§653.2. Pledge of share accounts; rights and remedies

A. Notwithstanding the provisions of Civil Code Articles 1893 et seq., compensation takes place by operation of law between shares held on deposit with a credit union organized as provided by law or with a federal credit union domiciled in this state and any loan, extension of credit, or other obligation incurred by the member in favor of the credit union. This compensation shall apply to those shares on deposit which the member has the right to withdraw on his request or endorsement alone, except shares deposited in an Individual Retirement Account or other type of tax-deferred account. The shares to which this compensation applies shall be deemed to be pledged by the member in favor of the credit union.

B. The pledge of such share accounts need not be reflected in writing or comply with the requirements of Civil Code Art. 3158 or R.S. 9:4321 et seq. Such a pledge shall instead be deemed for any and all purposes to constitute a statutory security interest arising by operation of law. The ability of the member to withdraw funds from a share account at will shall not be deemed to adversely affect the validity of the pledge provided under this Section.

C. In the event that the member should default under any loan, extension of credit, or other direct or indirect obligation of any nature and kind whatsoever in favor of the credit union, the credit union shall have the right to apply any shares that the member then has on share with the credit union or on which the credit union has taken a security interest under the Louisiana commercial laws involving secured transactions, R.S. 10:9-101 et seq., towards the payment of the depositor's indebtedness or obligations, whether such payment satisfies the indebtedness or obligations in whole or in part. The exercise of the credit union's remedies under this Subsection shall not affect any other rights and remedies available to the credit union following the member's default, including the privilege and lien provided by R.S. 6:652 or 12 U.S.C. 1757(11).

D. The credit union shall notify the member in writing within two business days following the exercise of the credit union's remedies under Subsection C of this Section. Such notice shall be forwarded by registered or certified mail to the member's most current address reflected in the credit union's records. In the event that the credit union mails such a notice to the member within the above time period, the credit union shall have no liability to the member or to any other person or persons as a result of the credit union's dishonor of checks or drafts drawn on the member's accounts with the credit union.

E. The rights and remedies afforded to credit unions under this Section shall be in addition to a credit union's contractual rights of compensation or setoff as provided in members' notes and agreements and shall further be in addition to any other rights and remedies that a credit union may have with regard to member share accounts on which the credit union may have a security interest subject to the Louisiana commercial laws involving secured transactions.

F. Notwithstanding the provisions of Civil Code Articles 1893 et seq., compensation or setoff shall occur by operation of law between any funds held on share with the credit union and any loans, extensions of credit, or other obligations of the member incurred in favor of the credit union, except that those shares held in any account designated as a trust account established on behalf of a person or persons other than the named member shall not be subject to compensation or setoff as provided in this Section.

Acts 1995, No. 293, §1.