BILL ANALYSIS



C.S.H.B. 1608
By: Grusendorf
03-13-95
Committee Report (Substituted)


BACKGROUND

The Sale of Checks Act gives the Department of Banking regulatory
authority and responsibility to administer and enforce the Act. 
This bill proposes changes in the current law to reflect the
current operating environment of licensees and the public, as well
as the repeal of existing law where it is outmoded.

Incorporated telegraph companies are currently exempt from
licensing under the Sale of Checks Act to the extent they transmit
money by telegraph.  This exemption is not utilized. No
incorporated telegraph companies transmit money by telegraph.  This
exemption is deleted.

Presently, applicants for a license under the Sale of Checks Act
must have a net worth of at least $500,000 and must meet certain
general requirements with respect to financial ability,
responsibility, business experience, and general character and
fitness.  Proposed changes in the license requirements would
provide greater protection of the public which would be better
served by a more comprehensive, less ambiguous framework of
requirements for licensing.

The Finance Commission currently does not have rulemaking authority
under the Sale of Checks Act. It is difficult for the Department of
Banking to adequately administer the Act without express rulemaking
authority.  This bill provides the Finance Commission with the
power to promulgate rules relating to license applications and all
matters relating to the qualifications for licensing, and with
respect to all matters incidental to the enforcement and orderly
administration of the Act.

PURPOSE

This bill would expand the scope of the Act when it is perceived
that public policy considerations warrant additional regulation to
protect the public and advance the purposes of the Act.  Where
existing legislation has become overly burdensome or outmoded,
House Bill 1608 proposes to amend the Act to correct or relieve
such problems as necessary.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill grants rulemaking
authority to the Finance Commisssion in Sections 3 and 8 of this
bill.

It is the committee's opinion that the Banking Commissioner is
granted rulemaking authority in Section 2 of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Definitions.

           Sec.2 Amends Article 489d by adding a new subsection (g)
to provide a definition of "commission" to mean the Finance
Commission of Texas.

SECTION 2. Section 4(b) of Article 489d is deleted to eliminate the
exemption from licensing for incorporated telegraph companies. A
new subsection (b) to Section 4 is added to allow the Commissioner
to grant exemptions from regulation or provide for less stringent
regulatory standards or requirements for companies engaged solely
in commercial check selling activities that serve to promote
interstate commerce if the Commissioner finds that doing so is in
the public interest.

SECTION 3. Qualifications.

Applicants seeking a license under the Sale of Checks Act must:
     1.    Have net worth of at least $500,000;
     2.    Be in a financial condition such that the applicant may
     safely and soundly engage in the business of selling checks;
     3.    Not ever have been convicted of a felony or crime
involving moral turpitude;
     4.    Be qualified, by experience or otherwise, to perform the
     duties required of a licensee;
     5.    Truthfully and completely answer each question in the
     original application and all renewals thereof;
     6.    Not be indebted to the state for any fees or for the
     payment of any penalty imposed under the Sale of Checks Act or
     rule of the Finance Commission;
     7.    Not be engaged in activities or practices that adversely
     affect the safety and soundness of the applicant.

SECTION 4. Section 7 of Article 489d is amended to allow the
Commissioner discretion to set the investigation fee.  Section 7(c)
of Article 489d is amended to allow the Banking Commissioner to
require an additional bond over the $500,000 ceiling up to a
maximum of $1,000,000 based on the licensee's financial condition
and the dollar volume of licensee's outstanding checks.  Included
is a provision that the bond represent funds held in trust for the
benefit of check purchasers.  Claimants (i.e., check purchasers)
are allowed to sue directly on the bond for an amount equal to the
amount of any unpaid judgment against the licensee.

Claimants also could assert claims directly against a licensee, if
the licensee were in bankruptcy or receivership.  A provision is
included for mandatory venue in Travis County for actions brought
against a licensee by the Attorney General on behalf of claimants. 
Section 7(d) of Article 489d is amended to provide for prior
approval of the Banking Commissioner to deposit securities in lieu
of bond.  Additionally, cash and certificates of deposit are
included in the list of items which may be deposited in lieu of
bond.

SECTION 5. Section 9 of Article 489d is amended to allow the
licensee additional time to file quarterly reports and so that the
reporting requirement in Section 9 comports with other reporting
requirements in the Act.

SECTION 6. Clarifies the date through which quarterly reports
should be filed, i.e., through the end of the immediately preceding
fiscal quarter.  Also licensees are allowed 120 days after the end
of each fiscal year to file their annual audited unconsolidated
financial statement.  The provisions allowing certain licensees to
file only a single report is deleted.

SECTION 7. Section 9C of Article 489d is revised so that a trust
is impressed upon proceeds from the sale of checks in the hands of
both licensees and their agents.

SECTION 8. Section 5 of Article 489d is amended to provide the
Finance Commission with the power to promulgate rules relating to
license applications and all matters relating to the qualifications
for licensing.  Section 9E is added to the Sale of Checks Act
directing the Department of Banking administer the Act and granting
rulemaking authority to the Finance Commission with respect to all
matters incidental to the enforcement and orderly administration of
the Act.  An agent or sub-agent is exempted from rules adopted.

Section 9D would require an agent of a licensee to remit all funds
due from the sale of checks to the licensee within ten calendar
days after the sale.  In order to not unduly infringe upon the
licensee's right to contract with its agent, the section includes
a provision whereby the licensee may require a shorter period of
time between sale and remittance of funds. The section also
includes a discretionary feature which would allow the Banking
Commissioner to require remittance in a shorter period of time, if
deemed necessary.

SECTION 9. Section 13 of Article 489d is amended to provide that
the mailing address or telephone number of the licensee be included
with the licensees' name on the face of the instrument.

SECTION 10.    Section 15 of Article 489d is amended to allow the
Banking Commissioner to make orders effective immediately in cases
where the Commissioner finds an imminent peril to the public
health, safety or welfare would result from delaying the effective
date of the order.  This section also clarifies that licensees
seeking court review of the Banking Commissioner's findings and
order would proceed under the provisions of the Chapter 2001, Texas
Government Code.

SECTION 11.    The Sale of Checks Act is amended by adding a new
Section 15A which would allow the Commissioner to issue cease and
desist orders if any one of the following violations or practices
is found to have occurred:

     Violation of any provision of the Sale of Checks Act or any
     other law or regulation applicable to the sale of checks;

     A refusal to comply with the provisions of the Sale of Checks
     or any other law or regulation applicable to the sale of
     checks, any willful neglect to perform duties, or the
     commission of a breach of trust of fiduciary duty;

     Commission of any fraudulent or other practice in the conduct
     of the licensee's business which endangers or threatens the
     solvency of the licensee;

     Refusal to submit to examination;

     Business being conducted in an unsafe or unauthorized manner;
     or

     A violation of any condition of a license or any agreement or
     order entered into with the Banking Commissioner.

Such cease and desist orders allow the subject of any cease and
desist order to appeal the order to the Finance Commission. Section
15A would also provide that the Attorney General of Texas, at the
request of the Commissioner, could bring suit in District Court to
enforce the final order of the Commissioner or the Finance
Commission and to enjoin violation of such orders.  The section
also specifically provides that the Commissioner would be empowered
to act under authority of the proposed cease and desist section,
Section 14 of the Act providing for revocation of the license or
any other application section of the Sale of Checks Act, or any
other law.  Therefore, it would not be necessary for the
Commissioner to proceed with a cease and desist order prior to
taking regulatory action to revoke the license or assess penalties
under the Act.

SECTION 12.    Amends Section 16 of the Sale of Checks Act,
governing penalties, to allow the Commissioner to assess civil
penalty in accordance with that section for violation of any order
of the Commissioner issued under the Sale of Checks Act (i.e.,
violation of a cease and desist order) or pursuant to any rule or
regulation adopted under the Act.

SECTION 13.    Amends the Sale of Checks Act by adding a new
Section 18 which would require that the Department of Banking keep
confidential all information obtained from a licensee relative to
the financial condition of a licensee, other than proprietary
information of a licensee, whether obtained through examination or
otherwise, except published statements, and all files and records
the Department of Banking relative thereto.  The Commissioner and
the officers and employees of the Department of Banking would be
prohibited from disclosing such information.  The Commissioner,
however, would be entitled to release such information if:

     The Commissioner finds immediate and irreparable harm is
     threatened to purchasers or potential purchasers of check or
     the general public;

     The licensee consents to any such release;

     The Commissioner finds that release of the information is
     required in connection with an administrative hearing under
     the Act, in which case information may be distributed to the
     parties to the hearing; or

     The Commissioner finds that the release is reasonably
     necessary for the protection of the public and in the interest
     of justice, in which case information may be distributed to an
     agency, department of instrumentality of this state, any other
     state of the federal government.

SECTION 14.    Effective date September 1, 1995.

SECTION 15.    Emergency Clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The original bill contained some drafting mistakes and the
substitute corrects these mistakes.  On page 10 of the substitute,
the phrase "business day" is clarified to say that it does not
include Saturdays, Sundays, and legal public holidays.  Also on
page 10, section 9E of the substitute was amended to exempt sub-agent or an agent from rules adopted under this Act.

SUMMARY OF COMMITTEE ACTION

The committee considered HB 1608 in a public hearing on March 13,
1995.

The committee considered a complete committee substitute for the
bill which was adopted without objections.

The following person testified in favor of the bill:
James C. Duff.

The following person testified neutrally on the bill:
Catherine A. Ghiglieri.

The bill was left pending.

The committee considered HB 1608 in a public hearing on April 3,
1995.

The committee reconsidered the vote by which it adopted the
complete committee substitute for HB 1608 without objection.  The
substitute was before the committee.

The committee considered two amendments to the substitute which
were adopted without objection.

The Chair instructed the Clerk to incorporate the amendments into
the substitute.

The motion to adopt the committee substitute as amended and report
HB 1608 favorably as substituted with the recommendation that it do
pass and be printed prevailed by the following record vote:  9
Ayes, 0 Nays, 0 PNV, 0 Absent.