BILL ANALYSIS

C.S.H.B. 4416

By: Goldman

Licensing & Administrative Procedures

Committee Report (Substituted)

BACKGROUND AND PURPOSE

H.B. 1560, passed by the 87th Legislature, required the Texas Department of Licensing and Regulation (TDLR) to study the regulation of auctioneering, including findings and recommendations to improve public safety and TDLR's processes to eliminate inefficiencies. Some areas of concern regarding auctions include certain regulatory authority regarding auctioneers, the regulation of associate auctioneers, the use of contracts with respect to practice standards, certain disciplinary actions, and the auctioneer education and recovery fund. Additionally, the Texas Auctioneers Association has shared that, especially during estate auctions, a surviving spouse may make last-minute decisions on items to be sold or not sold. C.S.H.B. 4416 seeks to address those concerns and incorporate changes and updates recommended by TDLR to accurately reflect the current operation of auctioneer regulation. The bill also clarifies certain consumer protections and provides for an agreement in writing indicating an itemized inventory of property to be sold or offered for sale by the auctioneer at auction.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill expressly does one or more of the following: creates a criminal offense, increases the punishment for an existing criminal offense or category of offenses, or changes the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Commission of Licensing and Regulation in SECTIONS 2, 6, and 12 of this bill.

ANALYSIS

C.S.H.B. 4416 amends the Occupations Code to revise certain statutory provisions relating to the regulation of auctioneers and associate auctioneers, including the entity responsible for certain regulatory actions relating to auctioneer's licenses, related disciplinary actions, and the auctioneer education and recovery fund.

Regulatory Authority

C.S.H.B. 4416 transfers to the Texas Department of Licensing and Regulation (TDLR) the regulatory authority granted under current law to the executive director of TDLR and updates applicable provisions and references to reflect that transfer with respect to the following duties:

· the issuance of, application for, and revocation of an auctioneer's license; and

· certain activities relating to the auctioneer education and recovery fund, including the payment of claims against an auctioneer from the fund as determined by the applicable administrative law judge who presided over the hearing regarding such claims.

Moreover, the bill requires TDLR to prepare, recognize, administer, or arrange for an auctioneer's license examination.

Practice Standards; Licensing by Reciprocity

C.S.H.B. 4416 requires an auctioneer who agrees to provide services to a person to provide to the person a written contract with the terms of the agreement. The bill requires each contract for the services of an auctioneer to include information required by the Texas Commission of Licensing and Regulation (TCLR) by rule. The bill requires the auctioneer and client, before any auction, to agree in writing to an itemized inventory of property to be sold or offered for sale by the auctioneer at auction. An amendment to the inventory must be in writing and signed by both parties. The bill requires TCLR by rule to adopt standards for the practice of auctioneers and associate auctioneers, including standards for required consumer notices and the maintenance and use of a trust or escrow account for funds belonging or owed to another.

C.S.H.B. 4416 repeals certain additional requirements for a nonresident applicant who is licensed as an auctioneer in another state but retains provisions that require such a person to submit with the auctioneer's license application a written irrevocable consent to service of process and that set out requirements for the consent.

Complaint Procedures and Disciplinary Action

C.S.H.B. 4416 repeals the authorization for the executive director of TDLR to investigate an alleged license violation by a licensed or unlicensed auctioneer or an applicant and a provision establishing a Class C misdemeanor for any license violation or related violation of TCLR rule. The bill's repeal of the misdemeanor offense does not apply to an offense committed before the bill's effective date and provides for the continuation of the law in effect before the bill's effective date for purposes of an offense, or any element thereof, that occurred before that date. In addition, the bill does the following:

· specifies that TCLR or the executive director of TDLR may take any disciplinary action or impose an administrative or other penalty against an auctioneer or associate auctioneer for specified violations and includes among such violations failing to account for or remit another's property and violating a rule or order of TCLR or the executive director of TDLR;

· includes TDLR's proposal to take a disciplinary action or impose an administrative penalty against a license holder among circumstances that trigger a license holder's entitlement to a hearing and removes certain specifications regarding such a hearing; and

· establishes that a proceeding relating to a license denial or disciplinary action is a contested case for purposes of Government Code provisions relating to administrative procedure.

C.S.H.B. 4416, with respect to a license revoked for a claim on the auctioneer education and recovery fund, removes the exception to a license holder's ineligibility for a new license until the auctioneer or associate auctioneer has repaid the applicable amount. The bill establishes that TDLR is not required to take applicable action based on a dispute or lack of dispute, as applicable, by the aggrieved party relating to the amount of a claim.

Auctioneer Education and Recovery Fund

C.S.H.B. 4416 repeals the authorization for funds from the auctioneer education and recovery fund to be invested and reinvested in the same manner as funds of the Employees Retirement System of Texas. The bill specifies that the $15,000 cap on the payment to a single aggrieved party is a cap for all claims arising from a single auction. The bill raises from $30,000 to $100,000 the cap on the total payment of claims against a single auctioneer and specifies that the cap applies to claims arising from a single auction.

C.S.H.B. 4416 changes from December 31 to August 31 the date at which, if the balance in the fund is less than $350,000, each license holder at the next license renewal must pay an additional license renewal fee. The bill removes the requirements for TDLR to do the following with regard to management of the auctioneer education and recovery fund:

· administer the fund without appropriation;

· appear at hearings or judicial proceedings; and

· invest and reinvest the fund's assets as instructed by the executive director of TDLR.

The bill repeals a provision authorizing the executive director of TDLR to use funds in the auctioneer education and recovery fund to pay for certain education expenditures.

Auctioneer Advisory Board

C.S.H.B. 4416 establishes that each auctioneer advisory board member serves a six-year term that expires on September 1 of each odd-numbered year and specifies that each board member is prohibited from receiving compensation from TDLR for serving on the board. The bill requires the presiding officer of TCLR to consider the geographical diversity of members in appointing each board member and repeals a provision establishing ex officio members of the advisory board. The bill's provisions relating to the board apply only to the term of a board member appointed on or after the bill's effective date.

Regulation of Associate Auctioneers

C.S.H.B. 4416 revises the definition of "associate auctioneer" to remove the requirement for a person to be employed by a licensed auctioneer and provides for the regulation of an associate auctioneer with respect to the following:

· the authority for an individual to act as an associate auctioneer for an entity;

· eligibility for an auctioneer's license based on past employment as a licensed associate auctioneer;

· disciplinary action against an associate auctioneer for specified misconduct;

· license revocation for a claim on the auctioneer education and recovery fund; and

· creating an offense for acting as an auctioneer without a license.

Rules

C.S.H.B. 4416 requires TCLR to adopt rules necessary to administer and enforce provisions relating to auctioneer's licenses.

Repealed Provisions

C.S.H.B. 4416 repeals the following provisions of the Occupations Code:

· Sections 1802.056(b) and (c), relating to the designated frequency of auctioneer's license examinations and the preparation of examinations and related materials by the executive director of TDLR;

· Section 1802.059;

· Section 1802.060, requiring an auctioneer's license to be issued for the period prescribed by TCLR;

· Section 1802.103(b);

· Section 1802.109, relating to the auctioneer advisory board's evaluation and TCLR funding of certain auctioneer education programs;

· Section 1802.154;

· Section 1802.156;

· Section 1802.201;

· Section 1802.206(b), which set a $30,000 cap on the total payment of all claims by more than one aggrieved party arising from one auction at one location; and

· Section 1802.303.

Procedural Provisions

C.S.H.B. 4416 does not affect the validity of a proceeding pending before a court or other governmental entity on the bill's effective date. The bill applies only to a violation committed on or after the bill's effective date. The bill provides for the continuation of the law in effect before the bill's effective date for purposes of a violation, or any element thereof, that occurred before that date.

EFFECTIVE DATE

September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 4416 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

While both the substitute and the introduced provide for the applicability of the bill's provisions, the substitute includes provisions that were not in the introduced expressly establishing the following:

· the applicability on or after the bill's effective date of the bill's provisions relating to the term of an auctioneer advisory board member and relating to conduct constituting a violation of the bill's provisions; and

· that the repeal of the misdemeanor offense under the bill does not apply to an offense committed before the bill's effective date.

Whereas the introduced required each contract for the services of an auctioneer to include an itemized inventory of property to be sold or offered for sale by the license holder at auction and any additional information required by TCLR in rule, the substitute retains the provision in the introduced requiring each such contract to include information required by TCLR by rule but requires the auctioneer and client to agree in writing to the itemized inventory and requires an amendment to the inventory to be in writing and signed by both parties.

The substitute makes a clarification not included in the introduced with respect to TDLR's payment to an aggrieved party of a claim against an auctioneer to specify that the applicable amount of actual damages is the amount as determined by an administrative law judge with the State Office of Administrative Hearings who presided over the hearing.