Foreign (other state) credit union not conducting business in California

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May 11, 2016

 Re:       Request for legal opinion

Dear ____________:

Thank you for your letter to the General Counsel of the Department of Business Oversight (“Department”), Scott Wyckoff, dated February 29, 2016, on behalf of ____________. As Counsel in the Legal Division, Mr. Wyckoff requested that I respond to this matter. Your letter requests a formal opinion from the Department about whether ____________ will be: 1) deemed to be conducting business in California under Financial Code section 16020, subdivision (c); 2) subject to regulation by the Department if it originates residential mortgage loans secured by California real property; or 3) required to comply with the laws of California applicable to state-chartered credit unions. This letter responds to your letter and our subsequent telephone conversations on March 9 and March 14, 2016.


____________ is a Nevada state-chartered credit union. Your letter states that ____________ intends to originate residential mortgage loans in California by doing one of the following: 1) the residential mortgage loan originations will be made through ____________’s existing limited liability company, or 2) the residential mortgage loan originations will be made through a new limited liability company formed in California. Under the second option, either ____________ or ____________ will be the sole member of ____________. Both ____________ and ____________ will be wholly-owned subsidiaries of ____________.

Under both options, ____________ and ____________ will become licensed by the Department as a residential mortgage lender. ____________ and ____________ will transact no business in California other than residential mortgage lending. All mortgage loan applications will be processed in Nevada. You stated that ____________ will not open any credit union branch offices or facilities or process any loan applications in California.

Credit Union Law

The California Credit Union Law1 applies to any corporation other than a federal credit union engaging in the business of a credit union in California. The Credit Union Law defines “branch business” of a credit union to include, among other things, issuing share accounts, receiving deposits, and making loans and other obligations.[1] A foreign (other state) credit union cannot transact business in California except at a branch office or facility the foreign (other state) credit union is licensed to maintain.[2] Financial Code section 16020, subdivision (c) provides an exception to the branch office and facility licensing requirement. A foreign (other state) credit union will not be deemed to be transacting business in California merely because a majority-owned subsidiary transacts business in this state.[3]


You stated that ____________ will only be making mortgage loans through a wholly-owned subsidiary. The wholly-owned subsidiary will be licensed by the Department as a residential mortgage lender. The proposed activity falls under the licensing exception in Financial Code section 16020, subdivision (c). As such, the proposed lending activities of ____________ do not constitute engaging in credit union business in California. ____________ would not be subject to the California Credit Union Law or other laws applicable to California, state-chartered credit unions.

This opinion is limited to the facts and circumstances described above regarding the regulation of ____________ only. Should any of the facts or circumstances change, the Department’s opinion may also change.

Should you have any questions, please contact the undersigned at ____________.


Jan Lynn Owen

Commissioner of Business Oversight



                               Shavaugn I. Lewis



cc: Scott Cameron, Senior Deputy Commissioner, Department of Business Oversight


1 Fin. Code § 14000 et seq.

[1] Fin. Code § 16001.

[2] Fin. Code § 16020, subd. (a).

[3] Fin. Code § 16020, subd. (c).