By: Montford S.B. No. 1213
73R2473 CAE-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of the sale of checks.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 2, The Sale of Checks Act (Article 489d,
1-5 Vernon's Texas Civil Statutes), is amended by amending Subsections
1-6 (c) and (g) and adding Subsection (i) to read as follows:
1-7 (c) "Check" means any check, draft, money order, personal
1-8 money order, or other instrument or means for the transmission or
1-9 payment of money, including wire, electronic, or other means used
1-10 to transmit money for a fee or other consideration.
1-11 (g) "Commissioner" means the Commissioner of the <State>
1-12 Banking Department of Texas.
1-13 (i) "Commission" means The Finance Commission of Texas.
1-14 SECTION 2. Section 4, The Sale of Checks Act (Article 489d,
1-15 Vernon's Texas Civil Statutes), is amended to read as follows:
1-16 Sec. 4. Exemption from Licensing. (a) No license to sell
1-17 checks as aforesaid shall be required hereunder of any of the
1-18 following:
1-19 (1) <(a)> Banks, credit unions, building and loan
1-20 associations, and savings and loan associations, whether organized
1-21 under the laws of this state or of the United States; provided,
1-22 however, that they do not issue or sell checks, other than
1-23 traveler's checks, off premises and that they do not issue or sell
1-24 checks, other than traveler's checks, through agents who are not
2-1 directly or indirectly owned by them;
2-2 (2) <(b) Incorporated telegraph companies insofar as
2-3 they receive money at any of their respective offices or agencies
2-4 for immediate transmission by telegraph;>
2-5 <(c)> Agents of a licensee, as provided in Section 11;
2-6 or
2-7 (3) <(d)> The United States or any department or
2-8 agency of the United States.
2-9 (b) The Commissioner by rule may exempt a person from this
2-10 Act or reduce the requirements of Sections 7, 8, 9A, 9B, and 9C of
2-11 this Act if:
2-12 (1) the sale of checks is ancillary to the person's
2-13 business, is limited to commercial contracts in interstate
2-14 commerce, and the person does not engage in the business of selling
2-15 checks to the public; and
2-16 (2) the Commissioner determines that the exemption or
2-17 reduced requirement is in the public interest.
2-18 SECTION 3. Section 5, The Sale of Checks Act (Article 489d,
2-19 Vernon's Texas Civil Statutes), is amended to read as follows:
2-20 Sec. 5. Qualifications. (a) <To qualify for a license
2-21 hereunder an applicant shall meet the following requirements:>
2-22 <(a) The applicant shall have a net worth of at least
2-23 Five Hundred Thousand Dollars ($500,000), computed according to
2-24 generally accepted accounting principles.>
2-25 <(b)> The financial responsibility, financial
2-26 condition, and business experience, and character and general
2-27 fitness of an <the> applicant for a license shall be such as
3-1 reasonably to warrant the belief that issuance of a license is in
3-2 the public interest <applicant's business will be conducted
3-3 honestly, carefully and efficiently>. To the extent deemed
3-4 advisable by the Commissioner, the Commissioner may investigate and
3-5 consider the qualifications of officers and directors of an
3-6 applicant in determining whether this qualification has been met.
3-7 (b) To qualify for a license under this Act an applicant:
3-8 (1) must have a net worth of at least Five Hundred
3-9 Thousand Dollars ($500,000), computed according to generally
3-10 accepted accounting principles;
3-11 (2) must be in a financial condition that will enable
3-12 the applicant to safely and soundly engage in the business of
3-13 selling checks;
3-14 (3) may not have been convicted of a felony or a crime
3-15 involving moral turpitude that is reasonably related to an
3-16 applicant's fitness to hold a license under this Act, regardless of
3-17 whether the punishment received was a suspended sentence,
3-18 probation, or nonadjudicated conviction, if the applicant is an
3-19 individual;
3-20 (4) must be qualified, by experience or otherwise, to
3-21 perform the obligations of a licensee required under this Act;
3-22 (5) must provide a truthful and complete response to
3-23 requests for information contained in an application for a license;
3-24 (6) may not be indebted to the state for a fee or
3-25 penalty imposed under this Act or a rule of the commission;
3-26 (7) must have good moral character and a reputation as
3-27 a peaceable, law-abiding citizen in the community where the
4-1 applicant resides, if the applicant is an individual; and
4-2 (8) may not be engaged in an activity or practice that
4-3 the Commissioner finds adversely affects the financial safety and
4-4 soundness of the applicant.
4-5 (c) The commission may adopt rules relating to:
4-6 (1) an application for a license;
4-7 (2) the financial responsibility, moral character, and
4-8 ability required of an applicant under this Act to qualify for a
4-9 license; and
4-10 (3) any other matter relating to qualifications for a
4-11 license necessary to protect the public interest.
4-12 SECTION 4. Section 7, The Sale of Checks Act (Article 489d,
4-13 Vernon's Texas Civil Statutes), is amended to read as follows:
4-14 Sec. 7. Accompanying Fee, Statements and Bond. Each
4-15 application for a license shall be accompanied by:
4-16 (a) An investigation fee in an amount set by rule of the
4-17 Commissioner that is sufficient to administer this Act <of Five
4-18 Hundred Dollars ($500)> which shall not be subject to refund but
4-19 which, if the license be granted, shall constitute the license fee
4-20 for the first license year or part thereof;
4-21 (b) Audited financial statements reasonably satisfactory to
4-22 the Commissioner;
4-23 (c) A surety bond issued by a bonding company or insurance
4-24 company authorized to do business in this state, in the principal
4-25 sum of One Hundred Thousand Dollars ($100,000), and, except as
4-26 provided by this subsection, an additional principal sum of Fifty
4-27 Thousand Dollars ($50,000) for each location, in excess of one but
5-1 for not more than the first nine locations, at which the applicant
5-2 proposes to sell checks in this state. The maximum amount of a
5-3 surety bond required under this subsection is Five Hundred Thousand
5-4 Dollars ($500,000), except the Commissioner, subject to Section 15
5-5 of this Act, may require a licensee to provide an additional amount
5-6 over the Five Hundred Thousand Dollars ($500,000) up to a total
5-7 maximum amount of One Million Dollars ($1,000,000), based on the
5-8 licensee's financial condition, considered in relation to the
5-9 dollar volume of the licensee's outstanding checks. Each<, but in
5-10 no event shall the bond be required to be in excess of Five Hundred
5-11 Thousand Dollars ($500,000). If the bond accompanying the
5-12 application be in a principal sum of less than Five Hundred
5-13 Thousand Dollars ($500,000), the> application shall also be
5-14 accompanied by a list of the locations at which the business is to
5-15 be conducted. The bond shall be in form satisfactory to the
5-16 Commissioner and represents money held in trust for the benefit of
5-17 check purchasers. The bond shall run to the state for the benefit
5-18 of any claimants against the applicant or his agents to secure the
5-19 faithful performance of the obligations of the applicant and his
5-20 agents with respect to the receipt, handling, transmission and
5-21 payment of money in connection with the sale of checks. The
5-22 aggregate liability of the surety in no event shall exceed the
5-23 principal sum of the bond. If a licensee is in bankruptcy or
5-24 receivership, claimants against the licensee or the licensee's
5-25 agents may bring suit directly on the bond for an amount equal to
5-26 the amount of an unpaid judgment against the licensee or may assert
5-27 a claim against the bond. The <Such claimants against the
6-1 applicant or his agents may themselves bring suit directly on the
6-2 bond, or the> Attorney General may bring suit in a district court
6-3 in Travis County on <thereon in> behalf of such claimants, either
6-4 in one action or successive actions; or
6-5 (d) If approved by the Commissioner, in <In> lieu of such
6-6 corporate surety bond or bonds, or of any portion of the principal
6-7 thereof as required by this Section, the applicant may deposit with
6-8 the Commissioner cash, certificates of deposit, <or with such banks
6-9 or trust companies or national banks in this state as such
6-10 applicant may designate and the Commissioner may approve>
6-11 interest-bearing stocks and bonds, notes, debentures or other
6-12 obligations of the United States or any agency or instrumentality
6-13 thereof, or guaranteed by the United States, or of this state, or
6-14 of a city, county, town, village, school district or
6-15 instrumentality of this state, or guaranteed by this state, or
6-16 other similar security devices acceptable to the Commissioner, to
6-17 an aggregate amount, based upon principal amount or market value,
6-18 whichever is lower, of not less than the amount of the required
6-19 corporate surety bond or portion thereof. A deposit under this
6-20 subsection shall be placed with the Texas Treasury Safekeeping
6-21 Trust Company and represents money held in trust for the benefit of
6-22 check purchasers. The deposit shall be <The securities shall be
6-23 deposited as aforesaid and> held to secure the same obligations as
6-24 would the surety bond, but the licensee <depositor> shall be
6-25 entitled to receive all interest and dividends thereon, shall have
6-26 the right, with the approval of the Commissioner, to substitute
6-27 other securities for those deposited, and shall be required so to
7-1 do on written order of the Commissioner made for good cause shown.
7-2 SECTION 5. Section 9, The Sale of Checks Act (Article 489d,
7-3 Vernon's Texas Civil Statutes), is amended to read as follows:
7-4 Sec. 9. Obligations of Licensee. Each person holding a
7-5 license under this Act shall at all times when the license is in
7-6 effect:
7-7 (a) Maintain the bond or securities in the amount prescribed
7-8 by Section 7;
7-9 (b) If the licensee does not have on file or deposit a bond
7-10 or securities, as aforesaid, in the undiminished principal sum of
7-11 at least Five Hundred Thousand Dollars ($500,000), file quarterly
7-12 reports with the Commissioner setting forth the locations at which
7-13 he sells checks in this state not later than the 45th day after the
7-14 date of the last day of each quarter of the licensee's fiscal year
7-15 <as of January 1, April 1, July 1, and October 1 in each year, the
7-16 report for each such date being due on or before the 15th day
7-17 thereafter>;
7-18 (1) Within ten (10) days following the filing of such
7-19 a report, the principal sum of the bond or securities shall be
7-20 increased to reflect any increase in the number of locations, and
7-21 may be decreased to reflect any decrease in the number of
7-22 locations;
7-23 (2) If the Commissioner shall at any time reasonably
7-24 determine that the bond or securities aforesaid are insecure,
7-25 deficient in amount, or exhausted in whole or part, the
7-26 Commissioner <he> may by written order require the filing of a new
7-27 or supplemental bond or the deposit of new or additional securities
8-1 in order to secure compliance with this Act, such order to be
8-2 complied with within thirty (30) days following service thereof
8-3 upon the licensee;
8-4 (c) Maintain a net worth equal to or greater than the amount
8-5 then currently prescribed by Section 5 for license applicants; and
8-6 (d) Have on hand permissible investments in an amount equal
8-7 to the aggregate face amount of all outstanding checks sold in the
8-8 United States<, except traveler's checks,> for which the licensee
8-9 is liable for payment<; however, this subsection does not apply to
8-10 any licensee with a net worth of not less than Five Million Dollars
8-11 ($5 million) as shown by audited financial statements reasonably
8-12 satisfactory to the Commissioner; statements filed under Section 9B
8-13 of this Act may be used to satisfy this requirement>.
8-14 SECTION 6. Section 9B(a), The Sale of Checks Act (Article
8-15 489d, Vernon's Texas Civil Statutes), is amended to read as
8-16 follows:
8-17 (a) Each year, on a quarterly basis not later than the 45th
8-18 day after the date of the last day of each quarter of the
8-19 licensee's fiscal year <May 15, August 15, November 15, and
8-20 February 15>, each licensee shall file with the Commissioner an
8-21 unconsolidated financial statement as of the last day of the
8-22 preceding quarter, including balance sheet, and required reports
8-23 regarding maintaining permissible investments pursuant to Section 9
8-24 for the preceding <calendar> quarter submitted on forms furnished
8-25 by the Commissioner. In addition, each licensee is <Each year at
8-26 least one of these unconsolidated financial statements must have
8-27 been audited before filing. Licensees who maintain a corporate
9-1 surety bond or securities, as described by Section 7(c), in a
9-2 principal sum of at least Five Hundred Thousand Dollars ($500,000)
9-3 are> required<, however, only> to file an <the> annual audited
9-4 unconsolidated financial statement not later than the 120th day
9-5 after the date of the last day of the licensee's fiscal year.
9-6 SECTION 7. Section 9C, The Sale of Checks Act (Article 489d,
9-7 Vernon's Texas Civil Statutes), is amended to read as follows:
9-8 Sec. 9C. Trust Imposed on Sales Proceeds. Licensees and
9-9 agents <Agents> of licensees shall hold in trust from the moment of
9-10 receipt the proceeds of a sale or delivery of the licensee's
9-11 checks. An agent of a licensee may not commingle the proceeds with
9-12 his own property or funds, except to use the funds in the ordinary
9-13 course of its business for the purpose of making change. If any
9-14 licensee or agent of a licensee commingles any proceeds received
9-15 from the sale of checks <issued by the licensee> with any other
9-16 funds or property owned or controlled by the licensee or agent, all
9-17 commingled proceeds and other property shall be impressed with a
9-18 trust in favor of the check purchasers <licensee> in an amount
9-19 equal to the amount of the proceeds <due the licensee> from the
9-20 sale of checks less the amount of fees paid for <due the agent
9-21 from> the sale of checks. In the event that a licensee's license
9-22 is revoked by the Commissioner pursuant to Section 14, all sales
9-23 proceeds then held in trust by the licensee and its agents <of that
9-24 licensee> shall be deemed to have been assigned to the Commissioner
9-25 for the benefit of check purchasers.
9-26 SECTION 8. The Sale of Checks Act (Article 489d, Vernon's
9-27 Texas Civil Statutes) is amended by adding Sections 9D and 9E to
10-1 read as follows:
10-2 Sec. 9D. MANDATORY REMITTANCE BY AGENT. An agent of a
10-3 licensee shall remit to the licensee all funds due from the sale of
10-4 a check within 10 days after the date of the sale, unless otherwise
10-5 ordered by the Commissioner, or a shorter period as the licensee
10-6 may require.
10-7 Sec. 9E. ADMINISTRATION; RULES. The Banking Department of
10-8 Texas shall administer this Act. The commission may adopt rules
10-9 necessary for the enforcement and orderly administration of this
10-10 Act.
10-11 SECTION 9. Section 13, The Sale of Checks Act (Article 489d,
10-12 Vernon's Texas Civil Statutes), is amended to read as follows:
10-13 Sec. 13. Disclosure of Responsibility. Every check sold by
10-14 a licensee, directly or through an agent, shall bear the name and
10-15 mailing address or telephone number of the licensee clearly
10-16 imprinted thereon or be accompanied by a written notice delivered
10-17 to the purchaser at the time of sale containing that information.
10-18 SECTION 10. Section 15, The Sale of Checks Act (Article
10-19 489d, Vernon's Texas Civil Statutes), is amended to read as
10-20 follows:
10-21 Sec. 15. Hearings. No license shall be denied or revoked
10-22 except after a hearing thereon. The Commissioner shall give the
10-23 applicant or licensee at least twenty (20) days written notice of
10-24 the time and place of such hearing by registered or certified mail
10-25 addressed to the principal place of business of such applicant or
10-26 licensee. Any order of the Commissioner denying or revoking such
10-27 license shall state the grounds upon which it is based and shall
11-1 not be effective until twenty (20) days after written notice
11-2 thereof has been sent by registered or certified mail to the
11-3 applicant or licensee at such principal place of business, unless
11-4 the Commissioner finds that an imminent peril to public health,
11-5 safety, or welfare exists, in which event the Commissioner may make
11-6 the order effective immediately. A licensee may seek court review
11-7 of the Commissioner's findings and order under the Administrative
11-8 Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas
11-9 Civil Statutes).
11-10 SECTION 11. The Sale of Checks Act (Article 489d, Vernon's
11-11 Texas Civil Statutes) is amended by adding Section 15A to read as
11-12 follows:
11-13 Sec. 15A. CEASE AND DESIST ORDERS. (a) The Commissioner
11-14 may issue an order to cease and desist from certain violations and
11-15 practices if the Commissioner determines that a licensee or a
11-16 person acting on behalf of the licensee has:
11-17 (1) violated this Act or a rule adopted under this Act
11-18 or has violated any other law applicable to the sale of checks or a
11-19 rule adopted under the other law;
11-20 (2) committed a breach of trust or of a fiduciary
11-21 duty;
11-22 (3) committed a fraudulent act or other practice in
11-23 the conduct of the licensee's business that threatens the solvency
11-24 of the licensee;
11-25 (4) refused to submit to an examination by the
11-26 Commissioner;
11-27 (5) conducted the licensee's business in an unsafe or
12-1 unauthorized manner; or
12-2 (6) violated a condition of the licensee's license or
12-3 an agreement between the licensee and the Commissioner.
12-4 (b) A copy of the order must be served on the licensee and
12-5 any other person named in the order. An order takes effect on the
12-6 date specified in the order but not before the 10th day after the
12-7 date of its receipt by the licensee or other person named in the
12-8 order unless the Commissioner finds that immediate and irreparable
12-9 harm is threatened to the licensee, purchasers or potential
12-10 purchasers of checks, or the general public. The licensee shall
12-11 certify to the Commissioner in writing that each person named in
12-12 the order and, if the licensee is a corporation, each member of the
12-13 licensee's board of directors has read and understood the order.
12-14 (c) A licensee or other person named in the order may appeal
12-15 the Commissioner's order to the commission by filing a notice of
12-16 appeal with the commission not later than the 10th day after the
12-17 date of receipt of notice of the order.
12-18 (d) On receipt of a timely notice of appeal, the commission
12-19 shall set a time and place for hearing the appeal of the order and
12-20 give reasonable notice of the hearing to the party filing the
12-21 appeal. Unless otherwise provided by this Act, the hearing before
12-22 the commission shall be conducted in accordance with the
12-23 Administrative Procedure and Texas Register Act (Article 6252-13a,
12-24 Vernon's Texas Civil Statutes). If the commission finds that a
12-25 party filing an appeal has committed one or more of the violations
12-26 or practices charged by the Commissioner and that the order is
12-27 necessary or in the best interests of purchasers of checks, the
13-1 commission shall affirm the order. If the commission finds
13-2 otherwise, the commission shall set aside the order. The licensee
13-3 or other person named in the order may appeal the decision of the
13-4 commission to a district court in Travis County in accordance with
13-5 the Administrative Procedure and Texas Register Act (Article
13-6 6252-13a, Vernon's Texas Civil Statutes).
13-7 (e) If a licensee or other person named in an order does not
13-8 comply with a final order, the Attorney General, if requested by
13-9 the Commissioner, may bring suit in a district court in Travis
13-10 County against the licensee or other person to enjoin violation of
13-11 the order.
13-12 (f) Nothing in this section diminishes the regulatory or
13-13 enforcement powers of the Commissioner or the commission under
13-14 other provisions of this Act or other applicable law. The
13-15 Commissioner is not required to proceed under this section before
13-16 taking regulatory action under Section 14 or 16 of this Act or
13-17 under any other applicable law.
13-18 SECTION 12. Section 16(c), The Sale of Checks Act (Article
13-19 489d, Vernon's Texas Civil Statutes), is amended to read as
13-20 follows:
13-21 (c) If, after notice and a hearing, the Commissioner finds
13-22 that a person has violated this Act, <or> a rule adopted under this
13-23 Act, or an order of the Commissioner issued under this Act, the
13-24 Commissioner may order the person to pay to the Commissioner a
13-25 civil penalty in the amount that the Commissioner specifies, except
13-26 that the amount of the civil penalty may not exceed One Thousand
13-27 Dollars ($1,000) for each violation or, in the case of a continuing
14-1 violation, One Thousand Dollars ($1,000) for each day that the
14-2 violation continues.
14-3 SECTION 13. The Sale of Checks Act (Article 489d, Vernon's
14-4 Texas Civil Statutes) is amended by adding Section 18 to read as
14-5 follows:
14-6 Sec. 18. CONFIDENTIAL INFORMATION. (a) Except as provided
14-7 by Subsection (b) of this section, information obtained by the
14-8 Commissioner or the commission under this Act from a licensee or
14-9 through an examination and a file or record of the Banking
14-10 Department of Texas relating to that information is confidential
14-11 and may not be disclosed if the information:
14-12 (1) relates to the financial condition of the
14-13 licensee; or
14-14 (2) is proprietary information of the licensee, as
14-15 determined by the Commissioner in the Commissioner's sole
14-16 discretion.
14-17 (b) The Commissioner may release confidential information
14-18 if:
14-19 (1) the information is an annual audited
14-20 unconsolidated financial statement filed by a licensee as required
14-21 by Section 9B of this Act;
14-22 (2) the Commissioner finds that immediate and
14-23 irreparable harm is threatened to purchasers or potential
14-24 purchasers of checks or the general public;
14-25 (3) the licensee consents to the release or has
14-26 published the information contained in the release;
14-27 (4) the Commissioner finds that release of the
15-1 information is required for an administrative hearing, in which
15-2 case the information may be released to the parties of the hearing;
15-3 or
15-4 (5) the Commissioner finds that the release is
15-5 reasonably necessary for the protection of the public and in the
15-6 interest of justice, in which case the information may be released
15-7 only to a representative of an agency, department, or
15-8 instrumentality of this state, another state, or the federal
15-9 government.
15-10 (c) Before releasing information that the Commissioner
15-11 determines is not proprietary under Subsection (a)(2) of this
15-12 section, the Commissioner shall give the licensee notice of the
15-13 release.
15-14 SECTION 14. (a) Except as provided by this section, this
15-15 Act takes effect September 1, 1993.
15-16 (b) Sections 2 and 4, The Sale of Checks Act (Article 489d,
15-17 Vernon's Texas Civil Statutes), as amended by Sections 1 and 2 of
15-18 this Act, take effect January 1, 1994.
15-19 (c) The changes made by this Act to the security
15-20 requirements provided by Section 7, The Sale of Checks Act (Article
15-21 489d, Vernon's Texas Civil Statutes), apply to a person holding a
15-22 license under the Act on September 1, 1993, beginning April 15,
15-23 1994.
15-24 SECTION 15. The importance of this legislation and the
15-25 crowded condition of the calendars in both houses create an
15-26 emergency and an imperative public necessity that the
15-27 constitutional rule requiring bills to be read on three several
16-1 days in each house be suspended, and this rule is hereby suspended.