residential mortgage loan contains the name and license number of the mortgage lender or mortgage loan broker, as well as the name, signature and license number of the mortgage loan originator who provided origination services with respect to the loan. The mortgage lender or mortgage loan broker shall also ensure that its records pertaining to the residential mortgage loan contain the unique identifier, if different from the license number, of each mortgage loan originator that provided services with respect to the loan.
  5. The sponsoring mortgage lender or mortgage loan broker is responsible for and shall supervise the acts of each sponsored mortgage loan originator.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-304. Prelicensing education of loan originators.

  1. In order to meet the prelicensing education requirement referred to in § 45-13-302(c)(4), an individual shall complete at least twenty (20) hours of education approved in accordance with subsection (b), which shall include at least:
    1. Three (3) hours of federal law and regulations;
    2. Three (3) hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and
    3. Two (2) hours of training related to lending standards for the nontraditional mortgage product marketplace.
  2. For purposes of subsection (a), prelicensing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a prelicensing education course shall include review and approval of the course provider.
  3. Nothing in this section shall preclude any prelicensing education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the applicant or an entity that is affiliated with the applicant by an agency contract or any subsidiary or affiliate of the employer or entity.
  4. Prelicensing education may be offered either in a classroom, online or by any other means approved by the Nationwide Mortgage Licensing System and Registry.
  5. The prelicensing education requirements approved by the Nationwide Mortgage Licensing System and Registry in subdivisions (a)(1)-(3) for any state shall be accepted as credit toward completion of prelicensing education requirements in this state.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-305. Testing of loan originators.

  1. In order to meet the written test requirement referred to in § 45-13-302(c)(5), an individual shall pass, in accordance with the standards established under this section, a qualified written test developed by the Nationwide Mortgage Licensing System and Registry and administered by a test provider approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards.
  2. A written test shall not be treated as a qualified written test for purposes of subsection (a) unless the test adequately measures the applicant's knowledge and comprehension in appropriate subject areas, including:
    1. Ethics;
    2. Federal law and regulation pertaining to mortgage origination;
    3. State law and regulation pertaining to mortgage origination; and
    4. Federal and state law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace and fair lending issues.
  3. Nothing in this section shall prohibit a test provider approved by the Nationwide Mortgage Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant, or the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a mortgage loan originator.
  4. Minimum Competence:
    1. An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than seventy-five percent (75%) correct answers to questions;
    2. An individual may retake a test three (3) consecutive times with each consecutive taking occurring at least thirty (30) days after the preceding test;
    3. After failing three (3) consecutive tests, an individual shall wait at least six (6) months before taking the test again; and
    4. A licensed mortgage loan originator who fails to maintain a valid license for a period of five (5) years or longer shall retake the test, not taking into account any time during which the individual is a registered mortgage loan originator.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-306. Standards for mortgage loan originator license renewal.

  1. The minimum standards for license renewal for mortgage loan originators shall include the following:
    1. Continues to meet the minimum standards for licensure under § 45-13-302(c);
    2. Satisfies the annual continuing education requirements described in § 45-13-307; and
    3. Pays a nonrefundable renewal fee of one hundred dollars ($100), which amount may be decreased or increased by rule of the commissioner.
  2. To renew a mortgage loan originator license for the following calendar year, the commissioner must receive on or before December 31 a completed renewal application and fee meeting the requirements of subsection (a). If the renewal requirements are not timely met, the mortgage loan originator license shall expire at the close of business on December 31.
  3. Should the commissioner deny a renewal application, the applicant may make written demand to the commissioner for a hearing on the question of whether the license should be renewed; provided, that the request for hearing be received by the commissioner within thirty (30) days from the date of denial; and provided, further, that the failure to timely request a hearing shall cause the license to be automatically revoked without further notice or hearing at the end of the thirty-day period. If a hearing is timely requested under this subsection (c), it shall be conducted under the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, and the license shall not expire until resolution of the appeal in accordance with the Uniform Administrative Procedures Act.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-307. Continuing education for mortgage loan originators.

  1. In order to meet the annual continuing education requirements referred to in § 45-13-306(a)(2), a licensed mortgage loan originator shall complete at least eight (8) hours of education approved in accordance with subsection (b), which shall include at least:
    1. Three (3) hours of federal law and regulations;
    2. Two (2) hours of ethics, which shall include instruction on fraud, consumer protection and fair lending issues; and
    3. Two (2) hours of training related to lending standards for the nontraditional mortgage product marketplace.
  2. For purposes of subsection (a), continuing education courses shall be reviewed and approved by the Nationwide Mortgage Licensing System and Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider.
  3. Nothing in this section shall preclude any education course, as approved by the Nationwide Mortgage Licensing System and Registry, that is provided by the employer of the mortgage loan originator or an entity that is affiliated with the mortgage loan originator by an agency contract or any subsidiary or affiliate of the employer or entity.
  4. Continuing education may be offered either in a classroom, online or by any other means approved by the Nationwide Mortgage Licensing System and Registry.
  5. A licensed mortgage loan originator:
    1. May only receive credit for a continuing education course in the year in which the course is taken; and
    2. May not take the same approved course in the same or successive years to meet the annual requirements for continuing education.
  6. A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originator's own annual continuing education requirement at the rate of two (2) hours credit for every one (1) hour taught.
  7. A person having successfully completed the education requirements approved by the Nationwide Mortgage Licensing System and Registry in subdivisions (a)(1)-(3) for any state shall be accepted as credit toward completion of continuing education requirements in this state.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-308. Provisional mortgage loan originator license.

Notwithstanding any provision of this chapter or the Industrial Loan and Thrift Companies Act, compiled in chapter 5 of this title, to the contrary, the commissioner is authorized to issue a provisional mortgage loan originator license to any individual who has not completed the prelicensing education requirements set forth in § 45-13-304 or passed a written test that meets the test requirement described in § 45-13-305; provided, that the individual meets all other requirements for a license under this part; and provided, further, that no provisional mortgage loan originator license shall be issued after or be valid after July 30, 2010. A provisional mortgage loan originator license shall for all purposes be considered a mortgage loan originator license issued under this part, except that a provisional license shall expire on July 30, 2010, unless the individual holding the license has by such date, completed the prelicensing education requirements set forth in § 45-13-304 and passed a written test that meets the test requirement described in § 45-13-305. If these education requirements are timely accomplished, and so long as the individual has furnished fingerprints to the Nationwide Mortgage Licensing System and Registry if requested to do so under § 45-13-302(f), the provisional nature of the license shall be removed, and the license shall not expire until the end of the calendar year in which the last of all the requirements have been met. Subject to the July 30, 2010, expiration date, a provisional mortgage loan originator license issued in 2009 may be renewed for 2010 pursuant to § 45-13-306 without satisfying the annual continuing education requirements described in § 45-13-307.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Part 4
Prohibitions and Enforcement

45-13-401. Prohibited acts and practices.

It is a violation of this chapter for any person subject to this chapter to:

  1. Directly or indirectly employ any scheme, device or artifice to defraud or mislead borrowers or lenders or to defraud any person;
  2. Solicit or enter into a contract with a borrower that provides in substance that the person subject to this chapter may earn a fee or commission through best efforts to obtain a residential mortgage loan even though no loan is actually obtained for the borrower;
  3. Solicit, advertise or enter into a contract for specific interest rates, points or other financing terms, unless the terms are actually available at the time of soliciting, advertising or contracting;
  4. Conduct any business covered by this chapter without holding a valid license as required under this chapter or assist or aide and abet any person in the conduct of business under this chapter without a valid license as required under this chapter;
  5. Fail to comply with this chapter or any rules or regulations promulgated under this chapter;
  6. Contract for or collect interest on a residential mortgage loan, or both, at a rate in violation of the maximum effective rate of interest applicable to the contract, as established pursuant to title 47, chapter 14 or 15, as applicable, unless otherwise authorized by law to do so;
  7. Fail to comply with any other state or federal law, or rules or regulations promulgated under any state or federal law, applicable to any business authorized or conducted under this chapter, including, but not limited to, the Real Estate Settlement Procedures Act (12 U.S.C. § 2601 et seq.), the Truth In Lending Act (15 U.S.C. § 1601 et seq.), and the Equal Credit Opportunity Act (15 U.S.C. §§ 1691-1691f);
  8. Make, in any manner, any false or deceptive statement or representation to a borrower or potential borrower, including, but not limited to, a false or deceptive statement or representation with regard to the rates, points or other financing terms or conditions for a residential mortgage loan, or engage in bait and switch advertising;
  9. Make any false statement or material omission in connection with any information reported to or filed with the commissioner or with the Nationwide Mortgage Licensing System and Registry or in connection with any examination or investigation conducted by the commissioner;
  10. Fail to accurately account for moneys belonging to a party to a residential mortgage loan transaction;
  11. Fail to disburse funds in accordance with a written agreement;
  12. Obtain any agreement or instrument in which blanks are left to be filled in after execution;
  13. Delay closing of any residential mortgage loan for the purpose of increasing interest, costs, fees or charges payable by the borrower;
  14. Intimidate a real estate appraiser or influence an appraiser's report relating to market conditions or determination of value;
  15. Refuse to permit the commissioner to make an examination authorized under this chapter; or
  16. Assign or attempt to assign any license issued under this chapter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Attorney General Opinions. An individual investment property owner who provides a purchaser with financing that qualifies as a “residential mortgage loan” must be licensed under T.C.A. §§ 45-13-201, et seq., unless a statutory exception applies. Additionally, such an individual who provides such financing for compensation or gain or in the expectation thereof must be licensed under T.C.A. §§ 45-13-301, et seq., unless a statutory exception applies.  OAG 10-93, 2010 Tenn. AG LEXIS 99 (8/24/10).

45-13-402. False or misleading advertising unlawful — Exceptions.

It is unlawful for any person to place or cause to be placed any false or misleading advertising matter pertaining to mortgage loans or the availability of mortgage loans; provided, that this section shall not apply to the owner, publisher, operator or employees of any publication or radio or television station that disseminates the advertising matter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-403. Payments to contractor from proceeds of mortgage loan for home improvement.

  1. A licensed mortgage lender or mortgage loan broker shall not make any payments to a contractor or home improvement contractor from proceeds of a mortgage loan for home improvement other than:
    1. In the form of an instrument that is payable to the borrower or jointly to the borrower and the contractor or home improvement contractor; or
    2. At the election of the borrower by a third-party escrow agent in accordance with terms established in a written agreement signed by the borrower, the licensee and the contractor or home improvement contractor prior to the date of payment.
  2. A licensed mortgage lender or mortgage loan broker shall not permit a contractor or home improvement contractor to be a cosigner or to act as a guarantor for a mortgage loan for home improvement.
  3. As used in this section, “mortgage loan for home improvement” means a consumer credit mortgage loan transaction involving property located within this state regardless of the amount of the loan.
  4. The commissioner is authorized to impose a civil penalty in an amount not to exceed twenty-five thousand dollars ($25,000) for each violation of this section after notice and opportunity for a hearing.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-404. Investigation and examinations.

  1. In addition to any authority allowed the commissioner elsewhere, the commissioner shall have the authority to conduct investigations and examinations of persons subject to this chapter, including those suspected to be engaging in business subject to this chapter, as often as necessary in order to carry out the purposes of this chapter. In order to carry out the purposes of this section, the commissioner may:
    1. Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures and documents, records, information or evidence obtained under this section;
    2. Use, hire, contract or employ public or privately available analytical systems, methods or software to examine or investigate persons subject to this chapter;
    3. Accept and rely on examination or investigation reports made by other government officials, within or without this state; and
    4. Accept audit reports made by independent certified public accountants for the person subject to this chapter in the course of that part of the examination covering the same general subject matter as the audit and incorporate the audit report in the report of examination, report of investigation or other writing of the commissioner.
  2. For purposes of initial licensing, renewal, suspension or revocation, or for general or specific inquiry relative to any other investigation or examination, the commissioner shall have the authority to access, receive, review and use any books, accounts, records, files, documents, information or evidence, including, but not limited to, the following:
    1. Criminal, civil and administrative history information;
    2. Personal history and experience information including independent credit reports obtained from a consumer reporting agency described in § 603(p) of the Fair Credit Reporting Act (15 U.S.C. § 1681a(p)); and
    3. Any other documents, information or evidence the commissioner deems relevant to the inquiry or investigation, regardless of the location, possession, control or custody of the documents, information or evidence.
  3. To carry out an investigation or examination, the commissioner may issue subpoenas, administer oaths, compel attendance, examine under oath all persons whose testimony may be relevant and compel the production of any relevant records, books, papers, contracts, accounts, files or other documents. This power shall include the authority to interview the officers, principals, loan originators, employees, independent contractors, agents and customers of the subject of the investigation or examination concerning the business of the licensee or other person subject to this chapter.
  4. Each person subject to investigation or examination shall make available to the commissioner upon request the books and records relating to the operations of the person and shall permit the commissioner to have access to the person's offices and places of business. In addition, the person shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section, including, but not limited to:
    1. Accounting compilations;
    2. Information lists and data concerning loan transactions in a format prescribed by the commissioner; or
    3. Other information deemed necessary to carry out the purposes of this section.
  5. If any person fails to comply with a subpoena of the commissioner under this chapter or to testify concerning any matter about which the person may be interrogated under this chapter, the commissioner may petition any court of competent jurisdiction for enforcement and may additionally suspend any license issued to the person pending compliance with the subpoena.
  6. A mortgage lender, mortgage loan broker, mortgage loan servicer or registrant that is investigated or examined under this section from July 1, 2015, through December 31, 2015, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination. After December 31, 2015, the costs for an examination or investigation of licensees or registrants shall be assessed pursuant to § 45-1-118(i). An unlicensed person subject to the licensing requirements of this chapter, that is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination.
  7. Any person aggrieved by the conduct of a person subject to this chapter in connection with a residential mortgage loan or in connection with any other activities of a mortgage lender, mortgage loan servicer or mortgage loan broker may file a written complaint with the commissioner, who is authorized to investigate the complaint.
  8. The commissioner has exclusive administrative power to investigate and enforce any and all complaints filed by any person that are not criminal in nature, which complaints relate to mortgage lenders, mortgage loan brokers, mortgage servicers or mortgage loan originators.
  9. No person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information that the commissioner may lawfully examine or investigate.
  10. The authority of this section shall remain in effect whether the person subject to investigation or examination acts or claims to act under any licensing or registration law or claims to act without such authority.

Acts 2009, ch. 499, § 8; 2012, ch. 729, § 1; 2014, ch. 736, §§ 11, 12.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-405. Violations — Cease and desist orders — Penalties.

  1. If, after notice and opportunity for a hearing, the commissioner finds that a person has violated this chapter or any administrative rule issued pursuant to this chapter, the commissioner may take any or all of the following actions:
    1. Order the person to cease and desist violating this chapter or any administrative rule issued pursuant to this chapter;
    2. Require the refund of any interest, fees or charges collected by the person in violation of this chapter or any administrative rule issued pursuant to this chapter;
    3. Order the person to pay the commissioner a civil monetary penalty of not more than ten thousand dollars ($10,000) for each violation of this chapter or administrative rule issued pursuant to this chapter; or
    4. Suspend or revoke any license issued under this chapter.
  2. For any violation of this chapter, the commissioner may deny an application for licensure or refuse to renew a license issued under this chapter. The commissioner may also, after notice and opportunity for a hearing, suspend or revoke any license issued under this chapter for failure to maintain the requirements for licensure.
  3. When a licensee is accused of any act, omission or misconduct that would subject the licensee to disciplinary action, the licensee, with the consent and approval of the commissioner, may surrender the license and all the rights and privileges pertaining to it for a period of time established by the commissioner. A person who surrenders a license shall not be eligible for or submit any application for a license under this chapter for a period of time established by the commissioner.
  4. A licensee is subject to disciplinary action if any officer, director, person owning twenty-five percent (25%) or more of the licensee's outstanding capital, member, partner, managing principal, branch manager, mortgage loan originator, employee or any other person who acts on behalf of the licensee violates this chapter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-406. Consent orders.

  1. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained in the consent order. A consent order need not constitute an admission by any person that this chapter or any rule, regulation or order promulgated or issued under this chapter has been violated, nor need it constitute a finding by the commissioner that the person has violated this chapter or any rule, regulation or order promulgated or issued under this chapter.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter by issuing a temporary emergency order without providing the opportunity for a prior hearing. In such cases, the commissioner shall promptly afford a subsequent hearing upon an application to rescind the emergency order that is filed with the commissioner within twenty (20) days after receipt of the notice of the commissioner's emergency action. If no such appeal is timely filed, the temporary emergency order of the commissioner shall become final.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-407. Censure, suspension, or bar from industry.

  1. If the criminal, civil or administrative judgment involved any offense reasonably related to the qualifications, functions or duties of a person engaged in the business in accordance with this chapter, the commissioner, after notice and opportunity for hearing, may censure, suspend or bar a person from any position of management, control, employment or providing services for any licensee, registrant or other person subject to the commissioner's jurisdiction, if the commissioner finds that:
    1. The censure, suspension or bar is in the public interest and that the person has committed or caused a violation of this chapter or any rule, regulation or order of the commissioner; or
    2. The person has been:
      1. Convicted of or pled guilty to or pled nolo contendere to any crime; or
      2. Held liable in any civil action by final judgment or any administrative judgment by any public agency.
  2. Persons suspended or barred under this section are prohibited from participating in any business activity of a registrant or licensee and from engaging in any business activity on the premises where a registrant or licensee is conducting its business. This subsection (b) shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a registrant or licensee.
  3. This section shall apply to any violation, conviction, plea or judgment after July 1, 2001.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Part 5
Nationwide Mortgage Licensing System and Registry

45-13-501. Authority to participate in the Nationwide Mortgage Licensing System and Registry.

  1. In addition to any other duties imposed upon the commissioner by law, the commissioner is authorized to require mortgage lenders, mortgage loan brokers and mortgage loan servicers, and shall require all mortgage loan originators, to be licensed or registered, or both, through the Nationwide Mortgage Licensing System and Registry. In order to carry out this subsection (a), the commissioner is authorized to participate in the Nationwide Mortgage Licensing System and Registry. For this purpose, the commissioner may:
    1. Promulgate whatever rules and regulations necessary for participation in, transition to or operation of the Nationwide Mortgage Licensing System and Registry;
    2. Establish relationships or contracts with the Nationwide Mortgage Licensing System and Registry or other entities designated by the Nationwide Mortgage Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this chapter;
    3. Require that applications for licensing under this chapter, as well as renewals of such licenses, be filed with the Nationwide Mortgage Licensing System and Registry;
    4. Require that any fees required to be paid under this chapter be paid through the Nationwide Mortgage Licensing System and Registry; and
    5. Establish for licensees deadlines for transitioning to the Nationwide Mortgage Licensing System and Registry, which authority includes the refusal to accept any applications or renewal applications not filed with the Nationwide Mortgage Licensing System and Registry after the deadlines, notwithstanding any dates established elsewhere in this chapter; provided, however, that the commissioner shall provide reasonable notice of the deadlines pertaining to transitioning.
  2. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter to its fullest extent. Nothing in this section shall be deemed to be a reduction or derogation of that authority and discretion.
  3. Applicants for and holders of licenses issued under this chapter shall pay all costs associated with submitting an application to or transitioning a license to the Nationwide Mortgage Licensing System and Registry, as well as all costs required by the Nationwide Mortgage Licensing System and Registry for maintaining and renewing any license issued by the commissioner on the Nationwide Mortgage Licensing System and Registry.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-502. Nationwide Mortgage Licensing System and Registry as agent.

The commissioner may use the Nationwide Mortgage Licensing System and Registry as an agent for channeling information, whether criminal or noncriminal in nature, whether derived from or distributed to the United States department of justice or any other state or federal governmental agency, or any other source, that the commissioner is authorized to request or distribute under this chapter.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-503. Mortgage call reports.

Each person holding a license issued under this chapter shall, pursuant to an order or direction of the commissioner, submit to the Nationwide Mortgage Licensing System and Registry reports of condition, which shall be in the form and shall contain the information that the Nationwide Mortgage Licensing System and Registry requires.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-504. Nationwide Mortgage Licensing System and Registry information challenge process.

The commissioner shall establish a process whereby mortgage loan originators may challenge information entered into the Nationwide Mortgage Licensing System and Registry by the commissioner.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

45-13-505. Confidentiality.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. Except as otherwise provided in P.L. 110-289, § 1512 (12 U.S.C. § 5111), the requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to the Nationwide Mortgage Licensing System and Registry, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to the information or material after the information or material has been disclosed to the Nationwide Mortgage Licensing System and Registry. The information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law, including under § 45-1-120;
  2. For the purposes of subdivision (1), the commissioner is authorized to enter agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators or other associations representing governmental agencies as established by rule, regulation or order of the commissioner;
    1. Information or material that is subject to a privilege or confidentiality under subdivision (1) shall not be subject to:
      1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or
      2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless with respect to any privilege held by the Nationwide Mortgage Licensing System and Registry with respect to such information or material, the person to whom such information or material pertains waives that privilege, in whole or in part, in the discretion of such person;
    2. This section shall supersede any inconsistent provisions of title 10, chapter 7, part 5 pertaining to the records open to public inspection.
    3. This section shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that is included in the Nationwide Mortgage Licensing System and Registry for access by the public.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

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

45-13-506. Report to Nationwide Mortgage Licensing System and Registry.

The commissioner shall regularly report violations of this chapter by mortgage loan originators, as well as enforcement actions and other relevant information pertaining thereto, to the Nationwide Mortgage Licensing System and Registry, subject to § 45-13-505.

Acts 2009, ch. 499, § 8.

Compiler's Notes. Former chapter 13, §§ 45-13-101—45-13-129 (Acts 1988, ch. 846, §§ 1-18; 1990, ch. 788, §§ 1-3; 1996, ch. 629, § 1; 2001, ch. 165, §§ 10-20; 2003, ch. 141, §§ 1-3; 2004, ch. 747, §§ 1-10; 2005, ch. 463, § 1; 2008, ch. 821, §§ 1-3, 5-9), concerning the Tennessee Residential Lending, Brokerage and Servicing Act of 1988, was repealed and replaced by the Tennessee Residential Lending, Brokerage and Servicing Act by Acts 2009, ch. 499, § 8, effective July 31, 2009. See this chapter for current provisions.

Chapter 14
Chartering of Savings Banks

45-14-101. Short title.

This chapter shall be known and may be cited as the “Savings Bank Chartering Act of 1991.”

Acts 1991, ch. 177, § 1.

45-14-102. Objective of chapter.

The objective of this chapter is to facilitate the delivery of credit for home ownership, family and community purposes, and of other financial and related services, through the chartering of depository institutions known as savings banks, which shall conduct their general business strictly as savings banks in accordance with the requirements of this chapter and the regulations issued under this chapter, if any.

Acts 1991, ch. 177, § 2; 1996, ch. 768, § 28.

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

45-14-103. Commissioner of financial institutions — Authority — Savings banks — Authorized activities — Applicable law — Definitions — Deposit insurance.

  1. The commissioner of financial institutions, hereinafter referred to as the “commissioner,” is authorized to provide for the organization, chartering, incorporation, examination, operation, regulation, safety and soundness of savings banks.
  2. A savings bank may organize, convert and engage in acquisitions, mergers, consolidations, share exchanges and purchase of assets and assumption of liabilities, in the same manner as is provided for associations in chapter 3 of this title.
  3. The commissioner may by regulation define any term used in this chapter that is not specifically defined in this chapter.
  4. The provisions of chapter 2 of this title, and the regulations thereunder, that are applicable to commercial banks and related parties regarding insolvency, conservatorship, receivership, the termination of unsafe and unsound practices, and the enforcement of laws, regulations and orders, are likewise applicable to savings banks.
  5. All savings banks chartered under this chapter shall be subject to this chapter and the regulations issued under this chapter, and a foreign depository institution operating in this state that meets the definition of a savings bank under § 3(g) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(g)), as in effect as of September 1, 1990, is likewise subject to the act and regulations.
  6. Except where the context requires otherwise, “savings bank,” as used in this chapter, means a depository institution chartered pursuant to this chapter.
  7. The deposits of each savings bank subject to this chapter must be insured by the federal deposit insurance corporation pursuant to the Federal Deposit Insurance Act.

Acts 1991, ch. 177, § 3; 1996, ch. 768, § 29.

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

45-14-104. Deposits — Borrowing and securities — Investments — Issuance of credit cards — Offices — Trust business.

  1. A savings bank may accept deposits that:
    1. May be withdrawn on a demand or other basis;
    2. May be negotiable instruments of the savings bank; and
    3. It may pay interest upon.
  2. A savings bank may borrow, give security, and issue securities, (including capital stock), notes, bonds, debentures and other obligations.
  3. A savings bank may invest in, sell or otherwise deal in the accounts, investments and loans, in the same manner as is provided for associations in chapter 3 of this title, and the regulations issued under that chapter.
  4. A savings banks may:
    1. Issue credit cards, extend credit in connection therewith, and otherwise engage in or participate in credit card operations;
    2. Establish, maintain and close offices, branches, remote service units, automated teller machines and other facilities on the same basis as savings institutions chartered under the laws of this state; and
    3. Carry on a trust business, which may encompass acting as trustee, executor, administrator, guardian or in any other fiduciary capacity, on the same basis, and subject to the same requirements with regard to the business, as may commercial banks, trust companies and other corporations authorized under the laws of this state and the regulations under the laws to carry on the business.

Acts 1991, ch. 177, §§ 4-6; 1996, ch. 768, §§ 30, 31.

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

45-14-105. Commissioner — Survey of pertinent laws of other states — Investments and activities — Authorization of investments permissible for federal savings banks — Competitive equality.

  1. The commissioner may survey periodically the laws and regulations governing savings banks chartered under the laws of other states, and that meet the definition of a “savings bank” under § 3(g) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(g)), as in effect as of September 1, 1990, and, based upon the best practices of such foreign savings banks, may authorize savings banks to make investments and engage in activities not otherwise permissible under this chapter; provided, that investments and activities authorized under this section may not exceed in the aggregate an amount equal to five percent (5%) of the assets of the savings bank.
  2. The commissioner may authorize savings banks to make any investment or engage in any activity that is permissible for federal savings banks, subject to the same limitations applicable to the federal savings banks, upon the commissioner's determination that, in the absence of the authorization, savings banks chartered under this chapter may be at a significant disadvantage in their ability to compete with other depository institutions.
  3. Subject to reasonable regulation to preserve safety and soundness, the commissioner may authorize a state bank to make any investment or engage in any activity permissible to institutions chartered under this chapter that the commissioner determines to be necessary to preserve the competitive equality between depository institutions.

Acts 1991, ch. 177, § 6; 1996, ch. 768, §§ 32, 33.

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

45-14-106. Capital requirements.

Savings banks are subject to the same capital requirements as are commercial banks chartered under the laws of this state.

Acts 1991, ch. 177, § 7.

45-14-107. Loans to single borrower.

Savings banks, with regard to the amount of loans they may make to any single borrower, are subject to the same requirements as are commercial banks chartered under the laws of this state.

Acts 1991, ch. 177, § 8.

45-14-108. Accounting requirements.

Savings banks are subject to the same accounting requirements as are commercial banks chartered under the laws of this state.

Acts 1991, ch. 177, § 9.

45-14-109. Membership in federal home loan bank or federal reserve bank.

Savings banks may obtain, maintain and terminate membership in a federal home loan bank or federal reserve bank, or both, meet all applicable requirements for membership, and engage in all acts incidental to membership, unless the acts are specifically prohibited by this chapter or regulations issued under this chapter.

Acts 1991, ch. 177, § 10.

45-14-110. Conversion to savings bank — Compliance with requirements of chapter.

A depository institution that converts to a savings bank pursuant to this chapter shall have a period of time that the commissioner determines to be reasonable and prudent to conform to the requirements of this chapter and the regulations issued under this chapter, but the period shall not exceed ten (10) years from the date of conversion.

Acts 1991, ch. 177, § 11; 1996, ch. 768, § 34.

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

45-14-111. Costs, fees and assessments.

Savings banks shall pay the costs, fees and assessments computed in the manner provided for commercial banks (but not for nondepository trust companies) in § 45-1-118.

Acts 1991, ch. 177, § 12.

45-14-112. Revocation of charter — Grounds.

  1. The commissioner may revoke any savings bank charter issued under this chapter if the commissioner finds, after notice and an opportunity for a hearing, that the savings bank willfully and consistently has been conducting its business in a manner that is substantially and materially inconsistent with the objective of this chapter, or if in violation of this chapter or any regulations promulgated thereunder.
  2. The commissioner shall revoke any savings bank charter issued under this chapter if the commissioner finds, after notice and an opportunity for a hearing, that the savings bank is violating § 45-14-103(g).
  3. The commissioner shall issue regulations providing for the voluntary surrender of savings bank charters issued under this chapter.

Acts 1991, ch. 177, § 13.

45-14-113. Commissioner — Regulations.

  1. The commissioner has the power to establish regulations to:
    1. Carry out the legislative purposes of this chapter;
    2. Provide for the safe and sound operation of state-chartered savings banks; and
    3. Establish from time to time reasonable fees for various applications made to the commissioner.
  2. This chapter shall take effect whether or not the commissioner has promulgated regulations to carry out various provisions of the chapter. In the absence of regulations promulgated under this chapter, regulations promulgated under the commissioner's authority granted by this title shall be deemed effective for savings banks until and unless regulations are promulgated specifically under this chapter.

Acts 1991, ch. 177, § 14.

45-14-114. Void and null charters and certificates of authority.

  1. Any charter issued under this chapter shall be null and void if:
    1. The institution for which the charter was issued does not commence operations within five (5) years of the date the charter was issued; provided, that the commissioner may act to extend the time to allow the commencement of operations; or
    2. An institution that is chartered and commences business ceases to conduct business and no operations or business are conducted for a period of five (5) years.
  2. Any certificate of authority issued under this chapter shall be null and void if substantially all of the assets of a savings bank are acquired without acquiring the charter.

Acts 1991, ch. 177, § 16; 2001, ch. 54, § 32.

Chapter 15
Title Pledges

45-15-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Title Pledge Act.”

Acts 1995, ch. 186, § 13.

Cross-References. Motor vehicle sales licenses, title 55, ch. 17.

45-15-102. Purpose.

The making of title pledge loans vitally affects the general economy of this state and the public interest and welfare of its citizens. It is the policy of this state and the purpose of this chapter to:

  1. Ensure a sound system of making title pledge loans through statewide licensing of title pledge lenders by the department of financial institutions;
  2. Establish licensing requirements;
  3. Provide for the examination and regulation of title pledge lenders by the department of financial institutions; and
  4. Ensure financial responsibility to the public.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 1.

45-15-103. Chapter definitions.

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

  1. “Commissioner” means the commissioner of financial institutions or the commissioner's designated representative;
  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 subdivision (2), 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 subdivision (2), the commissioner may determine whether a person, in fact, controls another person;
  3. “Controlling person” means any person in control of a title pledge lender;
  4. “Department” means the department of financial institutions;
  5. “Month” means thirty (30) days;
  6. “Person” means an individual, any sole proprietorship, general partnership, corporation or limited liability company duly qualified to do business in Tennessee;
  7. “Pledged property” means any titled personal property or personal property certificate of title that is deposited with a title pledge lender in the course of the title pledge lender's business and is the subject of a title pledge agreement or property pledge agreement;
  8. “Pledgor” means the individual or individuals obligated to repay the loan;
  9. “Property pledge agreement” means any written bailment or similar agreement whereby a title pledge lender agrees to make a loan of money to a pledgor, and the pledgor agrees to the title pledge lender's taking physical possession of unencumbered titled personal property owned by the pledgor, and taking possession of the personal property certificate of title. The pledgor shall have the exclusive right to redeem the titled personal property by repaying the loan of money in full, and by complying with the property pledge agreement. When the titled personal property is redeemed, the title pledge lender shall return the titled personal property and the certificate of title to the pledgor. The property pledge agreement shall provide that, upon failure by the pledgor to redeem the titled personal property at the end of the original thirty-day agreement period, or the end of any subsequent thirty-day renewal or renewals of the agreement period, the title pledge lender shall be allowed to sell or otherwise dispose of the titled personal property;
  10. “Title pledge agreement” means a thirty-day written agreement whereby a title pledge lender agrees to make a loan of money to a pledgor, and the pledgor agrees to give the title pledge lender a security interest in unencumbered titled personal property owned by the pledgor. The pledgor shall agree to the title pledge lender's keeping possession of the certificate of title. The pledgor shall have the exclusive right to redeem the certificate of title by repaying the loan of money in full and by complying with the title pledge agreement. When the certificate of title is redeemed, the title pledge lender shall release the security interest in the titled personal property, and return the personal property certificate of title to the pledgor. The title pledge agreement shall provide that, upon failure by the pledgor to redeem the certificate of title at the end of the original thirty-day agreement period, or at the end of any thirty-day renewal or renewals of the agreement period, the title pledge lender shall be allowed to take possession of the titled personal property. The title pledge lender shall retain physical possession of the certificate of title for the entire length of the title pledge agreement, but shall not be required to retain physical possession of the titled personal property at any time. A title pledge lender may only hold unencumbered certificates of title for pledge;
  11. “Title pledge lender” means any person engaged in the business of making title pledge agreements or property pledge agreements with pledgors;
  12. “Title pledge office” means the location at which, or premises in which, a title pledge lender regularly conducts business; and
  13. “Titled personal property” means any personal property, the ownership of which is evidenced and delineated by a state-issued certificate of title.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 2.

Attorney General Opinions. Compliance with Uniform Commercial Code by title pledge lenders, OAG 05-111, 2005 Tenn. AG LEXIS 113 (7/12/05).

45-15-104. Authority of licensed title pledge lenders.

  1. A title pledge lender licensed pursuant to this chapter has the power to make loans of money on pledges of personal property certificates of title or on pledges of titled personal property in accordance with this chapter.
  2. Title pledge lenders licensed pursuant to this chapter shall not have the powers enumerated in this chapter without first complying with the law regulating title pledge agreements and property pledge agreements, but title pledge lenders exercising any of the powers in compliance with this chapter's provisions shall not be deemed in violation of § 47-14-112 or § 47-14-117. No action shall be brought by a pledgor against a title pledge lender in connection with a title pledge agreement or property pledge agreement more than one (1) year after the date of the alleged occurrence of any violation of this chapter.

Acts 1995, ch. 186, § 13; 2000, ch. 846, § 28; 2005, ch. 440, § 3.

45-15-105. License required — Loans made without license void.

  1. No person shall engage in the business of title pledge lending without having first obtained a license. A separate license shall be required for each location from which the business is conducted. Any person engaged in the business of title pledge lending on November 1, 2005, under a license issued by the county clerk, may continue to engage in the business without a license issued by the commissioner, until the commissioner has acted upon the application for a license, if the application is filed by December 31, 2005.
  2. Any loan made without a license is void, in which case the person making the loan forfeits the right to collect any moneys, including principal, interest, and any other fee paid by the pledgor in connection with the title pledge agreement or property pledge agreement. The person making the loan shall return to the pledgor the pledged property, the titled personal property pledged, or the fair market value of the titled personal property, and all principal, interest, and any other fees paid by the pledgor. The pledgor is entitled to receive reasonable attorney's fees and costs in any action brought by a pledgor to recover from the person making the loan, the pledged property, the titled personal property, and the principal, interest and any fees paid by the pledgor.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 4.

45-15-106. Eligibility requirements for license — Application — Fees — Issuance or denial of license — Hearing on denial — Renewal — Change in control of lender.

  1. To qualify for a license, an applicant shall satisfy the following requirements:
    1. The applicant has a tangible net worth that comprises tangible assets less liabilities of not less than seventy-five thousand dollars ($75,000) for each location; and
    2. The financial responsibility, financial condition, business experience, character, and general fitness of the applicant shall reasonably warrant the belief that the applicant's business will be conducted lawfully and fairly. In determining whether this qualification has been met, and for the purpose of investigating compliance with this chapter, the commissioner may review and approve:
      1. The relevant business records and the capital adequacy of the applicant;
      2. The financial responsibility, financial condition, business experience, character, and general fitness of any person who is a director, officer, a shareholder who owns five percent (5%) or more of the applicant, or owns or controls the applicant; and
      3. Any record on the part of the applicant, or any person referred to in subdivision (a)(2)(B), of any criminal activity, any fraud or other act of personal dishonesty, any act, omission or practice that constitutes a breach of a fiduciary duty, or any suspension, removal or administrative action by any agency or department of the United States or any state, from participation in the conduct of any business.
  2. The requirements set forth in subsection (a) are continuing in nature.
  3. Each application for a license shall be in writing and under oath to the commissioner, in a form prescribed by the commissioner, and shall include the following:
    1. The legal name, residence and business address of the applicant, and, if the applicant is a partnership, association, or corporation, of every member, officer, managing employee and director of the applicant;
    2. The location in Tennessee at which the registered officer of the applicant shall be located; and
    3. Other data and information the commissioner may require with respect to the applicant, its directors, trustees, officers, members, managing employees or agents.
  4. Each application for a license shall be accompanied by:
    1. A nonrefundable supervision fee, as provided in § 45-1-118(i). The supervision fee shall be applicable to each location;
    2. A balance sheet and income statement for the immediately preceding fiscal year end, prepared in accordance with generally accepted accounting principles by a certified public accountant or public accounting firm not affiliated with the applicant. For a newly created entity, the commissioner may accept only a balance sheet prepared by a certified public accountant or public accounting firm not affiliated with the applicant, accompanied by a projected income statement demonstrating that the title pledge lender will have adequate capital after payment of start-up costs; and
    3. A surety bond, issued by an insurer regulated under title 56 and not affiliated with the applicant, in the amount of twenty-five thousand dollars ($25,000) for each location. However, in no event shall the aggregate amount of the surety bond required for a single title pledge lender exceed two hundred thousand dollars ($200,000). In lieu of the surety bond, the applicant shall file an irrevocable letter of credit, in the amount of the surety bond, issued by any federally insured bank, savings bank or credit union not affiliated with the applicant. The surety bond or irrevocable letter of credit shall be in a form satisfactory to the commissioner, and shall be payable to the commissioner for the benefit of any person who is injured pursuant to a title pledge or property pledge transaction by the fraud, misrepresentation, breach of contract, financial failure or violation of any provision of this chapter by a title pledge lender. In the case of a bond, the aggregate liability of the surety, in no event, shall exceed the principal sum of the surety bond. In the case of an irrevocable letter of credit, title pledge lenders shall obtain letters of credit for terms of not less than three (3) years and renew the letters of credit annually. If the title pledge lender fails to pay a person or the commissioner as required by this chapter, then a person may bring suit against the title pledge lender directly on the surety bond or irrevocable letter of credit in any court of competent jurisdiction, or the commissioner may bring suit in the chancery court of Davidson County, on behalf of those persons, either in one (1) or successive actions. The surety bond or irrevocable letter of credit shall be maintained by the title pledge lender for not less than three (3) years, following the expiration, revocation, suspension, or surrender of the license.
  5. Upon the filing of an application in a form prescribed by the commissioner, accompanied by the fee and documents required in this section, the commissioner shall investigate to ascertain whether the qualifications prescribed by this section have been satisfied. If the commissioner finds that the qualifications have been satisfied, and approves the documents, the commissioner shall issue to the applicant a license to engage in the title pledge lending business in Tennessee. A license issued pursuant to this subsection (e) shall remain in force and effect through December 31 in the year it was issued, unless earlier surrendered, suspended or revoked pursuant to this chapter.
  6. If the commissioner determines that an applicant is not qualified to receive a license, the commissioner shall notify the applicant in writing that the application has been denied, stating the basis for denial. If the commissioner denies an application, or if the commissioner fails to act on an application within ninety (90) days after the filing of a properly completed application, the applicant may make written demand to the commissioner for a hearing before the commissioner on the question of whether the license should be granted. Any hearing shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In the hearing, the burden of proving that the applicant is entitled to a license shall be on the applicant. A decision of the commissioner following any hearing on the denial of license is subject to review under the Uniform Administrative Procedures Act.
  7. The license shall be kept conspicuously posted in the place of business of the title pledge lender.
  8. The license is not transferable or assignable.
  9. Licenses issued pursuant to this chapter expire on December 31. A license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the requirements of this section and the payment of the nonrefundable supervision fee, as provided in § 45-1-118(i). A licensee making timely and complete application for renewal of its license may continue to operate under its existing license until its application is approved or denied. The completed renewal application and the payment of the annual supervision fee must be sent to the department on or before December 31, but no earlier than November 1, of each year.
  10. The commissioner may establish a biennial licensing arrangement for the filing of the application for license renewal, but in no case shall the supervision fee be payable for more than one (1) year at a time.
    1. A change in control of a title pledge lender shall require thirty-day prior written notice to the commissioner. In the case of a publicly traded corporation, notification shall be made in writing, within thirty (30) days of a change or acquisition of control of a title pledge lender.
    2. Upon notification of a change in control, the commissioner may require information deemed necessary to determine whether an application for license is required. The commissioner may waive the filing of an application, if, in the commissioner's discretion, the change of control does not pose any risk to the interests of the public.
    3. Costs incurred by the commissioner in investigating a change of control notification shall be paid by the person requesting approval, subject to limitations set forth in § 45-15-108(b).
    4. Whenever control of a title pledge lender is acquired or exercised in violation of this subsection (k), the license of the title pledge lender shall be deemed revoked as of the date of the unlawful acquisition of control. The title pledge lender, or its controlling person, shall surrender the license to the commissioner on demand.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 5; 2014, ch. 736, §§ 13-16; 2017, ch. 122, § 5.

NOTES TO DECISIONS

1. Private Right of Action.

General Assembly, in T.C.A. § 45-15-105, declared the effect of a loan made by a lender without a license, and added that in any action brought by the pledgor, he or she may recover attorney fees and costs, and in T.C.A. § 45-15-106(d), the General Assembly specified the form of surety needed to insure financial responsibility, and then added, almost incidentally, that an injured pledgor could bring a suit against the lender directly on the security posted; the Tennessee Title Pledge Act, T.C.A. § 45-15-101 et seq., created a private right of action in favor of pledgors for violations of the Act by predatory lenders. Brown v. Tenn. Title Loans, Inc, — S.W.3d —, 2009 Tenn. App. LEXIS 482 (Tenn. Ct. App. July 24, 2009), rehearing denied, Brown v. Tenn. Title Loans, Inc., — S.W.3d —, 2009 Tenn. App. LEXIS 608 (Tenn. Ct. App. Aug. 13, 2009), rev'd, Brown v. Tenn. Title Loans, Inc., 328 S.W.3d 850, 2010 Tenn. LEXIS 1026 (Tenn. Nov. 29, 2010).

45-15-107. Suspension or revocation of license.

  1. The commissioner may, after notice and opportunity for a hearing, suspend or revoke any license, if the commissioner finds that the title pledge lender has knowingly or through lack of due care:
    1. Engaged in conduct of a manner that would warrant the denial of an application;
    2. Refused to permit the commissioner to make any examination authorized by this chapter;
    3. Failed to pay any fees or assessments imposed by the commissioner under the authority of this chapter;
    4. Committed any fraud, engaged in any dishonest activities or made any misrepresentations;
    5. Made a false statement in the application for the license or failed to give a true reply to a question in the application;
    6. Demonstrated incompetency or untrustworthiness to act as a title pledge lender; or
    7. Violated any provisions of this chapter or any administrative regulation issued pursuant to this chapter, or has violated any other law in the course of the title pledge lender's dealings as a title pledge lender.
  2. If the reason for revocation or suspension of a title pledge lender's license at any one (1) location is of general application to all locations operated by a title pledge lender, the commissioner may revoke or suspend all licenses issued to a title pledge lender.
  3. A hearing shall be held on written notice given at least twenty (20) days prior to the date of the hearing, and shall be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 6; 2014, ch. 736, § 17.

45-15-108. Rules and regulations — Compliance examinations — Preservation of books and records — Reproduction and preservation of records — Report by commissioner on rates and terms of loans.

  1. The commissioner may promulgate reasonable regulations, in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the enforcement of this chapter. A copy of any rule or regulation adopted by the commissioner shall be mailed to each license holder at least thirty (30) days before the date the rule or regulation takes effect.
  2. To assure compliance with this chapter, the commissioner may examine the relevant business, books and records of any title pledge lender. The costs for an examination or investigation of licensees shall be assessed pursuant to § 45-1-118(i). An unlicensed person subject to the licensing requirements of this chapter, who is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination.
  3. The commissioner, for the purpose of discovering violations of this chapter and for the purpose of determining whether persons are subject to this chapter, is authorized to examine persons licensed under this chapter and persons reasonably suspected by the commissioner of conducting business that requires a license under this chapter, including all relevant books, records and papers employed by those persons in the transaction of their business, and to summon witnesses and examine them under oath concerning matters relating to the business of those persons, or other matters that may be relevant to the discovery of violations of this chapter, including, but not limited to, the conduct of business without a license as required under this chapter.
  4. All books and records required to be preserved by this chapter or any regulation of the commissioner, or required by any federal statute, regulation, or regulatory guideline, as applicable to each title pledge lender, shall be preserved and made available to the commissioner as provided in this chapter, for a period of twenty-five (25) months on all rejected applications, and for a period of twenty-four (24) months on loans paid in full. The title pledge lender may cause any or all records at any time in its custody to be reproduced or preserved, by the title pledge lender or by any other person who agrees in writing to submit its operations to the examination of the commissioner, to the extent that the operations directly affect the record-keeping, by any microphotographic process, electronic or mechanical data storage technique or any other means. A record reproduced or preserved by those processes, techniques or means shall have the same force and effect as the original record, and shall be admitted into evidence equally with the original. All records of the title pledge lending business shall be maintained separately by the title pledge lender from any other business in which the title pledge lender may engage.
  5. Commencing July 1, 2005, the commissioner shall have the authority to have full access to all records of a person engaged in the business of title pledge lending, for the sole purpose of making a written report to the general assembly, no later than February 1, 2006. The scope of the report shall be within the discretion of the commissioner, but shall, at a minimum, include an analysis of the rates and terms of title pledge loans and the reasonableness and appropriateness of the rates and terms.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 7; 2014, ch. 736, § 18.

45-15-109. Notification to commissioner of changes — Events requiring report to commissioner — Biennial reports.

    1. Each title pledge lender shall notify the commissioner fifteen (15) days prior to any change in the principal place of business of a title pledge lender.
    2. Each title pledge lender shall notify the commissioner in writing within fifteen (15) days of any change among the president, chief executive officer, treasurer or chief financial officer, or among the general partners or partners of a title pledge lender.
  1. Within fifteen (15) days of the occurrence of any one (1) of the events listed in subdivisions (b)(1)-(6), a title pledge lender shall file a written report with the commissioner describing the event and its expected impact on the activities of the title pledge lender in the state:
    1. The filing for bankruptcy or reorganization by the title pledge lender;
    2. The institution of administrative proceedings, including any revocation or suspension proceedings, against the title pledge lender by any state or governmental authority;
    3. The denial of the opportunity to engage in business by any state or governmental authority;
    4. Any felony indictment of the title pledge lender or any of its officers, directors or principals;
    5. Any felony conviction of the title pledge lender or any of its officers, directors or principals; and
    6. Other events that the commissioner may determine and identify by rule.
    1. Each title pledge lender shall file a report with the commissioner on the date of submission of the renewal application required under § 45-15-106(i), in every odd-numbered year containing the following information:
      1. The names and addresses of persons owning controlling interest in each title pledge lender;
      2. The location of all places of business operated by the title pledge lender and the nature of the business conducted at each location;
      3. The names and addresses of all affiliated entities regulated under this title, doing business in this state;
      4. Balance sheets, statements of income and expense, prepared by a certified public accountant or public accounting firm not affiliated with the title pledge lender, and other statistical information that may be reasonably required by the commissioner, consistent with generally accepted accounting practices, for the purpose of determining the general results of operations under this chapter; and
      5. If the title pledge lender is a corporation, the names and addresses of its officers and directors; if the title pledge lender is a partnership, the names and addresses of the partners; and if the title pledge lender is a limited liability company, the names and addresses of the board of governors of the limited liability company.
    2. If the title pledge lender holds two (2) or more licenses or is affiliated with other title pledge lenders, a composite report may be filed, but may not be required.
    3. All reports shall be filed in a form that may reasonably be required by the commissioner and shall be sworn to by a responsible officer of the title pledge lender.
    4. The information submitted by title pledge lenders pursuant to this subsection (c) shall be confidential and may not be disclosed or distributed outside the department by the commissioner, except that the commissioner is authorized to disclose confidential information to any local, state or federal agency, as the commissioner deems proper.
    5. The commissioner shall submit to the governor and general assembly, a biennial analysis and recapitulation of the reports for the preceding calendar year, for the purpose of reflecting the general results of operations under this chapter.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 8; 2014, ch. 736, § 19; 2017, ch. 122, § 6.

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

45-15-110. Record of transactions required — Required information printed on agreement — Execution of agreement — Liens.

  1. Every title pledge lender shall keep a consecutively numbered record of each and every title pledge agreement or property pledge agreement executed by the title pledge lender and pledgor. The record, as well as the title pledge agreement or property pledge agreement itself, shall include the following information:
    1. The make, model, and year of the titled personal property;
    2. The vehicle identification number, or other comparable identification number, along with the license plate number, if applicable, of the titled personal property;
    3. The name, residential address, date of birth, and physical description of the pledgor;
    4. The date the title pledge agreement or the property pledge agreement is executed by the title pledge lender and the pledgor;
    5. The identification number of the photo identification and the type of identification, including the issuing agency, accepted from the pledgor; and
    6. The maturity date of the title pledge agreement or property pledge agreement, which shall be thirty (30) days after the title pledge agreement or property pledge agreement is executed by the title pledge lender and the pledgor.
  2. The following information shall also be printed on the title pledge agreement or property pledge agreement:
    1. The name and physical address of the title pledge office;
    2. In not less than 14-point bold type, the name and address of the department of financial institutions, as well as a telephone number to which consumers may address complaints;
    3. The following statement in not less than 14-point bold type:
      1. THIS LOAN IS NOT INTENDED TO MEET LONG-TERM FINANCIAL NEEDS.
      2. YOU SHOULD USE THIS LOAN ONLY TO MEET SHORT-TERM CASH NEEDS.
      3. YOU WILL BE REQUIRED TO PAY ADDITIONAL INTEREST AND FEES IF YOU RENEW THIS LOAN RATHER THAN PAY THE DEBT IN FULL WHEN DUE.
      4. THIS LOAN IS A HIGHER INTEREST LOAN. YOU SHOULD CONSIDER WHAT OTHER LOWER COST LOANS MAY BE AVAILABLE TO YOU.
      5. YOU ARE PLACING AT RISK YOUR CONTINUED OWNERSHIP OF THE PERSONAL PROPERTY THAT YOU ARE PLEDGING FOR THIS LOAN, INCLUDING YOUR MOTOR VEHICLE, IF THAT IS THE PROPERTY PLEDGED.
      6. IF YOU FAIL TO REPAY THE FULL AMOUNT OF THIS LOAN ON OR BEFORE THE END OF THE MATURITY DATE OR RENEWAL OF THE LOAN, THE TITLE PLEDGE LENDER MAY TAKE POSSESSION OF THE PROPERTY PLEDGED AND SELL THE PROPERTY IN THE MANNER PROVIDED BY LAW.
      7. IF YOU ENTER INTO A TITLE PLEDGE AGREEMENT OR PROPERTY PLEDGE AGREEMENT, YOU HAVE A LEGAL RIGHT OF RESCISSION. THIS MEANS YOU MAY CANCEL YOUR CONTRACT AT NO COST TO YOU BY RETURNING THE MONEY YOU BORROWED BY THE NEXT BUSINESS DAY AFTER THE DATE OF YOUR LOAN.
      8. IF THE TITLE PLEDGE AGREEMENT OR PROPERTY PLEDGE AGREEMENT IS LOST, DESTROYED OR STOLEN, YOU SHOULD IMMEDIATELY SO ADVISE THE TITLE PLEDGE LENDER IN WRITING; and
    4. The statement that “The pledgor represents and warrants, to the best of the pledgor's knowledge, that the titled personal property is not stolen and has no liens or encumbrances against it, the pledgor has the right to enter into this transaction and the pledgor will not apply for a duplicate certificate of title while the title pledge agreement or property pledge agreement is in effect.”
  3. The pledgor shall sign the title pledge agreement or property pledge agreement and shall be provided with a copy of the agreement. The title pledge agreement or property pledge agreement shall also be signed by the title pledge lender, or the lender's employee or agent. If the pledgor has been issued a social security number, the title pledge lender shall keep on file the social security number of the pledgor. The social security number shall not be printed on the title pledge agreement or property pledge agreement, in order to protect the privacy of the pledgor.
  4. The title pledge lender shall be required to record the lender's security interest in the titled personal property by noting a lien on the certificate of title for all title pledge transactions, but shall not be required to note liens for property pledge transactions in which the title pledge lender retains possession of both the titled personal property and the certificate of title during the entire term of the transaction.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 9.

45-15-111. Rate of interest and charges — Consumer notification and disclosure form.

  1. A title pledge lender shall contract for and receive an effective rate of interest not to exceed two percent (2%) per month; additionally, the title pledge lender may charge, contract for, and receive a customary fee to defray the ordinary costs of operating a title pledge office, including, but not limited to, investigating the title, appraising the titled personal property, insuring the personal property when in the physical possession of the title pledge lender, documenting and closing the title or property pledge transaction, making required reports to local law enforcement officials, for all other services provided by the title pledge lender, advertising, for losses on title pledge or property pledge transactions, salaries, and for all other expenses incurred by the title pledge lender except those in subsection (b). The fee shall not be deemed interest for any purpose of law, and the fee may equal no more than one-fifth (1/5) of the original principal amount of the title pledge agreement or property pledge agreement, or of the total unpaid balance due at the inception of any renewal of the agreement. The interest and fees shall be deemed to be earned, due and owing as of the date of the title pledge agreement or property pledge agreement and a like sum shall be deemed earned, due and owing on the same day of each subsequent thirty-day period.
  2. Title pledge lenders may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver the titled personal property to the storage facility of the title pledge lender.
  3. Notwithstanding § 45-1-104, or any other law to the contrary, in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, the department of financial institutions shall promulgate rules requiring each title pledge lender to issue a standardized consumer notification and disclosure form in compliance with federal truth-in-lending laws prior to entering into any property pledge agreement or title pledge agreement wherein the pledged goods will consist of, or include, one (1) or more motor vehicles titled by this or any other state. The required style, content and method of executing the form shall be specifically prescribed by the rules and shall be designed to ensure that the pledgor, prior to entering into the agreement, receives and acknowledges an accurate and complete notification and disclosure of the itemized and total amounts of all interest, fees, charges and other costs that will or potentially could be imposed as a result of the agreement.

Acts 1995, ch. 186, § 13; 1996, ch. 718, § 1.

Attorney General Opinions. Constitutionality of customary fee provision in title pledges, OAG 96-052, 1996 Tenn. AG LEXIS 55 (3/26/96).

NOTES TO DECISIONS

1. Remedies.

Tennessee Title Pledge Act, T.C.A. §§ 45-15-10145-15-120, when the borrowers'  action against a title pledge lender was filed, contained no private right of action on behalf of pledgers against title pledge lenders for charging excessive interest and prohibited fees under T.C.A. § 45-15-111(a). Brown v. Tenn. Title Loans, Inc., 328 S.W.3d 850, 2010 Tenn. LEXIS 1026 (Tenn. Nov. 29, 2010).

45-15-112. Right to redeem.

Except as otherwise provided in this chapter, the pledgor, upon presentation of suitable identification, shall be entitled to redeem the titled personal property and/or certificate of title described therein upon satisfaction of all outstanding obligations pursuant to the title pledge or property pledge agreement and this chapter.

Acts 1995, ch. 186, § 13.

45-15-113. Thirty-day agreements — Renewal of agreements — Right to cancel — Fees and requirements for renewals.

  1. Title pledge agreements and property pledge agreements made pursuant to this chapter shall not exceed thirty (30) days in length. However, the agreements may provide for renewals for additional thirty-day periods, which may occur automatically, unless one (1) of the following has occurred:
    1. The pledgor has redeemed the pledged titled personal property or certificate of title by paying all principal, interest, and customary fees due in accordance with the title pledge agreement or property pledge agreement;
    2. The pledgor has surrendered possession, title and all other interest in and to the titled personal property and the certificate of title to the title pledge lender;
    3. The title pledge lender has notified the pledgor in writing that the title pledge agreement or property pledge agreement is not to be renewed; or
    4. Default by pledgor of any obligation pursuant to the title pledge agreement or property pledge agreement.
    1. Except as provided in subdivision (b)(2), where the statement required by this subsection (b) is hand delivered at the time of renewal, each title pledge lender shall furnish the pledgor with a statement at least five (5) days prior to the beginning of any period of renewal of the title pledge agreement. The statement shall include the agreement number, the annual percentage rate, the monthly rate of interest, the monthly fee rate, the original principal balance of the loan, the current payoff balance of the loan, the amount of all renewal fees, and the amount of any interest, fees or other reimbursements allowed pursuant to § 45-15-111(b) that have accrued since the last statement required by this subsection (b) was issued to the pledgor. The statement shall also include the payment amount required to pay off the title pledge loan in full if payment is made with cash or certified funds by the end of the title pledge agreement or any renewal of the title pledge agreement, and the exact date through which that payoff balance will be honored.
    2. If the title pledge loan is past due, the statement shall also include the number of days past due as of the statement date, the minimum payment required and the exact date by which the minimum payment must be received in order to reinstate the account to current status. The statement shall also include the telephone number, the normal business hours of operation, and the primary contact person at the office of the title pledge lender. The statement shall be sent to the pledgor by first class mail, postage prepaid, within five (5) days of the end of the title pledge agreement or hand delivered at the time of renewal, pending any renewal of the title pledge agreement.
  2. A pledgor has the right to cancel the pledgor's obligation to make payments under a title pledge agreement or property pledge agreement, until the close of the next business day after the day when the pledgor signs a title pledge agreement or property pledge agreement, if the pledgor returns the original check or cash to the location where the loan was originated. For the purpose of this section, “business day” means any day that the title pledge office is open for business.
  3. Notwithstanding any provision of this chapter to the contrary, beginning with the third renewal or continuation and at each successive renewal or continuation thereafter, the pledgor shall be required to make a payment of at least five percent (5%) of the original principal amount of the title pledge transaction, in addition to interest and fees authorized by this chapter. Interest and fees authorized by this chapter at each successive renewal or continuation shall be calculated on the outstanding principal balance. Principal payments in excess of the five percent (5%) required principal reduction shall be credited to the outstanding principal on the day received. If, at the maturity of any renewal requiring a principal reduction, the pledgor has not made previous principal reductions adequate to satisfy the current required principal reduction, and the pledgor cannot repay at least five percent (5%) of the original principal balance and any outstanding interest and fees authorized by this chapter, the title pledge lender may, but shall not be obligated to, defer any required principal payment until the end of the title pledge agreement or property pledge agreement. No further interest or fees may accrue on a principal amount thus deferred.

Acts 1995, ch. 186, § 13; 1999, ch. 143, § 1; 2005, ch. 440, § 10.

45-15-114. Twenty-day holding period — Procedure for redemption or failure to redeem — Loss of agreement by pledgor.

  1. Upon expiration of a property pledge agreement and the final renewal of the agreement, if any, the title pledge lender shall retain possession of the titled personal property and the certificate of title for at least twenty (20) days. If the pledgor fails to redeem the titled personal property and the certificate of title before the lapse of the twenty-day holding period, the pledgor shall thereby forfeit all right, title and interest in and to the titled personal property to the title pledge lender, who shall thereby acquire an absolute right of title to the titled personal property, and the title pledge lender shall have the right and authority to sell or dispose of the unredeemed pledged property.
    1. The title pledge lender has, upon default by the pledgor of any obligation pursuant to the title pledge agreement, the right to take possession of the titled personal property. In taking possession, the title pledge lender or the lender's agent may proceed without judicial process if this can be done without breach of the peace; or, if necessary, may proceed by action to obtain judicial process. After taking possession of the titled personal property, the title pledge lender shall retain possession of the titled personal property and the certificate of title for a twenty-day holding period. There shall be no further interest or other fees charged to the pledgor from the commencement of the twenty-day holding period.
    2. If, during the twenty-day holding period, the pledgor pays the repossession charge, and redeems the titled personal property and certificate of title, by paying all outstanding principal, interest and fees authorized by this chapter owed by the pledgor to the title pledge lender, the pledgor shall be given possession of the titled personal property and the certificate of title without further charge.
    3. If the pledgor fails to redeem the titled personal property and certificate of title during the twenty-day holding period, then the title pledge lender shall have a period of sixty (60) days in which to sell the titled personal property in a commercially reasonable manner. For purposes of this section, “commercially reasonable” is a sale that would be commercially reasonable under title 47, chapter 9, part 6. The proceeds of the commercially reasonable sale shall be applied to the principal, interest and all fees authorized by this chapter owed by the pledgor to the title pledge lender, including the actual direct costs of the sale. Any surplus from the sale of the titled personal property shall be remitted to the pledgor after the sale, and shall not be retained by the title pledge lender. The commissioner shall prescribe by rule the manner in which the title pledge lender shall remit any surplus to the pledgor.
  2. If the pledgor loses the title pledge agreement or property pledge agreement or other evidence of the transaction, the pledgor shall not thereby forfeit the right to redeem the pledged property, but may promptly, before the lapse of the redemption date, make affidavit for the loss, describing the pledged property, which affidavit shall, in all respects, replace and be substituted for the lost evidence of the pledge transaction.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 11.

Attorney General Opinions. Both title pledge lenders and other secured parties must comply with the applicable statutes governing motor vehicles, OAG 05-111, 2005 Tenn. AG LEXIS 113 (7/12/05).

45-15-115. Prohibited actions by lender.

A title pledge lender shall not:

  1. Accept a pledge from a person less than eighteen (18) years of age, or from anyone who appears to be intoxicated;
  2. Make any agreement giving the title pledge lender any recourse against the pledgor, other than the title pledge lender's right to take possession of the titled personal property and certificate of title upon the pledgor's default or failure to redeem, and to sell or otherwise dispose of the titled personal property, in accordance with this chapter;
  3. Enter into a title pledge agreement in which the amount of money loaned, when combined with the outstanding balance of other outstanding title pledge agreements the pledgor has with the same lender secured by any single certificate of title, exceeds two thousand five hundred dollars ($2,500), or enter into a property pledge agreement in which the amount of money loaned exceeds two thousand five hundred dollars ($2,500);
  4. Accept any waiver, in writing or otherwise, of any right or protection accorded a pledgor under this chapter;
  5. Fail to exercise reasonable care to protect from loss or damage titled personal property or certificate of title in the physical possession of the title pledge lender;
  6. Purchase pledged titled personal property that was repossessed in the operation of the lender's business;
  7. Maintain more than one (1) title pledge office or place of operation for each title pledge lender under each license; provided, however, that the title pledge lender may move from one (1) place of business to another, as permitted in § 45-15-109(a)(1);
  8. Keep open any title pledge office before eight o'clock a.m. (8:00 a.m.), or after six o'clock p.m. (6:00 p.m.), on any day during the year, with the exception of November 25 through December 24 of each year. During that period, a title pledge lender may open the place of business at eight o'clock a.m. (8:00 am.), and shall be entitled to close at nine o'clock p.m. (9:00 p.m.). No title pledge lender shall be open on Sunday. Nothing in this subdivision (8) prohibits a title pledge lender from accepting a payment pursuant to an existing title pledge or property pledge agreement at any time;
  9. Enter into a pledge agreement, unless the pledgor presents a clear title to titled personal property at the time that the loan is made, and the title is retained, after noting of the lien by the state, in the physical possession of the title pledge lender. If the title pledge lender files a lien against the property without possession of a clear title to the property, the resulting lien shall be void;
  10. Capitalize or add any accrued interest or fee to the original principal of the title pledge agreement or property pledge agreement during any renewal of the agreement;
  11. Sell or otherwise charge for any type of insurance in connection with a title pledge agreement or property pledge agreement. Nothing in this subdivision (11) shall prohibit a title pledge lender from offering a pledgor the option to purchase memberships in automobile clubs or associations, as defined in § 55-18-101; provided, that the title pledge lender informs the pledgor in writing that the membership is optional, that the membership can be purchased elsewhere, and that the purchase of the membership has no bearing on whether the pledgor receives a loan;
  12. Charge a prepayment penalty;
  13. Advertise using the words “interest free loans” or “no finance charges,” or engage in any other false or misleading advertising;
  14. Require a pledgor to provide any additional guaranty as a condition of entering into a title pledge agreement;
  15. Use any collection tactics in violation of the federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.);
  16. Renew or otherwise consolidate a title pledge agreement or property pledge agreement with the proceeds of another title pledge agreement or property pledge agreement made by the same title pledge lender;
  17. Use any device or agreement, including agreements with affiliated title pledge lenders, with the intent to obtain greater charges than otherwise would be authorized by this chapter; or
  18. Violate this chapter or any rule promulgated pursuant to this chapter by the commissioner.

Acts 1995, ch. 186, § 13; 1996, ch. 718, § 2; 1997, ch. 74, § 1; 2005, ch. 440, § 12; 2013, ch. 70, § 1.

45-15-116. Safekeeping of titled personal property or personal property certificates of title — Insurance coverage — Damaged property.

Every title pledge lender licensed under this chapter shall provide a safe place for the keeping of the pledged property. The title pledge lender shall have sufficient insurance coverage on the pledged property, in the event of loss or damage, for the benefit of the pledgor to pay the title pledge value of the pledged property as written on the title pledge or property pledge agreement; provided, that the personal property is in the physical possession of the title pledge lender. The insurance policy shall name the commissioner as an additional insured party for the protection and benefit of the pledgor. “Title pledge value,” for the purposes of this section, means the amount of money loaned in consideration of the pledged goods as stated on the title pledge or property pledge agreement.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 15.

45-15-117. Violations.

Any person who intentionally violates any provision of this chapter commits a Class A misdemeanor.

Acts 1995, ch. 186, § 13; 1996, ch. 718, § 3; 2005, ch. 440, § 13.

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

45-15-118. Actions authorized by commissioner for violations — Consent orders — Penalties — Enforcement — Emergency action — Investigation of complaints — Censure, suspension, or bar.

  1. If, after notice and opportunity for a hearing, the commissioner finds that a person has violated this chapter, or any administrative regulation issued pursuant to this chapter, the commissioner may take any or all of the following actions:
    1. Order the person to cease and desist violating the chapter or any administrative rules issued pursuant to the chapter;
    2. Require the refund of any fees collected by the person in violation of this chapter; and
    3. Order the person to pay the commissioner a civil penalty of not more than one thousand dollars ($1,000) for each transaction in violation of this chapter or each day that a violation has occurred and continues.
    1. The commissioner may enter into consent orders at any time with any person, to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained in the consent order. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation or order promulgated or issued under this chapter, has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this chapter or any rule, regulation or order promulgated or issued under this chapter.
    2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
    3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter, without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken that is filed with the commissioner within twenty (20) days after receipt of the notice of the commissioner's emergency action.
    1. Any person aggrieved by the conduct of a title pledge lender under this chapter, in connection with the title pledge lender's regulated activities, may file a written complaint with the commissioner, who may investigate the complaint.
    2. In the course of the investigation of the complaint, the commissioner may:
      1. Subpoena witnesses;
      2. Administer oaths;
      3. Examine any individual under oath; and
      4. Compel the production of records, books, papers, contracts or other documents relevant to the investigation.
    3. If any person fails to comply with a subpoena of the commissioner under this chapter, or to testify concerning any matter about which the person may be interrogated under this chapter, the commissioner may petition any court of competent jurisdiction for enforcement.
    4. The license of any title pledge lender under this chapter, who fails to comply with a subpoena of the commissioner, may be suspended pending compliance with the subpoena.
    5. The commissioner shall have exclusive administrative power to investigate and enforce any and all complaints filed by any person that are not criminal in nature, which complaint relates to the business of title pledge lending.
    1. The commissioner, after notice and opportunity for hearing, may censure, suspend for a period not to exceed twelve (12) months, or bar a person from any position of employment, management or control of any title pledge lender, if the commissioner finds that the:
      1. Censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this chapter or any rule, regulation or order of the commissioner; or
      2. Person has been:
        1. Convicted or pled guilty to, or pled nolo contendere to, any crime; or
        2. Held liable in any civil action by final judgment, or any administrative judgment by any public agency, if the criminal, civil or administrative judgment involved any offense reasonably related to the qualifications, functions, or duties of a person engaged in the business, in accordance with this chapter.
    2. Persons suspended or barred under this subsection (d) are prohibited from participating in any business activity of a title pledge lender and from engaging in any business activity on the premises where a title pledge lender is conducting its business. This subsection (d) shall not be construed to prohibit suspended or barred persons from having their personal transactions processed by a title pledge lender.
    3. This subsection (d) shall apply to any violation, conviction, plea, or judgment on or after November 1, 2005.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 14.

45-15-119. Supersession of ordinances or resolutions of municipal corporations.

No incorporated municipality, city or taxing district in this state shall enact an ordinance or resolution or promulgate any rules or regulations relating to this chapter. Any ordinance or resolution or rules or regulations of any municipality, city or taxing district relative to title pledge lending are superseded by this chapter.

Acts 1995, ch. 186, § 13; 2005, ch. 440, § 16.

45-15-120. Applicability of motor vehicle provisions.

Title 55, chapter 17, shall apply to all sales and transfers of any motor vehicle acquired under this chapter.

Acts 1995, ch. 186, § 14.

45-15-121. Licensing through multi-state automated licensing system.

  1. In addition to any other powers imposed upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be licensed through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate any rules reasonably necessary for participation in, transition to, or operation of, a multi-state automated licensing system;
    2. Establish relationships or enter into agreements reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements, and technology licensing agreements;
    3. Require that applications for licensing under this chapter and renewals of such licenses be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning licenses to a multi-state automated licensing system. The commissioner may deny any applications or renewal applications not filed with a multi-state automated licensing system after the deadlines have passed, notwithstanding any other deadlines established in this chapter. The commissioner shall provide reasonable notice of any transition deadlines to licensees; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section authorizes the commissioner to require a person who is not subject to this chapter to submit information to, or participate in, a multi-state automated licensing system.
  3. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter, and nothing in this section reduces or derogates this authority and discretion.
  4. Applicants for and holders of licenses issued under this chapter must pay all costs associated with submitting an application or transitioning a license to a multi-state automated licensing system, as well as all costs associated with maintaining and renewing any license issued by the commissioner on a multi-state automated licensing system.

Acts 2017, ch. 122, § 7.

45-15-122. Agent for channeling information.

The commissioner is authorized to use a multi-state automated licensing system as an agent for channeling information, whether criminal or noncriminal in nature, and whether derived from or distributed to the United States department of justice, any other state or federal governmental agency, or any other source, that the commissioner is authorized to request or distribute under this chapter.

Acts 2017, ch. 122, § 8.

45-15-123. Privacy or confidentiality of shared information.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, continue to apply to the information or material after it has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with title pledge lending oversight authority without the loss of privilege or confidentiality protections provided by federal or state law, including the protection available under § 45-1-120;
  2. For purposes of subdivision (1), the commissioner may enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies, as established by rule, regulation, or order of the commissioner;
  3. Information or material that is subject to a privilege or confidentiality protection under subdivision (1) is not subject to:
    1. Disclosure under any federal or state law governing disclosure to the public of information held by an officer or agency of the federal government or the respective state; or
    2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless the person to whom such information or material pertains, in this person's discretion, waives any applicable privilege held by a multi-state automated licensing system, in whole or in part;
  4. This section supersedes any inconsistent provisions of title 10, chapter 7, part 5, pertaining to the records open to public inspection; and
  5. This section does not apply to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.

Acts 2017, ch. 122, § 8.

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

Chapter 16
Automated Teller Machines

45-16-101. Chapter definitions.

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

  1. “Electronic terminal” means an electronic device through which a person may initiate an electronic fund transfer to access the person's deposit, share, or other accounts or credit facility, and includes, but is not limited to, automated teller machines, cash dispensing machines, point of sale terminals, or other cash, debit, stored value, script, or cash equivalent device;
  2. “Financial institution” means a state or national bank, savings and loan association, savings bank, or credit union that owns or operates an electronic terminal;
  3. “Foreign access card” means any card or other device eligible for use in an electronic terminal where the foreign access card is not issued to the user by the owner or operator of the electronic terminal;
  4. “Shared electronic network” means any system by which a person may initiate any financial transaction from an electronic terminal owned or operated by any person other than a financial institution with whom the person has a deposit, share, or other account or credit facility; and
  5. “Usage fee” is any fee charged by the owner or operator of an electronic terminal on transactions by a holder of a foreign access card.

Acts 1996, ch. 899, § 1.

45-16-102. Usage fees authorized.

An agreement to share electronic terminals or participate in a shared electronic network shall not prohibit, limit, or restrict the right of a financial institution to charge a usage fee for use of its electronic terminals, require a financial institution to limit or waive its rights or obligations under this section, or require the financial institution to otherwise distinguish or discriminate on classes or types of transactions. This section shall not limit or restrict any other fee that a financial institution may impose on its customers pursuant to any deposit, lending, or other written agreement that it has with a customer, or to any other transaction where a customer has no written agreement, but which a customer has notice of the fee.

Acts 1996, ch. 899, § 1.

45-16-103. Usage fees on foreign access cards.

A financial institution may impose and collect a usage fee on a foreign access card; provided, that the usage fee may only be charged if the imposition of the fee is disclosed at a time and in a manner that allows the user to terminate or cancel the transaction without incurring the usage fee.

Acts 1996, ch. 899, § 1.

45-16-104. Rules and regulations.

The commissioner of financial institutions is authorized to promulgate rules and regulations to effectuate the purposes of this chapter.

Acts 1996, ch. 899, § 2.

Chapter 17
Deferred Presentment Services

45-17-101. Short title.

This chapter shall be known and may be cited as the “Deferred Presentment Services Act.”

Acts 1997, ch. 255, § 2; 1999, ch. 14, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

Cross-References. Check cashing regulations, § 45-17-102.

Lottery retailers, § 4-51-115.

Negotiable instruments, title 47, ch. 3.

NOTES TO DECISIONS

1. Applicability.

Postpetition negotiation of debtor's pre-petition postdated check as authorized under authorized by Tenn. Code Ann. § 45-17-101 et seq. did not constitute a violation of the automatic stay under 11 U.S.C. § 362 and In re Meadows , where creditor cashing the check promptly refunded the proceeds to debtor's estate. Davison v. Kanipe, — F. Supp. 2d —, 410 B.R. 607, 2009 U.S. Dist. LEXIS 8571 (E.D. Tenn. Feb. 5, 2009).

45-17-102. Chapter definitions.

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

  1. “Check” means any payment instrument, including any customer authorization for electronic payment;
  2. “Commissioner” means the commissioner of financial institutions or the commissioner's designated representative;
  3. “Deferred presentment services” means a transaction pursuant to a written agreement involving the following combination of activities in exchange for a fee:
    1. Accepting a check dated on the date it was written; and
    2. Holding the check for a period of time prior to presentment for payment or deposit;
  4. “Department” means the department of financial institutions;
  5. “Licensee” means a person licensed to provide deferred presentment services pursuant to this chapter;
  6. “Payment instrument”:
    1. Means a check, draft, warrant, money order, traveler's check or other instrument for payment of money, whether or not negotiable, and also includes any authorization for electronic payment of money; and
    2. Does not include an instrument that is redeemable by the issuer in merchandise or service, a credit card voucher, or a letter of credit; and
  7. “Person” means an individual, group of individuals, partnership, association, corporation, or any other business unit or legal entity.

Acts 1997, ch. 255, § 3; 1999, ch. 14, § 1; 2011, ch. 205, §§ 1, 2.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

Attorney General Opinions. Definition of the term "check" in the Deferred Presentment Services Act.  OAG 11-40, 2011 Tenn. AG LEXIS 42 (4/28/11).

45-17-103. License requirement.

  1. No person shall engage in the business of deferred presentment services in this state through the use of the internet, facsimile, telephone, or other means without having first obtained a license. A person shall be deemed to be engaged in the business of deferred presentment services in this state, if the person induces a consumer, while located in this state, to enter into a deferred presentment services transaction in this state. A separate license shall be required for each location from which the business of deferred presentment services is conducted.
  2. Any nonresident person, seeking a license under this chapter, shall furnish the commissioner with the name and address of a resident of this state upon whom notices or orders issued by the commissioner, or process affecting a licensee under this chapter, may be served. Such nonresident licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, and such change shall not become effective until approved by the commissioner.

Acts 1997, ch. 255, § 4; 1999, ch. 14, § 1; 2011, ch. 205, § 3.

Code Commission Notes.

The former last sentence of this section, concerning persons continuing to engage in the business of deferred presentment services without a license if application for licensure was filed by October 1, 1997, was deemed obsolete by the code commission in 2007.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 amended Acts 1997, ch. 255, § 22, by deleting the repeal provisions and making the amendment effective on becoming law on March 17, 1999.

45-17-104. Qualifications for license.

  1. To qualify for a license, an applicant shall satisfy the following requirements:
    1. The applicant shall have a minimum net worth determined in accordance with generally accepted accounting principles of at least twenty-five thousand dollars ($25,000) available for the operation of each location; and
    2. The financial responsibility, financial condition, business experience, character, and general fitness of the applicant shall reasonably warrant the belief that the applicant's business will be conducted lawfully and fairly. In determining whether this qualification has been met, and for the purpose of investigating compliance with this chapter, the commissioner may review and approve:
      1. The relevant business records and the capital adequacy of the applicant;
      2. The competence, experience, integrity and financial ability of any person who is a director, officer, or ten percent (10%) or more shareholder of the applicant or owns or controls the applicant; and
      3. Any record, on the part of the applicant, or any person referred to in subdivision (a)(2)(B), of any criminal activity, any fraud or other act of personal dishonesty, any act, omission or practice that constitutes a breach of a fiduciary duty or any suspension, removal or administrative action by any agency or department of the United States or any state, from participation in the conduct of any business.
  2. The requirements set forth in subdivisions (a)(1) and (2) are continuing in nature.

Acts 1997, ch. 255, § 5; 1999, ch. 14, § 1; 2012, ch. 679, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-105. Application for license.

Each application for a license shall be in writing and under oath to the commissioner, in a form prescribed by the commissioner, and shall include the following:

  1. The legal name, residence and business address of the applicant and, if the applicant is a partnership, association, or corporation, of every member, officer, managing employee and director thereof;
  2. The location at which the registered agent of the applicant shall be located; provided, that “registered agent of the applicant” includes a person designated by the applicant for accepting notices or orders by the commissioner, or process affecting the applicant, pursuant to § 45-17-103; and
  3. Other data and information the commissioner may require with respect to the applicant, its directors, trustees, officers, members, managing employees or agents.

Acts 1997, ch. 255, § 6; 1999, ch. 14, § 1; 2011, ch. 205, § 4.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-106. Filing fees — Financial statements.

  1. Each application for a license shall be accompanied by:
    1. A nonrefundable supervision fee, as provided in § 45-1-118(i); and
    2. A balance sheet and income statement for the immediately preceding fiscal year end, prepared in accordance with generally accepted accounting principles by a certified public accountant or public accounting firm. For a newly created entity, the commissioner may accept a balance sheet only, accompanied by a projected income statement demonstrating that the licensee will have adequate capital after payment of start-up costs.
  2. The supervision fee set forth in subdivision (a)(1) shall be applicable to each location.

Acts 1997, ch. 255, § 7; 1999, ch. 14, § 1; 2014, ch. 736, §§ 20, 21.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-107. Investigation — Issuance of license — Posting.

  1. Upon the filing of an application in a form prescribed by the commissioner, accompanied by the fee and documents required in § 45-17-106, the commissioner shall investigate to ascertain whether the qualifications prescribed by § 45-17-104 have been satisfied. If the commissioner finds that the qualifications have been satisfied, and approves the documents, the commissioner shall issue to the applicant a license to engage in the deferred presentment services business in Tennessee.
  2. The license shall be kept conspicuously posted in the place of business of the licensee.
  3. A license issued pursuant to this section shall remain in force and effective through the remainder of the year ending December 31 after its date of issuance unless earlier surrendered, suspended or revoked pursuant to this chapter.

Acts 1997, ch. 255, § 8; 1999, ch. 14, § 1; 2012, ch. 679, § 2.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-108. Nontransferability — Change in control of license.

  1. A license issued pursuant to this chapter is not transferable or assignable.
  2. The prior written approval of the commissioner is required for the continued operation of a deferred presentment services business whenever a change in control of a licensee is proposed. “Control,” in the case of a corporation, means direct or indirect ownership, or the right to control, twenty-five percent (25%) or more of the voting shares of the corporation, or the ability of a person to elect a majority of the directors or otherwise effect a change in policy. “Control,” in the case of any other entity, means the ability to change the principals of the organization, whether active or passive. The commissioner may require information deemed necessary to determine whether a new application is required. Costs incurred by the commissioner in investigating a change of control request shall be paid by the person requesting approval, subject to the limitations set forth in § 45-17-111.
  3. A licensee shall notify the department five (5) days before any change in the licensee's principal place of business, branch office or name.

Acts 1997, ch. 255, § 9; 1999, ch. 14, § 1; 2012, ch. 679, § 3.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-109. Reports to commissioner.

Within fifteen (15) days of the occurrence of any one (1) of the events listed in subdivisions (1)-(6), a licensee shall file a written report with the commissioner describing the event and its expected impact on the activities of the licensee in this state:

  1. The filing for bankruptcy or reorganization by the licensee;
  2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;
  3. The denial of the opportunity to engage in the deferred presentment services business by any state or governmental authority;
  4. Any felony indictment of the licensee or any of its directors, officers or principals;
  5. Any felony conviction of the licensee or any of its directors, officers or principals; and
  6. Other events that the commissioner may determine and identify by rule.

Acts 1997, ch. 255, § 10; 1999, ch. 14, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-110. Expiration of license.

  1. Licenses issued pursuant to this chapter shall expire on December 31. A license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the requirements of § 45-17-104 and the payment to the commissioner annually, between November 1 and December 31, of the nonrefundable supervision fee, as provided in § 45-1-118(i). A licensee making timely and complete application and payment for renewal of its license shall be permitted to continue to operate under its existing license until its application is approved or denied.
  2. Licenses issued or renewed under the former provisions of this chapter with an expiration date of September 30, 2012, shall instead expire on December 31, 2012.
  3. The commissioner may establish a biennial license arrangement for the filing of the application for licensure renewal, but in no case shall the supervision fee be payable for more than one (1) year at a time.

Acts 1997, ch. 255, § 11; 1999, ch. 14, § 1; 2012, ch. 679, § 4; 2014, ch. 736, §§ 22, 23.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-111. Regulations — Examinations — Payment of expenses.

  1. The commissioner may promulgate reasonable regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the enforcement of this chapter. A copy of any rule or regulation adopted by the commissioner shall be mailed to the principal place of business of each license holder at least thirty (30) days before the date it takes effect.
  2. To assure compliance with this chapter, the commissioner may examine the relevant business, books and records of any licensee. Further, for the purpose of discovering violations of this chapter and determining whether persons are subject to this chapter, the commissioner may examine or investigate persons licensed under this chapter and persons reasonably suspected by the commissioner of conducting business that requires a license under this chapter, by exercising authority that includes, but is not limited to, the power to summon witnesses and examine them under oath, and to compel the production of books and records that may be relevant to the examination or investigation.
  3. A licensee that is examined or investigated from July 1, 2015, through December 31, 2015, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination. After December 31, 2015, the costs for an examination or investigation of licensees shall be assessed pursuant to § 45-1-118(i). An unlicensed person subject to the licensing requirements of this chapter, that is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the investigation or examination.

Acts 1997, ch. 255, § 12; 1999, ch. 14, § 1; 2011, ch. 205, § 5; 2012, ch. 679, § 5; 2014, ch. 736, § 24.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-112. Retention of records — Operating costs — Deferred presentment procedures.

  1. Each licensee shall keep and use in its business any books, accounts and records the commissioner may require to carry into effect this chapter and the administrative regulations issued hereunder. Every licensee shall preserve the books, accounts and records for at least two (2) years. Any licensee, after receiving the prior written approval of the commissioner, may maintain records at a location within or outside this state.
  2. A licensee may charge a fee to defray operational costs, including, but not limited to, investigating the checking account and copying required documents, photographing the person signing the check, securing the check and customer records in a safe, fire-proof place, maintaining records as required by this chapter, maintaining required capital and liquidity, processing, documenting and closing the transaction, and for other expenses and losses. The fee authorized by this subsection (b) shall not exceed fifteen percent (15%) of the face amount of the check. The fee, when made and collected, shall not be deemed interest for any purpose of law.
  3. Before a licensee shall present for payment or deposit a check accepted by the licensee, the check shall be endorsed with the actual name under which the licensee is doing business.
  4. Any agreement for deferred presentment of a check must be in writing and signed by the maker of the check. The maker of a check shall have the right to redeem the check from the licensee before the agreed date of deposit upon payment to the licensee of the amount of the check. A licensee shall not defer presentment of any personal check for more than thirty-one (31) calendar days after the date the check is tendered to the licensee.
  5. Within five (5) business days after being advised by the payer financial institution that a check or draft has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity, the licensee shall notify the district attorney general for the district in which the check was received or the customer resides. If a check or draft is returned to the licensee by the payer financial institution for any of these reasons, the licensee shall not release the check, draft or money order without the consent of the district attorney general or other investigating law enforcement authority.
  6. A licensee shall comply with all provisions of state and federal law regarding cash transactions and cash transaction reporting.
  7. A licensee shall provide each prospective customer, before consummation of the deferred presentment agreement, a written explanation, in clear, understandable language, of the fees to be charged by the licensee, and the date on which the check will be deposited or presented by the licensee. The commissioner may promulgate rules establishing additional requirements in order to assure complete and accurate disclosure. The department of financial institutions shall promulgate rules requiring each licensee to issue a standardized consumer notification and disclosure form in compliance with federal truth-in-lending laws prior to entering into any deferred presentment transaction. The required style, content and method of executing the form shall be specifically prescribed by the rules and shall be designed to ensure that the consumer, prior to entering into a deferred presentment transaction, receives and acknowledges an accurate and complete notification and disclosure of the itemized and total amounts of all fees and other costs that will or potentially could be imposed as a result of the agreement. Enactment of this subsection (g) shall not create any inference that a particular method of disclosure was required prior to October 1, 1997.
  8. A licensee shall issue a receipt to each person for whom a licensee defers deposit of a check. The receipt shall include the information described in subsection (g).
  9. If a check is returned to the licensee from a payer financial institution due to insufficient funds, closed account, or a stop-payment order, the licensee shall have the right to all civil means available and allowed by law to collect the check, including the right to collect court costs incurred in bringing the civil action as authorized in § 47-29-101(a)(4), (b) and (c). However, no licensee shall have the authority to assess a handling charge against the maker or drawer authorized by § 47-29-102 or the right to collect attorney's fees relating to the check. No other provisions of title 47, chapter 29, are applicable to a person licensed under this chapter. No individual who issues a personal check to a licensee under this chapter shall be convicted under § 39-14-121.
  10. No licensee may alter or delete the date on any check accepted by the licensee. No licensee may accept an undated check or a check dated on a date other than the date on which the licensee accepts the check.
  11. No licensee shall engage in unfair or deceptive acts, practices or advertising in the conduct of the licensed business.
  12. Consistent with the nature of deferred presentment transactions, no licensee shall require a customer to provide security for the transaction or require the customer to provide a guaranty from another person.
  13. Each licensee must pay the full amount of any check cashed in cash or by check issued by the licensee, less only the fees permitted under this chapter. Payment by a licensee by means of a check shall not cause the licensee to be subject to chapter 7 of this title.
  14. Each licensee shall display its license in a conspicuous location in its place of business and shall post a notice in a conspicuous location in its place of business containing a description of the charges imposed by the licensee.
  15. No licensee or any person related to the licensee by common ownership or control may have outstanding more than two (2) checks from any one (1) customer at any one (1) time, with the aggregate face value of all outstanding checks from any one (1) customer not to exceed five hundred dollars ($500).
  16. Each licensee shall inquire of any person seeking deferred presentment services regarding the person's outstanding checks from other licensees. If the customer represents in writing that the customer has no more than two (2) checks outstanding to any licensee or licensees and that the aggregate face value of all outstanding checks issued by the customer for deferred presentment does not equal or exceed five hundred dollars ($500), a licensee may accept for deferred presentment a check in an amount that, when combined with the customer's other outstanding checks held for deferred presentment, does not exceed five hundred dollars ($500), so long as the check for deferred presentment complies with subsection (o). If the customer represents in writing that the customer has three (3) or more checks outstanding to any licensee or licensees, or if the aggregate face value of all outstanding checks issued by the customer for deferred presentment equals or exceeds five hundred dollars ($500), a licensee shall not accept another check for deferred presentment from that customer until the customer represents to the licensee in writing that the customer qualifies to issue a new check for deferred presentment in accordance with the preceding sentence. Each licensee may rely on a written representation of a customer regarding the existence of any outstanding checks for deferred presentment held by any licensee other than the licensee receiving the representation.
  17. A licensee shall not renew or otherwise consolidate a deferred presentment transaction with the proceeds of another deferred presentment transaction made by the same licensee. A transaction entered into in violation of this subsection (q) is void and unenforceable in law or equity.
  18. A licensee shall not use any device or agreement, including agreements with affiliated licensees, with the intent to obtain greater charges than otherwise would be authorized by this chapter.
    1. No deferred presentment services agreement, subject to this chapter shall:
      1. Provide that the law of a jurisdiction other than Tennessee applies;
      2. Provide that the customer consents to the jurisdiction of another state or foreign country;
      3. Fix venue; or
      4. Waive any provision of this chapter.
    2. Any such provision contained in any deferred presentment services agreement subject to this chapter shall be void and not enforceable as a matter of public policy.

Acts 1997, ch. 255, § 13; 1999, ch. 14, § 1; 2001, ch. 5, § 1; 2011, ch. 205, §§ 6-10.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

Law Reviews.

It's (Almost) My Money and I Need It Now: Facilitating Information to Encourage Competition in Tennessee's Payday Lending Markets, 48 U. Mem. L. Rev. 671 (2017).

Attorney General Opinions. Recovery of attorney fees and costs by deferred presentment service provider, OAG 98-070, 1998 Tenn. AG LEXIS 70 (3/25/98).

45-17-113. Denial of license — Hearing.

  1. If the commissioner determines that an applicant is not qualified to receive a license, the commissioner shall notify the applicant in writing that the application has been denied, stating the basis for denial.
  2. If the commissioner denies an application, or if the commissioner fails to act on an application within ninety (90) days after the filing of a properly completed application, the applicant may make written demand to the commissioner for a hearing before the commissioner on the question of whether the license should be granted.
  3. Any hearing on the denial of a license shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In the hearing, the burden of proving that the applicant is entitled to a license shall be on the applicant. A decision of the commissioner following any hearing on the denial of a license is subject to review under the Uniform Administrative Procedures Act.

Acts 1997, ch. 255, § 14; 1999, ch. 14, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-114. Suspension or revocation of licenses.

  1. The commissioner may, after notice and hearing, suspend or revoke any license if the commissioner finds that the licensee has knowingly or through lack of due care:
    1. Failed to pay any fees or assessments imposed by the commissioner under this chapter;
    2. Has committed any fraud, engaged in any dishonest activities or made any misrepresentations;
    3. Has violated any provisions of this chapter or any administrative regulation issued pursuant to this chapter or has violated any other law in the course of the licensee's dealings as a licensee;
    4. Has made a false statement in the application for the license or failed to give a true reply to a question in the application; or
    5. Has demonstrated incompetency or untrustworthiness to act as a licensee.
  2. If the reason for revocation or suspension of a licensee's license at any one (1) location is of general application to all locations operated by a licensee, the commissioner may revoke or suspend all licenses issued to a licensee.
  3. A hearing shall be held on written notice given at least twenty (20) days prior to the date of the hearing and shall be conducted in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

Acts 1997, ch. 255, § 15; 1999, ch. 14, § 1; 2014, ch. 736, § 25.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-115. Violations — Cease and desist orders — Penalties.

If, after notice and opportunity for a hearing, the commissioner finds that a person has violated this chapter, or any administrative regulation issued pursuant thereto, the commissioner may:

  1. Order the person to cease and desist violating the chapter or any administrative rules issued pursuant thereto;
  2. Require the refund of any fees collected by the person in violation of this chapter; and/or
  3. Order the person to pay to the commissioner a civil penalty of not more than one thousand dollars ($1,000) for each transaction in violation of this chapter or each day that a violation has occurred and continues.

Acts 1997, ch. 255, § 16; 1999, ch. 14, § 1; 2001, ch. 165, § 21.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-116. Consent orders.

  1. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation or order promulgated or issued under this chapter has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this chapter or any rule, regulation or order promulgated or issued under this chapter.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken that is filed with the commissioner within twenty (20) days after receipt of the notice of the commissioner's emergency action.

Acts 1997, ch. 255, § 17; 1999, ch. 14, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-117. Written complaint — Investigation — Subpoenas.

  1. Any person aggrieved by the conduct of a licensee under this chapter in connection with the licensee's regulated activities may file a written complaint with the commissioner who may investigate the complaint.
  2. In the course of the investigation of the complaint, the commissioner may:
    1. Subpoena witnesses;
    2. Administer oaths;
    3. Examine any individual under oath; and
    4. Compel the production of records, books, papers, contracts or other documents relevant to the investigation.
  3. If any person fails to comply with a subpoena of the commissioner under this chapter or to testify concerning any matter about which the person may be interrogated under this chapter, the commissioner may petition any court of competent jurisdiction for enforcement.
  4. The license of any licensee under this chapter who fails to comply with a subpoena of the commissioner may be suspended pending compliance with the subpoena.
  5. The commissioner shall have exclusive administrative power to investigate and enforce any and all complaints filed by any person that are not criminal in nature, which complaint relates to the business of deferred presentment services.

Acts 1997, ch. 255, § 18; 1999, ch. 14, § 1.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-118. Construction with other statutes.

The business of deferred presentment services conducted in accordance with this chapter shall not be subject to or controlled by any other statute governing the imposition of interest, fees or loan charges, including but not limited to, § 47-14-104. A licensee shall not have the powers enumerated in this chapter without first complying with the law regulating the particular transaction involved, but licensees legally exercising any of the powers set forth in this chapter shall not be deemed in violation of §§ 47-9-610, 47-14-112, 47-14-115 and 47-14-117.

Acts 1997, ch. 255, § 19; 1999, ch. 14, § 1; 2000, ch. 846, § 29.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

45-17-119. Annual reports.

  1. Each licensee shall file an annual report with the commissioner between November 1 and December 31 of each year, containing the following information:
    1. The names and addresses of persons owning controlling interest in each licensee;
    2. The location of all places of business operated by the licensee and the nature of the business conducted at each location;
    3. The names and addresses of all affiliated entities regulated under this title, doing business in this state;
    4. Balance sheets, statements of income and expense, and other statistical information that may be reasonably required by the commissioner, consistent with generally accepted accounting practices, for the purpose of determining the general results of operations under this chapter; and
    5. If the licensee is a corporation, the names and addresses of its officers and directors, or if the licensee is a partnership, the names and addresses of the partners, or if the licensee is a limited liability company, the names and addresses of the board of governors of the limited liability company.
  2. If the licensee holds two (2) or more licenses or is affiliated with other licensees, a composite report may be filed, but may not be required.
  3. The reports shall be filed in a form that may reasonably be required by the commissioner and shall be sworn to by a responsible officer of the licensee.
  4. The information submitted by licensees pursuant to this section shall be afforded the same degree of confidentiality by the department and the commissioner as is applicable to reports filed by industrial loan and thrift companies pursuant to § 45-5-503.
  5. The commissioner shall prepare and submit to the governor and general assembly, annually, an analysis and recapitulation of the reports for the preceding calendar year for the purpose of reflecting the general results of operations under this chapter.

Acts 1997, ch. 255, § 20; 1999, ch. 14, § 1; 2012, ch. 679, § 6.

Compiler's Notes. Acts 1997, ch. 255, § 22 provided that §§ 45-17-10145-17-119 were to be repealed at 12:01 a.m. October 1, 1999; however, Acts 1999, ch. 14, § 1 deleted the repeal provisions in Acts 1997, ch. 255, § 22, effective March 17, 1999.

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

Reporting requirements satisfied by notice to general assembly members of publication of report, § 3-1-114.

45-17-120. Commissioner's authority to require licensing through a multi-state automated licensing system.

  1. In addition to any other powers conferred upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be licensed through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate whatever rules and regulations are reasonably necessary for participation in, transition to or operation of a multi-state automated licensing system;
    2. Establish relationships or enter into agreements that are reasonably necessary for participation in, transition to or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements and technology licensing agreements;
    3. Require that applications for licensing under this chapter and renewals of such licenses be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning licensees to a multi-state automated licensing system. The commissioner has the authority to deny any applications or renewal applications not filed with a multi-state automated licensing system after such deadlines have passed, notwithstanding any dates established elsewhere in this chapter; provided, however, that the commissioner shall provide reasonable notice of any transition deadlines to licensees; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section shall authorize the commissioner to require a person who is not subject to this chapter to submit information to, or to participate in, a multi-state automated licensing system that is operated or participated in pursuant to this chapter.
  3. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter to its fullest extent. Nothing in this section shall be deemed to be a reduction or derogation of that authority and discretion.
  4. Applicants for and holders of licenses issued under this chapter shall pay all costs associated with submitting an application to or transitioning a license to a multi-state automated licensing system, as well as all costs required by a multi-state automated licensing system for maintaining and renewing any license issued by the commissioner on a multi-state automated licensing system.

Acts 2012, ch. 679, § 7.

45-17-121. Commissioner's authority to use multi-state automated licensing system as agent for information channeling.

The commissioner is authorized to use a multi-state automated licensing system as an agent for channeling information, whether criminal or noncriminal in nature, whether derived from or distributed to the United States department of justice or any other state or federal governmental agency, or any other source, that the commissioner is authorized to request or distribute under this chapter.

Acts 2012, ch. 679, § 8.

45-17-122. Promotion of more effective regulation and reduction of regulatory burden through supervisory information sharing.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, shall continue to apply to the information or material after the information or material has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with deferred presentment services oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal or state law, including the protection available under § 45-1-120;
  2. For purposes of subdivision (1), the commissioner is authorized to enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors or other associations representing governmental agencies as established by rule, regulation or order of the commissioner;
  3. Information or material that is subject to a privilege or confidential under subdivision (1) shall not be subject to:
    1. Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or any agency of the federal government or the respective state; or
    2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless with respect to any privilege held by a multi-state automated licensing system applicable to such information or material, the person to whom such information or material pertains waives that privilege, in whole or in part, in the discretion of such person;
  4. This section shall supersede any inconsistent provisions of title 10, chapter 7, part 5 pertaining to the records open to public inspection; and
  5. This section shall not apply with respect to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.

Acts 2012, ch. 679, § 9.

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

Chapter 18
Check Cashing Act

45-18-101. Short title.

This chapter shall be known and may be cited as the “Check Cashing Act of 1997.”

Acts 1997, ch. 309, § 1.

Cross-References. Check cashing regulations, § 45-17-102.

Negotiable instruments, title 47, ch. 3.

45-18-102. Chapter definitions.

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

  1. “Applicant” means a person filing an application for a license under this chapter;
  2. “Check” means any payment instrument;
  3. “Check casher” means a person who, for compensation, provides currency in exchange for payment instrument received;
  4. “Commissioner” means the commissioner of financial institutions;
  5. “Consideration” means and includes any premium charged for the sale of goods, or services provided in connection with the sale of the goods that is in excess of the cash price of the goods or services;
  6. “Control” means ownership of, or the power to vote, twenty-five percent (25%) or more of the outstanding voting securities of a licensee controlled by any person. There shall be aggregated with the person's interest the interest of any other person controlled by the person or by any spouse, parent, or child of the person;
  7. “Currency” means the coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance. “Currency” includes United States silver certificates, United States notes, and Federal Reserve notes. “Currency” also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country;
  8. “Department” means the department of financial institutions;
  9. “Licensee” means a check cashing business licensed by the commissioner to engage in that business in accordance with this chapter;
  10. “Material litigation” means any litigation that, according to generally accepted accounting principles, is deemed significant to a person's financial health and would be required to be referenced in annual audited financial statements, reports to shareholders or similar documents;
  11. “Payment instrument” means a check, draft, warrant, money order, traveler's check or other instrument for payment of money, whether or not negotiable. “Payment instrument” does not include an instrument that is redeemable by the issuer in merchandise or service, a credit card voucher, or a letter of credit; and
  12. “Person” means any individual, partnership, association, trust, corporation, limited liability company, or other group, however organized, but does not include the governments of the United States or this state or any department, agency, or instrumentality thereof.

Acts 1997, ch. 309, § 2.

Attorney General Opinions. Recovery of attorney fees, costs and other charges by check casher, OAG 98-070, 1998 Tenn. AG LEXIS 70 (3/25/98).

45-18-103. Application.

This chapter does not apply to:

  1. Any bank, trust company, credit union, building and loan association, savings bank or mutual bank organized under the laws of any state or the United States;
  2. Persons who offer a check cashing service without receiving, directly or indirectly, any consideration or fee; and
  3. Persons engaged in the cashing of payment instruments that is incidental to the retail sale of goods or services, whose compensation for cashing payment instruments at each site does not exceed five percent (5%) of the gross receipts from the retail sale of goods or services by the person during the person's most recently completed fiscal year.

Acts 1997, ch. 309, § 3; 2007, ch. 80, § 1.

Attorney General Opinions. Recovery of attorney fees, costs and other charges by check casher, OAG 98-070, 1998 Tenn. AG LEXIS 70 (3/25/98).

45-18-104. License requirement.

  1. No person shall engage in, or in any manner advertise engagement in, the business of cashing payment instruments without first obtaining a license under this chapter. A separate license shall be required for each location from which the business is conducted.
  2. Any licensed money transmitter or registered industrial loan and thrift company engaged in the business of cashing payment instruments on October 1, 2007, may continue to engage in the business of cashing payment instruments without a license issued by the commissioner, until the commissioner has acted upon the application for license, if the application is filed by December 31, 2007.

Acts 1997, ch. 309, § 4; 2007, ch. 80, § 2.

45-18-105. Qualifications of licensee.

  1. Each applicant for a license shall demonstrate, and each licensee shall maintain, a minimum net worth of at least twenty-five thousand dollars ($25,000) for each location.
  2. Every corporate applicant, at the time of filing an application for a license under this part and at all times after a license is issued, shall be in good standing in the state of its incorporation. All applicants, whether corporate or noncorporate, at the time of filing an application for a license under this part and at all times after a license is issued, shall be qualified to do business in this state.
  3. Subject to the commissioner's discretion, no person shall be licensed under this chapter to do business in the state if the person has been adjudged guilty of any felony or if an executive officer, key shareholder or director of the person has been so adjudged. For purposes of this part, a person shall be deemed to have been convicted of a crime if the person has either pleaded guilty to, pled nolo contendere to, obtained a pretrial diversion or been found guilty of a charge before a court or federal magistrate, or by the verdict of a jury, regardless of the pronouncement of sentence or the suspension of the sentence. The department may take into consideration the fact that the plea of guilty, or the decision, judgment, or verdict, has been set aside, reversed, or otherwise abrogated by lawful judicial process, or that the person convicted of the crime received a pardon from the jurisdiction where the conviction was entered, or received a certificate pursuant to any provision of law that removes the disability under this part because of the conviction.
  4. The department may deny an initial application for a license if the applicant is the subject of a pending criminal prosecution or governmental enforcement action, in any jurisdiction, until the conclusion of the criminal prosecution or enforcement action.
  5. All applicants shall demonstrate experience, character, and general fitness to command the confidence of the public and warrant the belief that the business to be operated thereunder will be operated lawfully and fairly. This requirement is continuing in nature. In determining whether this qualification has been met, the commissioner may review:
    1. The business records and the capital adequacy of the applicant;
    2. The competence, experience, integrity, and financial ability of any person who is a director, officer, supervisory employee or five percent (5%) shareholder of the applicant or owns or controls the applicant; and
    3. Any record, on the part of the applicant or any person referenced in subdivision (e)(2) of any criminal activity, any fraud or other act of personal dishonesty, any act, omission, or practice that constitutes a breach of a fiduciary duty or any suspension, removal or administrative action by any agency or department of the United States or any state, from participation in the conduct of any business.
  6. The commissioner may deny a license pursuant to this chapter to any applicant whose license or registration was revoked in any jurisdiction during the twelve-month period before the date of the application.

Acts 1997, ch. 309, § 5.

45-18-106. Application for license.

Each application for a license under this chapter shall be made in writing under oath, and in a form prescribed by the commissioner.

Acts 1997, ch. 309, § 6.

45-18-107. Supervision fee — Financial statements.

Each application for a license shall be accompanied by:

  1. A nonrefundable supervision fee, as provided in § 45-1-118(i). The supervision fee shall be applicable to each location; and
  2. Financial statements for the immediately preceding fiscal year end prepared in accordance with generally accepted accounting principles by a certified public accountant or public accounting firm.

Acts 1997, ch. 309, § 7; 2014, ch. 736, §§ 26, 27.

45-18-108. Issuance of license.

  1. Upon the filing of a properly completed application, accompanied by the nonrefundable supervision fee, as provided in § 45-1-118(i), and other required documents, the department shall investigate to ascertain whether the qualifications and requirements prescribed by this chapter have been met. If the department finds the applicant meets the qualifications and requirements, the department shall issue the applicant a license to engage in the check cashing business in this state. Any license issued under this chapter shall remain in effect through December 31 of each year following its date of issuance unless otherwise specified by the department or earlier surrendered, suspended, or revoked. If the commissioner finds that the qualifications and requirements prescribed by this chapter have not been met, the commissioner shall deny the application in writing setting forth the reasons for the denial.
  2. The commissioner shall approve or deny every application for a license within ninety (90) days from the date a completed application with all required fees and documents is submitted, which period may be extended by the written consent of the commissioner. If the commissioner denies an application, or if the commissioner fails to act on an application within ninety (90) days after its filing, the applicant may make written demand to the department for a hearing before the commissioner on the question of whether the license should be granted.
  3. Any hearing on the denial of a license shall be conducted pursuant to the Uniform Administrative Procedures Act, compiled in title 4, chapter 5. In the hearing, the burden of proving that the applicant is entitled to a license is on the applicant. Decisions of the commissioner following any hearing on the denial of a license are subject to review under the Uniform Administrative Procedures Act.
  4. Licenses are not transferable or assignable.

Acts 1997, ch. 309, § 8; 2014, ch. 736, § 28; 2017, ch. 122, § 16.

Code Commission Notes.

Former subsection (e), concerning filing an application for a license within ninety days of October 1, 1997, was deemed obsolete by the code commission in 2007.

45-18-109. License renewal.

    1. Licenses issued pursuant to this chapter expire on December 31. A license may be renewed for the ensuing twelve-month period upon application by the license holder showing continued compliance with the qualifications for a license, filing of the completed renewal form, and payment of the nonrefundable supervision fee, as provided in § 45-1-118(i). A licensee making timely and complete application and payment for renewal of its license may continue to operate under its existing license until its application is approved or denied. The completed renewal application and the payment of the annual supervision fee must be sent to the department on or before December 31, but no earlier than November 1, of each year.
    2. A license holder submitting a renewal application pursuant to this chapter for a license expiring on March 31, 2018, must pay the supervision fee as provided in § 45-1-118(i) for each location. The completed renewal application and payment must be sent to the department on or before March 1, 2018. A renewed license issued under this chapter with a beginning effective date of April 1, 2018, expires on December 31, 2018.
  1. The licensee shall include in its annual renewal report:
    1. A copy of its most recent unconsolidated annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position, except that a licensee may provide the most recent consolidated annual financial statement of the parent corporation if the statement includes the balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes of financial position of the licensee;
    2. Any material changes to any of the information submitted by the licensee on its original application that have not previously been reported to the commissioner on any other report required to be filed under this chapter;
    3. Notification of material litigation relating to the businesses regulated under this chapter; and
    4. Other information that the commissioner may deem appropriate for the proper enforcement of this chapter.
  2. The commissioner may establish a biennial license arrangement for the filing of the application for licensure renewal, but in no case shall the supervision fee be payable for more than one (1) year at a time.

Acts 1997, ch. 309, § 9; 2014, ch. 736, §§ 29-31; 2017, ch. 122, § 10; 2017, ch. 122, §§ 9, 10.

45-18-110. Licensee's change of address, name and/or ownership — Revocation of license.

  1. No licensee shall change its address unless it has given fourteen (14) days prior notice to the commissioner.
  2. No licensee shall change its name unless it has given fourteen (14) days prior notice to the commissioner.
  3. A change in control of a licensee shall require prior written notice to the commissioner. In the case of a publicly traded corporation, notice shall be made in writing within thirty (30) days of a proposed change or acquisition of control of a licensee. Upon notification, the commissioner may require such information deemed necessary to determine whether an application for a license is required. “Control,” in the case of a corporation, has the meaning used in § 45-18-102. “Control,” in the case of any other entity, means any change in the principals of the organization, whether active or passive. Costs incurred by the department in investigating a change in control request shall be paid by the person or persons requesting approval. The commissioner may waive the filing of an application if, in the commissioner's discretion, the change of control does not pose any risk to the interests of the public.
  4. Whenever control of a licensee is acquired or exercised in violation of this section, the license shall be deemed revoked as of the date of the unlawful acquisition of control. The licensee, or its controlling person, shall surrender the license to the commissioner on demand.
  5. If the commissioner approves of the change of name, location or ownership and an amended license must be issued, a fifty dollar ($50.00) fee shall be paid for the amended license.

Acts 1997, ch. 309, § 10.

45-18-111. Location of check cashing business.

A licensee may operate the businesses regulated under this chapter at a location where any other business is operated or in association or conjunction with any other business as long as the licensee gives prior written notification to the commissioner and the other business is consistent with the following requirements:

  1. The books, accounts and records of businesses regulated under this chapter are kept and maintained separate and apart from the books, accounts, and records of any other business; and
  2. The other business is not of a type that would tend to enable the concealment of acts engaged in to evade the requirements of this chapter. If the commissioner determines upon investigation that the other business is of the type that would conceal the acts, the commissioner shall order the licensee to cease the operation of the businesses regulated under this chapter at that location.

Acts 1997, ch. 309, § 11.

45-18-112. Filing of written report with commissioner — Events impacting activities of licensee.

Within fifteen (15) days of the occurrence of any one (1) of the events listed in subdivisions (1)-(6), a licensee shall file a written report with the commissioner describing the event and its expected impact on the activities of the licensee in the state:

  1. The filing for bankruptcy or reorganization by the licensee;
  2. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority;
  3. The denial of the opportunity to engage in the check cashing business by any state or governmental authority;
  4. Any felony indictment of the licensee or any of its officers, directors or principals;
  5. Any felony conviction of the licensee or any of its officers, directors, or principals; and
  6. Other events that the commissioner may determine and identify by rule.

Acts 1997, ch. 309, § 12.

45-18-113. Examination of licensee by commissioner.

  1. The commissioner may conduct periodic examinations of a licensee to determine compliance with this chapter. In conducting the examination, the commissioner or the commissioner's staff shall have full and free access to all the books, papers and records of the licensee and may summon and qualify as witnesses, under oath, and examine the directors, officers, members, agents and employees of any licensee, and any other person concerning the condition and affairs of the licensee. The cost for an examination or investigation of licensees shall be assessed pursuant to § 45-1-118(i).
  2. Upon reasonable cause, the commissioner may conduct an examination of any unlicensed person to determine whether violations of this chapter have occurred or are occurring. In conducting the examination, the commissioner has the ability to summon witnesses and examine them under oath concerning matters relating to the business of the persons or other matters that may be relevant to the discovery of a violation of this chapter, including, but not limited to, the conduct of business without a license as required under this chapter. An unlicensed person subject to the licensing requirements of this chapter, who is examined or investigated in accordance with this chapter, shall pay to the commissioner the reasonable and actual expenses of the examination or investigation.
  3. The commissioner may promulgate reasonable regulations in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5, for the enforcement of this chapter. A copy of any rule or regulation adopted by the commissioner shall be mailed to each license holder at least thirty (30) days before the date it takes effect.
  4. The commissioner is authorized to disclose information obtained pursuant to this chapter to any local, state or federal agency as the commissioner deems proper.

Acts 1997, ch. 309, § 13; 2006, ch. 596, § 2; 2014, ch. 736, §§ 32, 33.

45-18-114. Required records.

  1. Each licensee shall make, keep and preserve the books, accounts, records, and documents as the commissioner may determine by rule.
  2. All records of the check cashing business shall be maintained separately by the licensee from any other business in which the licensee may engage.

Acts 1997, ch. 309, § 14.

45-18-115. Suspension or revocation of license.

  1. After notice and an opportunity for a hearing, the commissioner may suspend or revoke a license if the commissioner finds that:
    1. Any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying the application;
    2. The licensee violates any provision of this chapter or any rule or order validly promulgated or issued by the commissioner;
    3. The licensee refuses to permit the commissioner to make any examination authorized by this chapter;
    4. The licensee willfully fails to make any report or pay any fee required by this chapter;
    5. The licensee has been found guilty of or liable for any fraudulent act or practice;
    6. The licensee has made any material false representation to the commissioner in any application or report filed with the commissioner; or
    7. The licensee has abandoned its place of business for a period of sixty (60) days or more.
  2. The commissioner may only revoke or suspend the particular license with respect to which grounds for revocation or suspension may occur or exist unless the commissioner finds that the grounds for revocation or suspension are of general application to all offices or to more than one (1) office operated by the licensee, in which case the commissioner may revoke or suspend all of the licenses issued to the licensee.

Acts 1997, ch. 309, § 15.

45-18-116. Hearing.

The Uniform Administrative Procedures Act, compiled in title 4, chapter 5, applies to any hearing afforded pursuant to this chapter.

Acts 1997, ch. 309, § 16.

45-18-117. Civil penalties.

If, after notice and an opportunity for a hearing, the commissioner finds that a person has violated this chapter or a rule adopted under this chapter, the commissioner may, in addition to all other powers conferred in this chapter:

  1. Order the person to cease and desist violating the chapter or its rules and require the refund of any fees collected by the person in violation of this chapter; and
  2. Order the person to pay to the commissioner a civil penalty in an amount specified by the commissioner, not to exceed one thousand dollars ($1,000) for each violation or, in the case of a continuing violation, one thousand dollars ($1,000) for each day that the violation continues.

Acts 1997, ch. 309, § 17.

45-18-118. Consent orders.

  1. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this chapter. A consent order shall be signed by the person to whom it is issued or a duly authorized representative, and must indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this chapter, or any rule, regulation or order promulgated or issued under this chapter has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this chapter or any rule, regulation or order promulgated or issued under this chapter.
  2. Notwithstanding the issuance of a consent order, the commissioner may seek civil penalties or compromise civil penalties concerning matters encompassed by the consent order.
  3. In cases involving extraordinary circumstances requiring immediate action, the commissioner may take any enforcement action authorized by this chapter without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken that is filed with the commissioner within twenty (20) days of the receipt of the notice of the commissioner's emergency action.

Acts 1997, ch. 309, § 18.

45-18-119. Criminal penalties.

  1. Any person who knowingly and willfully violates any provision of this chapter or any order or rule pursuant thereto for which a penalty is not specifically provided commits a Class C misdemeanor. Each day the violation occurs is a separate offense.
  2. Any person who knowingly and willfully makes a material, false statement in any document filed or required to be filed under this chapter with the intent to deceive the recipient of the document commits a Class E felony.
  3. Any person who knowingly and willfully fails to file a document required to be filed under this chapter commits a Class E felony.
  4. Any person who carries on an unauthorized check cashing business commits a Class E felony.
  5. Any person who obstructs or endeavors to obstruct a lawful examination of a licensee commits a Class E felony.
  6. It is the duty of the commissioner to submit to the appropriate district attorney general for the respective counties of the state any criminal violation of this chapter known by the commissioner to have occurred in the county. The commissioner shall also report the violation to the appropriate division of the Tennessee bureau of investigation. The commissioner may provide the information to the attorney general and reporter or the appropriate federal authorities, or both, as the commissioner deems proper. Confidential information that is communicated by the commissioner pursuant to this section remains confidential in the hands of the agency to which the information is reported, and does not become a matter of public record by virtue of this communication.
  7. In addition to the criminal penalty provided for in this section, the commissioner may also commence an action to enjoin the operation of the business through a cease and desist order.

Acts 1997, ch. 309, § 19.

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

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

Penalty for Class E felony, § 40-35-111.

45-18-120. Licensee's conduct — Written complaints.

  1. Any person aggrieved by the conduct of a licensee under this chapter in connection with the regulated activities, may file a written complaint with the commissioner who may investigate the complaint.
  2. In the course of the investigation of the complaint, the commissioner may:
    1. Subpoena witnesses;
    2. Administer oaths;
    3. Examine any individual under oath; and
    4. Compel the production of records, books, papers, contracts, or other documents relevant to the investigation.
  3. If any person fails to comply with a subpoena of the commissioner under this chapter or to testify concerning any matter about which the person may be interrogated under this chapter, the commissioner may petition any court of competent jurisdiction for enforcement.
  4. The license of any licensee under this chapter who fails to comply with a subpoena of the commissioner may be suspended pending compliance with the subpoena.
  5. The commissioner has the administrative power to investigate and enforce any and all complaints filed by any person that are not criminal in nature, which complaint relates to check cashing businesses, including licensees hereunder and those who are exempt under § 45-18-103.

Acts 1997, ch. 309, § 20.

45-18-121. Check cashing — Practice and procedure.

  1. Before a licensee deposits with any financial institution a payment instrument that is cashed by a licensee, the item must be endorsed with the actual name under which the licensee is doing business. Additionally, the words “Licensed Check Cashing Business” must be written legibly or stamped immediately after or below the name of the endorser.
  2. Licensees shall comply with all applicable federal statutes governing currency transaction reporting.
  3. Every licensee shall display its license and post a notice containing its charges for services regulated under this chapter.
  4. Licensees may not alter or delete the date on any check cashed.
  5. Licensees shall issue a receipt for each check cashing transaction upon request. The receipt shall include, among other matters the licensee may desire to include, the amount of the check and the total fee charged.
  6. The maximum fee a licensee may charge for a bad check is twenty dollars ($20.00).
  7. No licensee may advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, any statement or representation that is false, misleading, or deceptive, or that omits material information.
  8. Within ten (10) business days after being advised by the payor financial institution that a payment instrument has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity, the licensee shall notify the police department in the city or town where the office of the licensee is located at which the check was cashed. If a payment instrument is returned to the licensee by the payor financial institution for any of the aforementioned reasons, the licensee may not release the payment instrument without the consent of the city or town police department, or other investigative law enforcement authority.
  9. No licensee shall issue coupons, gift certificates or tokens to be used in lieu of money when cashing a check.
  10. No licensee shall require the customer to receive payment by a method that causes the customer to pay additional or further fees and charges to the licensee or other person.
  11. No licensee shall conduct a business regulated under this chapter at a location other than the licensed location.
  12. No licensee shall receive any other charges or fees in addition to the fees listed in this chapter.
  13. Licensees shall pay to every customer tendering a payment instrument to be cashed the entire face amount of the instrument in cash, less any charges permitted by law, on the same date upon which the instrument is presented.
  14. Licensees shall not require that a customer cash two (2) separate checks in a manner to avoid the limitations on the fees a licensee can charge.
  15. No check casher shall:
    1. Charge check cashing fees, except as otherwise provided in this chapter, in excess of five percent (5%) of the face amount of the payment instrument or five dollars ($5.00), whichever is greater;
    2. Charge check cashing fees in excess of three percent (3%) of the face amount of the payment instrument, or two dollars ($2.00), whichever is greater, if the payment instrument is the payment of any kind of state public assistance or federal social security benefit payable to the bearer of the payment instrument; or
    3. Charge check cashing fees for personal checks or money orders in excess of ten percent (10%) of the face amount of the personal check or money order or five dollars ($5.00), whichever is greater.
  16. No licensee shall agree to hold a payment instrument for later deposit.
  17. Licensees may charge a customer with a one-time membership fee not to exceed ten dollars ($10.00).

Acts 1997, ch. 309, § 21.

Attorney General Opinions. Recovery of attorney fees, costs and other charges by check casher, OAG 98-070, 1998 Tenn. AG LEXIS 70 (3/25/98).

45-18-122. Licensing through multi-state automated licensing system.

  1. In addition to any other powers imposed upon the commissioner by law, the commissioner is authorized to require persons subject to this chapter to be licensed through a multi-state automated licensing system. Pursuant to this authority, the commissioner may:
    1. Promulgate any rules reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system;
    2. Establish relationships or enter into agreements reasonably necessary for participation in, transition to, or operation of a multi-state automated licensing system. The agreements may include, but are not limited to, operating agreements, information sharing agreements, interstate cooperative agreements, and technology licensing agreements;
    3. Require that applications for licensing under this chapter and renewals of such licenses be filed with a multi-state automated licensing system;
    4. Require that any fees required to be paid under this chapter be paid through a multi-state automated licensing system;
    5. Establish deadlines for transitioning licenses to a multi-state automated licensing system. The commissioner may deny any applications or renewal applications not filed with a multi-state automated licensing system after the deadlines have passed, notwithstanding any other deadlines established in this chapter. The commissioner shall provide reasonable notice of any transition deadlines to licensees; and
    6. Take such further actions as are reasonably necessary to give effect to this section.
  2. Nothing in this section authorizes the commissioner to require a person who is not subject to this chapter to submit information to, or participate in, a multi-state automated licensing system.
  3. Notwithstanding any other provision of this section, the commissioner retains full authority and discretion to license persons under this chapter and to enforce this chapter. Nothing in this section reduces or derogates that authority and discretion.
  4. Applicants for and holders of licenses issued under this chapter must pay all costs associated with submitting an application or transitioning a license to a multi-state automated licensing system, as well as all costs associated with maintaining and renewing any license issued by the commissioner on a multi-state automated licensing system.

Acts 2017, ch. 122, § 11.

45-18-123. Agent for channeling information.

The commissioner is authorized to use a multi-state automated licensing system as an agent for channeling information, whether criminal or noncriminal in nature, and whether derived from or distributed to the United States department of justice, any other state or federal governmental agency, or any other source, that the commissioner is authorized to request or distribute under this chapter.

Acts 2017, ch. 122, § 11.

45-18-124. Privacy or confidentiality of shared information.

In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing:

  1. The requirements under any federal or state law regarding the privacy or confidentiality of any information or material provided to a multi-state automated licensing system, and any privilege arising under federal or state law, including the rules of any federal or state court, with respect to such information or material, continue to apply to the information or material after it has been disclosed to a multi-state automated licensing system. The information or material may be shared with all state and federal regulatory officials with check-cashing industry oversight authority without the loss of privilege or confidentiality protections provided by federal or state law, including the protection available under § 45-1-120;
  2. For purposes of subdivision (1), the commissioner may enter into agreements or sharing agreements with other governmental agencies, the Conference of State Bank Supervisors, or other associations representing governmental agencies, as established by rule, regulation, or order of the commissioner;
  3. Information or material that is subject to a privilege or confidentiality protection under subdivision (1) is not subject to:
    1. Disclosure under any federal or state law governing disclosure to the public of information held by an officer or agency of the federal government or the respective state; or
    2. Subpoena or discovery or admission into evidence in any private civil action or administrative process, unless the person to whom such information or material pertains, in the person's discretion, waives any applicable privilege held by a multi-state automated licensing system, in whole or in part;
  4. This section supersedes any inconsistent provisions of title 10, chapter 7, part 5, pertaining to the records open to public inspection; and
  5. This section does not apply with respect to information or material relating to publicly adjudicated disciplinary and enforcement actions against persons subject to this chapter that is included in a multi-state automated licensing system for access by the public.

Acts 2017, ch. 122, § 11.

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

Chapter 19
Data Match System for Child Support Obligors

45-19-101. Operating agreements for data match systems.

  1. All financial institutions conducting business in this state shall enter agreements with the department of human services to develop and operate, in coordination with the department of human services, and the federal parent locator service in the case of financial institutions doing business in two (2) or more states, a data match system using automated data exchanges to the maximum extent feasible, to locate, encumber, escrow, seize or surrender the assets of any obligor who owes past-due child support. Each financial institution each calendar quarter will provide the name, record address, social security or other taxpayer identification number, and other identifying information for each obligor maintaining an account at the institution who owes past-due child support as identified by the department of human services or its agents or contractors by that person's name and social security or other taxpayer identification number. In drafting the agreements, the department of human services shall consult with a representative number of financial institutions and shall avoid the imposition of requirements that are not reasonably compatible with the data processing and recordkeeping systems generally utilized by financial institutions.
  2. All financial institutions conducting business in this state shall enter agreements with the department of human services to encumber, escrow, seize or surrender, as the case may be, in response to a notice of lien or levy by any agency enforcing child support, the assets of any obligor whose assets held by the financial institution are subject to a child support lien pursuant to 42 U.S.C. § 666(a)(4). The agreements shall provide, wherever feasible by automated data exchange, for the automated notice to the financial institution of any liens on the assets of the obligor and shall provide for the automated escrow, seizure or surrender of the assets pending any adjudication by the department of any encumbrance, escrow, seizure or surrender and for the automated transfer of assets to the department or its contractors or agents after completion of the adjudication, or, at the option of the financial institution and with the agreement of the department, the financial institution may furnish information for all account holders at the financial institution from which the department may determine the delinquent child support obligors.
  3. When an administrative order is issued by the department of human services pursuant to any provisions of law or regulations or pursuant to agreements entered pursuant to subsection (a) or (b) directing the encumbrance, escrow, seizure or surrender of assets of an obligor consisting of a demand deposit account, or an account accessible by a checking or negotiable order of withdrawal for the purpose of satisfying a lien for past-due child support, the department may direct that only a portion of the accounts, up to the amount necessary to satisfy the existing lien for past-due child support, be encumbered, escrowed, seized or surrendered. If less than the whole amount of the account is sought, the department's order shall direct the financial institution to withhold a specific percentage or a specific dollar amount of those types of accounts.
  4. The agreements shall provide for the department of human services to pay a reasonable fee to the financial institution for providing account information and for conducting the data match provided in subsection (a), not to exceed the actual costs incurred by the financial institution.
  5. As used in this part, unless the context otherwise requires:
    1. “Account” means a demand deposit account, account accessible by checking or negotiable orders of withdrawal, savings account, time deposit account, or money-market mutual fund account; and
    2. “Financial institution” means:
      1. A depository institution, as defined in § 3(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(c));
      2. An institution-affiliated party, as defined in § 3(u) of the act (12 U.S.C. § 1813(u));
      3. Any federal credit union or state credit union as defined in § 101 of the Federal Credit Union Act (12 U.S.C. § 1752), including, for the purposes of title 36, chapter 5, parts 8 and 9, an institution-affiliated party of the credit union, as defined in § 206 of the act (12 U.S.C. § 1786); and
      4. Any benefit association, insurance company, safe deposit company, money market mutual fund, securities broker/dealer or similar entity authorized to conduct business in this state.

Acts 1997, ch. 551, § 14; 1998, ch. 1098, § 60; 2001, ch. 447, § 12.

Compiler's Notes. Provisions relating to the federal parent locator service, referred to in this section, are compiled at 42 U.S.C. § 653.

Cross-References. Alimony and child support, title 36, ch. 5.

Employment and security records and reports, § 50-7-701.

Programs and services for children, title 71.

45-19-102. Immunity for provision of financial information.

  1. A “financial institution,” as defined in § 45-19-101(e), or any financial institution's contractor that may process any records pursuant to this chapter, shall be absolutely immune from any civil or criminal liability under common law or under any contract, statute or regulation for:
    1. The disclosure of any information pursuant to this part, for the escrow, encumbrance, seizure or surrender of any assets held by the financial institution in response to a notice of lien or levy issued by any state child support enforcement agency or its contractors or agents, or for disclosing any records to the federal parent locator service as may be required by this part or for any action taken in good faith to comply with the requirements of this part;
    2. Subject to subsection (b), any erroneous disclosure, encumbrance, seizure or surrender made in a good faith effort to comply with the requirements of this part; or
    3. Subject to subsection (b), any good faith failure to effect, or good faith delay in effecting, a disclosure, encumbrance, seizure or surrender in compliance with the requirements of this part, if the failure or delay results from an error or from events beyond the control of the financial institution.
  2. Subdivisions (a)(2) and (3) shall apply to erroneous acts or failures to act only if the error from which the act or failure results is an unintentional bona fide error, including, but not limited to, a clerical or computer malfunction or programming error. In the event of an erroneous act under subdivision (a)(2) or an erroneous or other failure to act under subdivision (a)(3), the financial institution shall, upon discovery thereof, exercise the diligence that the circumstances require.

Acts 1997, ch. 551, § 14; 2001, ch. 447, § 13.

Compiler's Notes. Provisions relating to the federal parent locator service, referred to in this section, are compiled at 42 U.S.C. § 653.

Chapter 20
Tennessee Home Loan Protection Act

45-20-101. Short title.

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

Acts 2006, ch. 801, § 1.

Cross-References. Attachment and replevy, title 29, ch. 6.

Injunction against sale under trust deed or mortgage, title 29, ch. 23, part 2.

Interest on home loans, title 47, ch. 15.

Judicial and trust sales, notice by publication, § 35-5-101.

Lien of judgment on real property. 25-5-101.

Liens claimed for mortgages or deeds of trust, limitation of actions, § 28-2-111.

Redemption of real estate sold for debt, title 66, ch. 8.

45-20-102. Chapter definitions.

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

  1. “Affiliate” means any company that controls, is controlled by, or is under common control with another company, as set forth in the federal Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), and the regulations promulgated pursuant to that act;
  2. “Annual percentage rate” means the annual percentage rate for the loan calculated according to the federal Truth-in-Lending Act (15 U.S.C. § 1601 et seq.), and the regulations, including official staff commentary, promulgated pursuant to that act, by the board of governors of the federal reserve system;
  3. “Bona fide loan discount points” means loan discount points actually paid by the borrower to the lender for the purpose of reducing, and that in fact result in a bona fide reduction of, the interest rate applicable to the loan by a minimum of twenty-five (25) basis points per discount point;
  4. “Borrower” means a natural person obligated to pay a home loan, including a co-borrower;
  5. “Commissioner” means the commissioner of financial institutions;
  6. “Construction loan” means a loan for the initial construction of a borrower's principal dwelling on land owned by the borrower, with a maturity of less than eighteen (18) months, that only requires the payment of interest until the time that the entire unpaid balance is due and payable, or a fee in lieu of interest;
  7. “Department” means the department of financial institutions;
  8. “High-cost home loan” means a home loan in which the terms of the loan meet or exceed the rate threshold or the total points and fees threshold;
  9. “Home loan” means a loan in which:
    1. The principal amount of the loan does not exceed the lesser of the conforming loan size limit for a single-family dwelling as established by the federal national mortgage association, or three hundred fifty thousand dollars ($350,000);
    2. The debt is incurred primarily for personal, family, or household purposes;
    3. The loan is secured by a mortgage or deed of trust on real estate in this state, upon which there is located or there is to be located a structure:
      1. Designed principally for occupancy by one (1) to four (4) families; and
      2. That is or will be occupied by a borrower as the borrower's principal dwelling; and
    4. “Home loan” does not include:
      1. Any residential mortgage transaction as defined in 12 CFR 226.2(a)(24);
      2. An open-end credit loan as defined in section 12 CFR 226.2(a)(20), and as used in the official staff commentary of the board of governors of the federal reserve system, except as provided in § 45-20-106;
      3. A reverse mortgage transaction, as defined in title 47, chapter 30;
      4. A construction loan; and
      5. Any loan that is insured or guaranteed by, securitized for, or sold to a government agency, including the department of housing and urban development, the department of veteran affairs, the Tennessee housing development agency, or the United States department of agriculture;
  10. “Lender” means “lender” as defined in 24 CFR 3500.2. “Lender” also means a “mortgage loan broker” as defined in § 45-13-102;
  11. “Person” means any individual, corporation, partnership, trust, or any other business unit or legal entity, as the context may require;
    1. “Points and fees” means as defined in 12 CFR 226.32, and as used in the official staff commentary of the board of governors of the federal reserve system;
    2. “Points and fees” shall exclude up to and including two (2) bona fide loan discount points; and
    3. “Points and fees” shall not include charges for all items listed in 12 CFR 226.4(c)(7), as provided in 12 CFR 226.32(b)(1)(iii), where the charges are paid to an affiliate of the lender and the amount is reasonably consistent with amounts charged for comparable services by a party not affiliated with the lender at the time the loan is made; provided, however, that only the amount of the charge that exceeds the charge for comparable items shall be included within the term “points and fees”;
  12. “Principal loan amount” is the total amount of money paid to, received by, or credited to the account of the borrower on which interest is to be computed;
  13. “Rate threshold” means that the annual percentage rate of the loan at the time the loan is consummated is such that the loan is considered a mortgage pursuant to § 152 of the Home Ownership Equity Protection Act of 1994 (15 U.S.C. §  1602(aa)), and the regulations adopted pursuant to 15 U.S.C. § 1602(aa) by the federal reserve system, including 12 CFR 226.32, and as used in the official staff commentary of the board of governors of the federal reserve system;
  14. “Servicer” means any person who in the regular course of business assumes responsibility for servicing and accepting payments for a high-cost home loan;
  15. “Total loan amount” means the term as defined in 12 CFR 226.32 and as used in the official staff commentary of the board of governors of the federal reserve system; and
  16. “Total points and fees threshold” means the total points and fees payable by the borrower at or before the loan closing that exceed:
    1. The greater of five percent (5%) of the total loan amount or two thousand four hundred dollars ($2,400), if the total loan amount is more than thirty thousand dollars ($30,000); or
    2. Eight percent (8%) of the total loan amount, if the total loan amount is thirty thousand dollars ($30,000) or less.

Acts 2006, ch. 801, § 2.

Compiler's Notes. 24 CFR 3500.2, which is referred to in this section, was removed. Part 3500 now directs the user to 79 FR 34224, 34226, June 16, 2014.

45-20-103. Prohibited acts and practices.

The following acts and practices are prohibited in the making of a high-cost home loan:

  1. No lender shall recommend or encourage default or skipping a payment on an existing loan or other debt prior to and in connection with the closing or planned closing of a high-cost home loan that refinances all or any portion of the existing loan or debt;
    1. A lender or servicer of a high-cost home loan shall provide a borrower or the borrower's designated agent, upon request, two (2) pay-off statements within any twelve-month period, free of charge. The statement shall be valid for a minimum of fifteen (15) days;
    2. The lender may require that any request for a pay-off statement be sent in writing, by facsimile, or other electronic means, to a designated address or location, and contain sufficient information to identify the loan, including the name of the borrower as listed on the loan documents and the loan number;
    3. A request for a pay-off statement sent to the location designated by the lender or servicer shall be provided within five (5) business days after an authorized request, plus any required fee, is received by the lender; and
    4. A lender or servicer may charge a reasonable fee for any additional requests for a pay-off statement during the twelve-month period;
  2. No lender or servicer shall charge a fee to provide a release upon prepayment of a high-cost home loan, except for the actual cost paid to record the release;
  3. No lender shall knowingly or intentionally make a high-cost home loan that refinances, within thirty (30) months, an existing home loan or high-cost home loan of the borrower, when the new loan does not have a reasonable benefit to the borrower, considering all the circumstances, including the terms of both the new and refinanced loans, the economic and noneconomic circumstances, the cost of the new loan, and the borrower's circumstances;
    1. No lender shall make a high-cost home loan that finances, directly or indirectly, any single premium credit life insurance, as defined in § 56-7-904, credit accident, credit disability, credit unemployment, credit property or health insurance, any other credit insurance product, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, unless the total benefits payable under all of the policies or contracts issued in connection with the loan do not exceed fifty thousand dollars ($50,000), the principal amount of financed premiums for the policy or contract are repayable during the term of the policy or contract, and the amount payable under the credit life insurance policy are not at any time during the term of the loan more than one hundred three percent (103%) of the then unamortized principal balance of the loan;
    2. Nothing in this subdivision (5) prohibits the payment or receipt of insurance premiums or debt cancellation or suspension fees calculated on the unpaid balance of a home loan and paid on a monthly basis, or prohibits bona fide credit property insurance required by the federal housing administration or the United States department of agriculture to be paid in a single premium to the respective federal agency;
    3. As used in this subdivision (5), “credit property insurance” means property insurance written in connection with credit transactions under which the lender is the primary beneficiary;
    1. A lender may not make a high-cost home loan, unless the lender reasonably believes at the time the loan is made that one (1) or more of the borrowers, when considered individually or collectively, will be able to make scheduled payments to repay the obligation, based upon consideration of their current and expected income, current obligations, employment status, and other financial resources, other than the borrower's equity in the dwelling that secures repayment of the loan;
    2. A borrower shall be deemed to be able to make the scheduled payments to repay the high-cost home loan, if, at the time the loan is consummated, the borrower's total monthly debts, as identified on the borrower's credit report and as computed by the lender's underwriting guidelines and methodology, including amounts owed under the loan, do not exceed fifty percent (50%) of the borrower's monthly gross income:
      1. As verified by the credit application, the borrower's financial statements, tax returns, payroll receipts or third party income verification; and,
      2. As underwritten in accordance with the lender's underwriting guidelines and methodology; and
    3. No presumption of inability to make the scheduled payments to repay the high-cost home loan shall arise solely from the fact that, at the time the loan is consummated, the borrower's total monthly debts, including amounts owed under the loan, exceed fifty percent (50%) of the borrower's monthly gross income;
  4. No lender may directly or indirectly finance, in connection with any high-cost home loan, any points and fees in excess of an amount that is the greater of three percent (3%) of the total loan amount or one thousand five hundred dollars ($1,500), if the total loan amount is more than thirty thousand dollars ($30,000), or an amount equal to five percent (5%) of the total loan amount, if the total loan amount is thirty thousand dollars ($30,000) or less; provided, however, that registrants under chapter 5 of this title may finance as points and fees an amount not to exceed the charges allowed pursuant to § 45-5-403(a)(1)(A) on loans made under chapter 5 of this title;
  5. A lender may not charge a borrower points and fees in connection with a high-cost home loan, if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan with the same lender or affiliate of the lender; provided, however, that this subdivision (8) shall not prohibit a lender from charging points and fees in connection with any additional proceeds received by the borrower in connection with the refinancing. For purposes of this subdivision (8), additional proceeds shall be defined as the amount over and above the amount required to pay off the existing high-cost home loan;
    1. No prepayment fees or penalties shall be provided in the loan documents for a high-cost home loan, or charged a borrower, that exceed, in aggregate, two percent (2%) of the loan amount prepaid in the first twenty-four (24) months following the loan closing;
    2. No prepayment fees or penalties shall be provided in the loan documents or charged a borrower in a refinancing of a high-cost home loan, if the lender or an affiliate of the lender is the note holder of the note being refinanced; and
    3. Any refund method not permitted under 12 CFR 226.32(d)(6) and (d)(7) shall be prohibited;
  6. No lender shall make a high-cost home loan that contains a scheduled payment that is more than twice as large as the average of the earlier scheduled payments. This subdivision (10) does not apply when the payment schedule is adjusted to the seasonal or irregular income of a borrower;
  7. No lender shall make a high-cost home loan that contains a payment schedule with regular periodic payments that cause the principal balance to increase;
  8. No lender shall make a high-cost home loan that contains a provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This subdivision (12) does not apply when repayment of the loan has been accelerated by default in the terms of the note or deed of trust;
  9. No lender shall make a high-cost home loan that includes terms under which more than two (2) periodic payments required under the loan are consolidated and paid in advance from the loan proceeds provided to the borrower;
  10. No lender shall make a high-cost home loan that contains a provision that increases the interest rate after default. This subdivision (14) does not apply to interest rate changes in a variable rate loan otherwise consistent with the loan documents; provided, that the change in the interest rate is not triggered by the event of default or acceleration of the indebtedness;
  11. No lender shall make a high-cost home loan that provides for a late payment fee, except as follows:
    1. The late payment fee shall not be in excess of five percent (5%) of the amount of the payment past due or fifteen dollars ($15.00), whichever is greater;
    2. The late payment fee shall only be assessed for a payment past due for ten (10) days or more; and
    3. The late payment fee shall not be imposed more than once with respect to a single late payment; and no late payment fee shall be charged with respect to a subsequent payment that would have been a full payment, but for the previous default or the imposition of the previous late payment fee;
  12. A lender shall not make a high-cost home loan unless the lender has given the following written notice, in at least twelve (12) point bold type, to the borrower, acknowledged in writing and signed by the borrower, not later than the time the notice provided by 12 CFR 226.31(c) is required:

    NOTICE TO BORROWER

    YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE TO OBTAIN A LOAN AT A LOWER COST. YOU SHOULD SHOP AROUND AND COMPARE LOAN RATES AND FEES. MORTGAGE LOAN RATES AND CLOSING COSTS AND FEES VARY BASED ON MANY FACTORS, INCLUDING YOUR PARTICULAR CREDIT AND FINANCIAL CIRCUMSTANCES, YOUR EMPLOYMENT HISTORY, THE LOAN-TO-VALUE REQUESTED AND THE TYPE OF PROPERTY THAT WILL SECURE YOUR LOAN. THE LOAN RATE AND FEES COULD ALSO VARY BASED ON WHICH LENDER OR BROKER YOU SELECT.

    IF YOU ACCEPT THE TERMS OF THIS LOAN, THE LENDER WILL HAVE A MORTGAGE LIEN ON YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU PUT INTO IT IF YOU DO NOT MEET YOUR PAYMENT OBLIGATIONS UNDER THE LOAN.

    YOU SHOULD CONSULT A QUALIFIED INDEPENDENT CREDIT COUNSELOR OR OTHER EXPERIENCED FINANCIAL ADVISOR REGARDING THE RATE, FEES AND PROVISIONS OF THIS MORTGAGE LOAN BEFORE YOU PROCEED. THE UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) MAINTAINS A LIST OF CREDIT COUNSELORS IN YOUR AREA. YOU MAY OBTAIN HUD'S LIST OF CREDIT COUNSELORS BY CONTACTING HUD DIRECTLY OR BY CONTACTING THE TENNESSEE DEPARTMENT OF FINANCIAL INSTITUTIONS.

    YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THIS DISCLOSURE OR HAVE SIGNED A LOAN APPLICATION. REMEMBER, PROPERTY TAXES AND HOMEOWNER'S INSURANCE ARE YOUR RESPONSIBILITY. NOT ALL LENDERS PROVIDE ESCROW SERVICES FOR THESE PAYMENTS. YOU SHOULD ASK YOUR LENDER ABOUT THESE SERVICES.

    ALSO, YOUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE TO YOUR CREDIT RATINGS. YOU SHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR EXISTING LENDERS;

    1. A lender may not present a borrower with a high-cost home loan at closing with a materially different interest rate, term, type of loan, or settlement charges from the settlement charges disclosed on the last disclosures required by the Real Estate Settlement Procedures Act (12 U.S.C. § 2601 et seq.), without redisclosure not less than one (1) day before closing. “Materially different settlement charges” means that the total settlement charges disclosed on the final settlement statement would exceed the previously last disclosed settlement charges by an amount equal to more than fifteen percent (15%) in the aggregate; and
    2. A high-cost home loan may not be closed in a location other than an office of the lender, at the office of any attorney at law licensed to practice in Tennessee, at the office of a title insurance company or title insurance agency licensed to do business in Tennessee, the office of a settlement or closing agent, or the commercial office of a mortgage broker;
  13. A lender or its servicer shall report, at least quarterly, both the favorable and unfavorable payment history information of the borrower on payments due to the lender on a high-cost home loan to a nationally recognized consumer credit reporting agency;
    1. Each mortgage or deed of trust securing a high-cost home loan shall state on the face of the instrument the following legend prominently displayed: “This instrument secures a high-cost home loan, as defined in Tennessee Code Annotated, Title 45.”; and
    2. Each note that meets the definition of a high-cost loan as defined in this chapter shall state on the face of the instrument the following legend prominently displayed: “This instrument is a high-cost home loan, as defined in Tennessee Code Annotated, Title 45.”;
    1. No lender, in connection with a high-cost home loan, shall encourage or solicit any person to execute any loan agreement, mortgage, deed, deed of trust, loan application, settlement statement, or other loan or closing document for a high-cost home loan, if any material terms of the loan or transaction, including, but not limited to, the duration, interest rate, or fees, are omitted or incomplete;
    2. No person, in connection with a high-cost home loan, shall modify, including, but not limited to, any alteration or change, any loan agreement, mortgage, deed, deed of trust, loan application, settlement statement, or other loan or closing document, after the execution of the document, unless the modification is with the consent of the person or persons affected by the change and the consent is in writing, or the modification is authorized by a valid power of attorney authorizing the modification. A power of attorney is valid for this purpose, if it specifically includes the type or nature of the modification; and
    3. No person, in connection with a high-cost home loan, shall encourage, solicit, or conspire with any other person to violate this section; and
  14. A lender may not make a high-cost home loan without first providing to the borrower, in a separate document clearly identified, notice of availability of counselors from third-party nonprofit organizations approved by the United States department of housing and urban development (HUD), a housing financing agency of this state, or the regulatory agency that has jurisdiction over the lender. The document shall provide either a list of counselors who are located in the county of the borrower or the nearest available county where counselors are available; or a resource list for HUD, Tennessee housing and development agency or the Tennessee department of financial institutions, including toll-free numbers and website information, if available, to identify the counselors. The borrower shall be afforded the opportunity to seek counseling without penalty. For purposes of this section, this document shall be provided to the borrower not later than the time that the good faith estimate of closing costs required by the Real Estate Settlement Procedures Act (12 U.S.C. § 2601 et seq.), must be provided to the borrower.

Acts 2006, ch. 801, § 3.

45-20-104. Cure of default — Foreclosure.

  1. If a lender or servicer asserts that grounds for acceleration exist and requires the payment in full of all sums secured by the security instrument of a high-cost home loan, the borrower, or anyone authorized to act on the borrower's behalf, shall have the right at any time, prior to three (3) business days prior to a foreclosure sale, to cure the default and reinstate the home loan by tendering the amount or performance. Cure of default shall reinstate the borrower to the same position as if the default had not occurred and shall nullify, as of the date of the cure, any acceleration of any obligation under the security instrument or note arising from the default.
  2. Not less than thirty (30) days prior to publishing notice of foreclosure as provided in § 35-5-104, or commencing an action for judicial foreclosure, a notice of the right to cure the default shall be sent to the borrower informing the borrower of the following:
    1. The nature of default claimed on the home loan, and of the borrower's right to cure the default by paying the sum of money required to cure the default. If the amount necessary to cure the default will change during the thirty-day period after the effective date of the notice, due to the application of a daily interest rate or the addition of late fees, the notice shall give sufficient information to enable the borrower to calculate the amount at any point during the thirty-day period;
    2. The date by which the borrower shall cure the default to avoid acceleration and initiation of foreclosure, or other action to seize the home, which date shall not be less than thirty (30) days after the date the notice is sent, and the name and address and telephone number of a person to whom the payment or tender shall be made;
    3. That if the borrower does not cure the default by the date specified, steps may be taken to terminate the borrower's ownership in the property by requiring payment in full of the home loan and commencing a foreclosure proceeding or other action to seize the home; and
    4. The name and address of the lender or servicer and the telephone number of a representative of the person whom the borrower may contact if the borrower disagrees with the assertion that a default has occurred or the correctness of the calculation of the amount required to cure the default.
  3. To cure a default under this section, a borrower shall not be required to pay any charge, fee or penalty attributable to the exercise of the right to cure a default as provided for in this section, other than the fees specifically allowed by this section. During the cure period, the borrower shall be liable for any expenses actually incurred to preserve, maintain, or protect the property or the security interest of the lender that are otherwise permitted in the note or deed of trust, or other loan documents. After a lender publicly files a notice of foreclosure or takes other action to seize or transfer ownership of the home, the borrower shall be liable for attorney's fees that are reasonable and actually incurred by the lender, based on a reasonable hourly rate and a reasonable number of hours and reasonable cost for publishing notice of and conducting the foreclosure sale.
  4. A borrower's right to cure a default prior to commencing a foreclosure proceeding under this section may not be invoked more than once in any twelve-month period.

Acts 2006, ch. 801, § 4.

45-20-105. Purchaser or assignee of loan subject to all claims and defenses of the borrower — Relief granted — Due diligence.

  1. Notwithstanding any other provision of law, any person who purchases or is otherwise assigned a high-cost home loan shall be subject to all claims and defenses with respect to the high-cost home loan that the borrower could assert against the lender of the high-cost home loan, unless the purchaser or assignee demonstrates, by a preponderance of the evidence, that the purchaser or assignee exercised due diligence at the time of the purchase of the high-cost home loans, or within a reasonable time thereafter, intended to prevent the purchaser or assignee from purchasing or taking assignment of a high-cost home loan that violates this chapter.
  2. The relief granted in an action, pursuant to subsection (a):
    1. May be asserted by the borrower acting only in an individual capacity;
    2. May not exceed the sum of the amount required to reduce the borrower's liability, so that it is no longer a high-cost home loan, plus the amount required to recover costs, including reasonable attorney's fees;
    3. May be asserted by the borrower of a high-cost home loan after notice of acceleration or foreclosure of the high-cost home loan, asserting a violation of §  45-20-103 in an individual action to enjoin foreclosure, or to preserve or obtain possession of the home secured by the high-cost home loan; and
    4. Shall be brought within three (3) years from the date of the occurrence of the violation; provided, however, that a borrower shall not be barred from asserting a violation of § 45-20-103 in an action to collect the debt that was brought more than one (1) year from the date of the occurrence of the violation, as a matter of defense by recoupment or set-off in the action, except as otherwise provided by law.
  3. This section shall not apply if a purchaser or assignee has exercised due diligence by demonstrating that the purchaser or assignee:
    1. Has in place, at the time of the purchase or assignment of the loans, policies that expressly prohibit the purchase or acceptance of assignment, by the purchaser or assignee, of any high-cost home loan containing violations;
    2. Requires, by the applicable purchase contract, that a seller or assignor of the loans to the purchaser or assignee represents and warrants to the purchaser or assignee, as of the applicable sale date, that either:
      1. The seller or assignor will not sell or assign to the purchaser or assignee any high-cost home loan containing violations; or
      2. The seller or assignor is a beneficiary of a representation and warranty from a previous seller or assignor to that effect, and, as a result of its purchase of the loans, the purchaser or assignee is a beneficiary of the representation and warranty; and
      3. Exercises reasonable due diligence, at or before the time of the purchase or assignment of home loans, or within a reasonable period of time after the purchase or assignment of the home loans, that is intended by the purchaser or assignee to prevent the purchaser or assignee from purchasing or taking assignment of any high-cost home loan containing violations.
  4. The reasonable due diligence requirement referred to in subdivision (c)(2)(C) may be met by employing lender's quality control sampling methodology and shall not require loan-by-loan review, for purposes of this subsection (d).

Acts 2006, ch. 801, § 5.

45-20-106. Actions prohibited to avoid application or provisions of chapter — Open-end credit plan.

  1. No person shall, with the intent to avoid the application or provisions of this chapter:
    1. Divide a loan transaction into separate parts;
    2. Structure a loan transaction as an open-end credit plan for the purpose and with the intent of evading this chapter, when the loan would have been a high-cost home loan if the loan had been structured as a closed-end loan; or
    3. Engage in any other subterfuge.
  2. For purposes of this section, “open-end credit plan” means “open-end loan” as defined in 12 CFR 226.2(a)(20), and as used in the official staff commentary of the board of governors of the federal reserve system.
  3. For open-end credit plan, “points and fees” means “points and fees” as defined in 12 CFR 226.32, and as used in the official staff commentary of the board of governors of the federal reserve system that are known at or before closing, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.

Acts 2006, ch. 801, § 6.

45-20-107. Penalties — Punitive damages — Remedies — Limitations — Frivolous or harassment actions — Notice of action.

  1. Except as provided in § 45-20-108, any lender found by a preponderance of the evidence to have violated this chapter shall be subject to the following:
    1. The making of a high-cost home loan that violates one (1) or more of the provisions found in § 45-20-103(1), (4)-(14), (16), (17), or (19)-(21), or § 45-20-106 is subject to the following penalties:
      1. Actual damages;
      2. For willful or intentional violations, statutory damages equal to the amount of all finance charges and fees paid by the borrower and forfeiture of the remaining interest under the loan; and
      3. Costs and reasonable attorney's fees;
    2. The collecting or servicing of a high-cost home loan that violates one (1) or more of the provisions in § 45-20-103(2), (3), (15), or (18), § 45-20-104, or § 45-20-106 is subject to the following penalties:
      1. Actual damages;
      2. For willful or intentional violations, statutory damages equal to the amount of all finance charges and fees paid by the borrower; and
      3. Costs and reasonable attorney's fees.
  2. Punitive damages may be awarded where the court finds that the violation is malicious or reckless. Punitive damages shall be limited to three (3) times the actual damages and the amount of all finance charges and fees paid by the borrower, exclusive of costs and reasonable attorney's fees.
  3. The loan may be reformed to effect the remedies provided in this section.
  4. The remedies provided in this section are not exclusive and are in addition to any other remedies available to a borrower under applicable law.
  5. Any action under this section shall be brought within three (3) years from the date the borrower discovered or should have discovered the violation. This subsection (e) does not bar a borrower from asserting a violation of this chapter as a defense in an action to collect the debt that was brought more than three (3) years from the date of occurrence of the violation as a matter of defense by recoupment or set-off in the action.
  6. In any action under this section, upon finding that the action is frivolous or brought for the purpose of harassment, the court may require the borrower instituting the action to indemnify the defendant for reasonable attorney's fees and costs. To assert a claim under this section, the lender or servicer shall file a motion with the court and provide at least fifteen (15) days after service in which the borrower may respond to deny, withdraw, or amend the complaint.
  7. In any action under this section, notice of the action by copy shall be filed simultaneously with the department of financial institutions.

Acts 2006, ch. 801, § 7.

45-20-108. Compliance failure.

  1. A lender or servicer, as applicable, of a high-cost home loan who, when acting in good faith, fails to comply with § 45-20-103, § 45-20-104, or § 45-20-106 shall not be deemed to have violated the section, if the lender or servicer establishes that either:
    1. Within thirty (30) days of discovery and prior to the institution of any action under this chapter:
      1. The borrower is notified of the compliance failure;
      2. The lender or servicer has made appropriate restitution to the borrower;
      3. With respect to the violations identified in § 45-20-107(a)(1), the lender or servicer makes whatever adjustments are necessary to the loan to either, at the choice of the borrower, make the loan satisfy the requirements of § 45-20-103, or change the terms of the loan in a manner beneficial to the borrower, so that the loan will no longer be considered a high-cost home loan subject to this chapter; and
      4. With respect to the violations identified in § 45-20-107(a)(2), the lender or servicer makes whatever adjustments or refunds and/or takes action necessary to cure the violation, by affording the borrower the rights and benefits provided under this chapter;
    2. The compliance failure was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adapted to avoid the errors, and within sixty (60) days after the discovery of the compliance failure and prior to the institution of any action under this chapter or the receipt of written notice of the compliance failure:
      1. The borrower is notified of the compliance error;
      2. The lender makes appropriate restitution to the borrower;
      3. With respect to the violations identified in § 45-20-107(a)(1), the lender or servicer makes whatever adjustments are necessary to the loan to either, at the choice of the borrower, make the loan satisfy the requirements of § 45-20-103, or change the terms of the loan in a manner beneficial to the borrower, so that the loan will no longer be considered a high-cost home loan subject to this chapter; and
      4. With respect to the violations identified in § 45-20-107(a)(2), the lender or servicer  makes whatever adjustments or refunds and/or takes action necessary to cure the violation, by affording the borrower the rights and benefits provided under this chapter.
  2. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction and programming, and printing errors.
  3. For purposes of this section, “appropriate restitution” means the reimbursement by the lender of any points and fees, interest, or other charges made by the lender and received from the borrower necessary to put the borrower in the same position as the borrower would have been had the loan, as adjusted, in accordance with subdivisions (a)(1) and (2), been originally made.

Acts 2006, ch. 801, § 8.

45-20-109. Commissioner's powers — Rules and regulations — Examinations and investigations — Injunctions.

  1. The commissioner is granted the power to interpret this chapter and to enact reasonable substantive and procedural rules as are necessary and proper for the administration, enforcement and interpretation of this chapter.
    1. For the purpose of discovering violations of this chapter or securing information lawfully required under this chapter, the commissioner may conduct examinations and investigations of the business and the books, accounts, records and files used in the business of each person subject to the regulatory jurisdiction of the commissioner, or of each person that the commissioner reasonably suspects to be subject to the regulatory jurisdiction of the commissioner. For purposes of defraying the examination and investigation expenses incurred by the commissioner in the enforcement of this chapter, the commissioner shall recover the actual costs for the examination and investigation from the person.
    2. The commissioner has the power to subpoena witnesses, compel their attendance, require the production of evidence, administer oaths and examine any person under oath in connection with the enforcement of this chapter.
    3. If, after notice and opportunity for a hearing, the commissioner determines that a person has violated this chapter, or any administrative rule issued pursuant to this chapter, the commissioner may take any or all of the following actions:
      1. Order the person to cease and desist violating this chapter or any administrative rules issued pursuant to this chapter;
      2. Order a person to make restitution for actual damages to borrowers;
      3. Impose a civil penalty of up to ten thousand dollars ($10,000) for each violation;
      4. Suspend, revoke, or refuse to renew any license or registration issued by the commissioner;
      5. Censure, suspend or bar an individual responsible for a violation of this chapter, or any administrative rule issued pursuant to this chapter, from any position of management, control, employment or other capacity related to activities regulated by the commissioner;
      6. Pending completion of an investigation or any formal proceeding instituted pursuant to this chapter, if the commissioner finds that the interests of the public require immediate action to prevent undue harm to borrowers, enter an emergency order to be effective immediately and until entry of a final order. The emergency order may include: a temporary suspension of the lender's authority to make high-cost home loans under this chapter, a temporary cease and desist order, a temporary prohibition against a lender transacting high-cost home loan business in this state, or another order relating to high-cost home loans that the commissioner may deem necessary to prevent undue harm to borrowers pending completion of an investigation or formal proceeding. In cases requiring immediate action, the commissioner shall promptly afford a subsequent hearing upon application to rescind the action taken; or
      7. Impose other conditions that the commissioner deems appropriate.
  2. In the event a person does not comply with an order or subpoena for documents or testimony issued pursuant to this chapter, 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 (c).
  3. The commissioner may 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 this chapter, or any administrative rule issued pursuant to this chapter. 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's fees.
  4. This section shall not limit the authority of the attorney general and reporter from instituting or maintaining any action within the scope of the attorney general and reporter's authority with respect to practices prohibited under this chapter.

Acts 2006, ch. 801, § 9.

45-20-110. Restrictions on local regulation.

All counties, municipalities, or political subdivisions of this state are prohibited from enacting and enforcing ordinances, resolutions, and rules regulating financial and lending activities, including ordinances, resolutions, and rules disqualifying persons from doing business with a city, county, or municipality based upon lending practices, interest rates or imposing reporting requirements or any other obligations upon persons regarding financial services or lending practices of persons or entities, and any subsidiaries or affiliates thereof, who:

  1. Are subject to the jurisdiction of the department of financial institutions, including activities subject to this chapter;
  2. Are subject to the jurisdiction of the office of thrift supervision, the office of the comptroller of the currency, the national credit union administration, the federal deposit insurance corporation, the federal trade commission, or the United States department of housing and urban development;
  3. Originate, purchase, sell, buy, secure, or service property interests or obligations created by financial transactions or loans made, executed, or originated by persons referred to in subdivision (1) or (2) to assist or facilitate the transactions; or
  4. Are chartered by the United States congress to engage in secondary market mortgage transactions.

Acts 2006, ch. 801, § 12.

45-20-111. Application.

This chapter shall apply to all high-cost home loans applied for and closed on or after January 1, 2007; provided, that this chapter shall not apply to the extent it is preempted by, or is in conflict with or inconsistent with the National Bank Act (12 U.S.C. § 21 et seq.), the Homeowner's Loan Act (12 U.S.C. § 1464 et seq.), the Federal Credit Union Act (12 U.S.C. § 1751 et seq.), or regulations issued by the office of the comptroller of the currency, the office of thrift supervision, the federal deposit insurance corporation or the federal credit union administration, and as interpreted by the federal courts, to national or state banks or trust companies, federal or state savings institutions, federal or state credit unions, or the operating subsidiaries of any of those.

Acts 2006, ch. 801, § 13.