Code Section Group

Financial Code - FIN

DIVISION 5. CREDIT UNIONS [14000 - 16906]

  ( Division 5 repealed and added by Stats. 1979, Ch. 112. )

CHAPTER 6. Share Accounts and Certificates for Funds [14850 - 14905]

  ( Chapter 6 added by Stats. 1979, Ch. 112. )

ARTICLE 1. General [14850 - 14870]
  ( Article 1 added by Stats. 1979, Ch. 112. )


The Corporate Securities Law relating to the necessity of qualification of the sale of securities does not apply to the sale and issue of membership shares, certificates for funds, and other securities, by credit unions organized under this division or lawfully doing business in this state. No credit union lawfully doing business in this state shall be required to file a certificate for determination of preference with the office of the Secretary of State in connection with any share offering so long as it complies with all applicable provisions of this division and the rules of the commissioner.

(Amended by Stats. 1980, Ch. 321, Sec. 12.)


(a) Every credit union may issue shares (1) to any member qualified pursuant to the credit union’s bylaws; (2) to an officer, employee, or agent of nonmember units of federal, Indian tribal, state, or local governments, and political subdivisions thereof when acting in his or her official capacity; and (3) in coownership to a member and any person designated by the member. Coownership, as used herein, includes, but is not limited to, joint tenancy, tenancy in common, or community property forms of ownership. No membership privilege, including voting and obtaining a loan, may be made available to any nonmember as a result of ownership of shares solely as coowner of shares with a member, and any certificate or other evidence of shares which may be issued, shall contain the words “No transfer of voting rights or other membership privilege is permitted by virtue of transfer of shares.” Shares may be transferred to a public agency lawfully entitled to receive the shares when designated by a member as assignee of an account pledged as a surety deposit to the public agency by the member.

(b) A credit union that has a low-income designation pursuant to Section 701.34 of the regulations of the National Credit Union Administration (12 C.F.R. Sec. 701.34) may issue shares to nonmembers. Except with the written approval of the commissioner, the total number of shares issued by the credit union to nonmembers pursuant to this subdivision shall not exceed 20 percent of the unimpaired capital and surplus of the credit union.

(Amended by Stats. 1998, Ch. 539, Sec. 32.5. Effective January 1, 1999.)


Every credit union may charge a reasonable fee for the transfer of its shares.

(Repealed and added by Stats. 1979, Ch. 112.)


A credit union may issue shares or certificates for funds to a minor of any age or maintain any other account authorized for credit union members for a minor, and receive payments thereon by or for the minor. The minor is entitled to withdraw, transfer, or pledge any shares or certificates or other moneys owned by him or her and to receive from the credit union all dividends, interest, or other money due thereon in the same manner and subject to the same conditions as an adult. The receipt or acquittance of a minor constitutes a valid release and discharge of the credit union for the payment of dividends, interest, or other money due to the minor.

(Amended by Stats. 1983, Ch. 6, Sec. 4.)


Subject to Section 14860, a credit union share account that is a multiple-party account, as defined in Section 5132 of the Probate Code, is governed by Part 2 (commencing with Section 5100) of Division 5 of the Probate Code.

(Amended by Stats. 1990, Ch. 79, Sec. 9. Operative July 1, 1991, pursuant to Stats. 1990, Ch. 710, Sec. 46.)


Every credit union may receive money and accumulate funds to be loaned and execute certificates for funds for the money received. The certificates for funds shall specify the date, amount, rate of interest, and when the principal and interest are payable.

(Added by Stats. 1979, Ch. 112.)


Every credit union may impress a lien upon the shares and dividends of any member to the extent of any obligations entered into with that member and for any dues or charges payable by that member.

(Amended by Stats. 1984, Ch. 789, Sec. 9.)


Every credit union may cancel the shares of any member who withdraws or is expelled, and apply the value of the shares to the liquidation of the member’s indebtedness to the credit union.

(Added by Stats. 1979, Ch. 112.)


Every credit union shall apply for and obtain insurance as provided for by Title II of the Federal Credit Union Act (12 U.S.C. Sec. 1781 and following), or other insurance or guaranty of shares that is not unsatisfactory to the commissioner. In seeking and retaining this insurance or guaranty, a credit union may do all things and assume and discharge all obligations required of it when not in conflict with the laws of this state.

(Amended by Stats. 1998, Ch. 539, Sec. 33. Effective January 1, 1999.)


Except as provided in this section and Part 2 (commencing with Section 5100) of Division 5 of the Probate Code, no credit union shall exercise trust powers except upon qualifying as a trust company pursuant to Division 1 (commencing with Section 99).

(a) Notwithstanding any other law relating to trusts and trust authority, subject to the regulations of the commissioner, a credit union may act as a trustee or custodian, and may receive reasonable compensation for so acting, under any written trust instrument or custodial agreement created or organized in the United States which is a part of a pension, education, or medical plan for its members or groups or organizations of its members, which qualifies or has qualified for specific tax treatment under Section 220, 223, 401, 408, 408A, 457, or 530 of the Internal Revenue Code, Title 26 of the United States Code, or any deferred compensation plan for the benefit of the credit union’s employees, provided the funds received pursuant to these plans are invested as provided in Section 16040 of the Probate Code. All funds held by a credit union as trustee or in a custodial capacity shall be maintained in accordance with applicable laws and rules and regulations as may be promulgated by the Secretary of Labor, the Secretary of the Treasury, or any other authority exercising jurisdiction over the trust or custodial accounts. The credit union shall maintain individual records for each participant or beneficiary that show in detail all transactions relating to the funds of each participant or beneficiary.

The trust instrument or agreement shall provide for the appointment of a successor trustee or custodian by a person, committee, corporation, or organization other than the credit union or any person acting in his or her capacity as a director, employee, or agent of the credit union, upon notice from the credit union or the commissioner that the credit union is unwilling or unable to continue to act as trustee or custodian.

(b) Shares may be issued in a revocable or irrevocable trust subject to the following:

(1) When shares are issued in a revocable trust, the settlor shall be a member of the credit union issuing the shares in his or her own right. If the trust has joint settlors, who are spouses, then only one settlor need be a member of the credit union.

(2) When shares are issued in an irrevocable trust, the settlor or the beneficiary shall be a member of this credit union in his or her own right. For purposes of this section, shares issued pursuant to a pension plan authorized by this section shall be treated as an irrevocable trust unless otherwise indicated in rules and regulations issued by the commissioner.

(3) This subdivision does not apply to trust accounts established prior to the effective date of this subdivision.

(Amended by Stats. 2016, Ch. 50, Sec. 37. (SB 1005) Effective January 1, 2017.)


No credit union shall issue shares to anyone not qualified for membership under its bylaws, except shares issued in coownership as provided in Section 14851.

(Amended by Stats. 1980, Ch. 52, Sec. 9.)


(a) A credit union shall not impose any charge on a member or depositor holding a periodic certificate for funds for the failure of such member or depositor to invest, or for the late investment of, any agreed periodic installment investment in such a periodic certificate for funds. A credit union shall pay interest on periodic certificates for funds at the same rate of interest per annum as is paid on certificates for funds as to which a member or depositor has not agreed to make periodic installment investments.

(b) As used in this section “periodic certificate for funds” means a certificate for funds under which a member or depositor undertakes to make periodic investments of a specified amount into one account, except, however, a periodic certificate for funds shall not mean an impound account established for the purpose of payment of taxes or other expenses and obligations in connection with a loan secured by real property.

(Added by Stats. 1979, Ch. 112.)


Shares issued by a credit union to a member shall be evidenced in monetary amounts rather than by numbers of shares. The shares owned by a member also may be referred to as a “share account”. There shall be no limit to the amount of shares which a credit union may issue.

(Added by Stats. 1980, Ch. 321, Sec. 14.)


The evidence of credit union shares issued shall be a certificate, a passbook, a statement or other evidence approved by regulation of the commissioner. The evidence of any credit union shares shall not constitute an “investment security” under Division 8 (commencing with Section 8101) of the Commercial Code.

(Amended by Stats. 1983, Ch. 89, Sec. 8.)


(a) Shares, including special shares, and certificates for funds may be withdrawn for payment to the owner or for any third party, in the manner and in accordance with written procedures which shall be established by the board of directors.

(b) The board of directors may waive any requirement of notice of intent to withdraw or provide that there is no requirement of notice of intent to withdraw or to transfer funds, except when requirement of the notice is imposed by applicable law.

(c) Unless otherwise provided by written agreement of the parties, the rights, responsibilities, and liabilities of a person regarding an item withdrawn from a credit union, or transferred to a credit union or otherwise handled by a credit union are defined in and determined by the provisions of Division 3 (commencing with Section 3101) and Division 4 (commencing with Section 4101) of the Commercial Code, as if the credit union were a bank.

(Amended by Stats. 1984, Ch. 452, Sec. 4.)


(a) As used in this section:

(1) “Beneficiary” has the meaning given that term in Section 5126 of the Probate Code.

(2) “Totten trust account” has the meaning given that term in Section 80 of the Probate Code.

(b) In the case of a Totten trust account, the deposit agreement shall indicate the current address of each beneficiary.

(Added by Stats. 1989, Ch. 397, Sec. 18. Operative July 1, 1990, by Sec. 42 of Ch. 397.)


(a) For purposes of this section, the following definitions apply:

(1) “Nonqualifying account” means a deposit account, other than a demand deposit account, that is not a qualifying account.

(2) “Qualifying account” means a deposit account, other than a demand deposit account, through which a credit union’s depositors may obtain chances to win prizes in a savings promotion.

(3) “Savings promotion” means a contest or promotion to encourage savings deposits that is sponsored by one or more credit unions, or by a credit union trade association or its subsidiary in conjunction with one or more credit unions, and in which credit union depositors are offered a chance to win designated prizes.

(b) A credit union may sponsor or participate in a savings promotion if all of the following requirements are satisfied:

(1) Credit union depositors are not required to pay any fee or otherwise provide any consideration in order to enter the savings promotion.

(2) All material terms of, and fees charged by a credit union in connection with, a qualifying account are comparable to those of comparable nonqualifying accounts offered by the credit union.

(3) Each entry in the savings promotion has an equal chance of winning.

(4) Participants in the savings promotion are not required to be present at a prize drawing in order to win.

(c) For purposes of this section, a depositor’s deposit of at least a specified amount of money in a qualifying account, which is required in order to enter the savings promotion, is not consideration if the interest rate associated with the qualifying account is not reduced, as compared to comparable nonqualifying accounts offered by the credit union, to account for the possibility of winning a prize.

(d) A savings promotion offered by a credit union shall not be considered a lottery within the meaning of Section 319 or 319.3 of the Penal Code, or a raffle within the meaning of Section 320.5 of the Penal Code.

(Added by Stats. 2018, Ch. 847, Sec. 2. (SB 1055) Effective January 1, 2019.)

FINFinancial Code - FIN1.