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 Law [1] 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.[2] 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.[3] 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.[4]


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.

[2] Fin. Code § 16001.

[3] Fin. Code § 16020, subd. (a).

[4] Fin. Code § 16020, subd. (c).