BILL ANALYSIS
H.B. 1608
By: Grusendorf (Rosson)
Economic Development
5-24-95
Senate Committee Report (Unamended)
BACKGROUND
Current law gives the Department of Banking regulatory authority
and responsibility to administer and enforce the Sale of Checks
Act. It is difficult for the Department of Banking to administer
the Act without express rulemaking authority and a clear framework
for license requirements.
PURPOSE
As proposed, H.B. 1608 regulates the sale of checks.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the commissioner of the Department of Banking under SECTION 2
(Sec.4(b), Article 489d, V.T.C.S.) and to the Finance Commission of
Texas under SECTION 3 (Sec. 5(c), Article 489d, V.T.C.S.) and
SECTION 8 (Sec. 9E, Article 489d, V.T.C.S.) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 2, Article 489d, V.T.C.S. (Sale of Checks
Act), by amending Subsection (g) and adding Subsection (i), as
follows:
(g) Redefines "commissioner" to mean the Commissioner of the
Banking Department of Texas, rather than the Commissioner of
the State Banking Department.
(i) Defines "commission" to mean the Finance Commission of
Texas.
SECTION 2. Amends Section 4, Article 489d, V.T.C.S. (Sale of Checks
Act), as follows:
Sec. 4. EXEMPTION FROM LICENSING. (a) Adds to the list of
entities of which no license to sell checks shall be required,
a savings bank whether organized under the laws of this state,
another state, or the U.S.; provided that they do not issue or
sell checks, other than traveler's checks, through agents who
are not owned by them, unless the agent is a federally insured
bank, credit union, savings and loan association, or savings
bank; and escrow or trust fund checks issued by a title
company or attorney. Deletes existing Subsection (b). Makes
nonsubstantive changes.
(b) Authorizes the Commissioner of the Banking Department of
Texas (commissioner), by rule, to exempt a person from this
act or reduce the requirements of Sections 7, 8, 9A, 9B, and
9C of this Act if:
(1) the sale of checks is ancillary to the person's
business, is limited to commercial contracts in interstate
commerce, and the person does not engage in the business
of selling checks to the public; and
(2) the commissioner determines that the exemption or
reduced requirement is in the public interest.
SECTION 3. Amends Section 5, Article 489d, V.T.C.S., as follows:
(a) Redesignates existing Subsection (b). Requires the
financial responsibility, financial condition, business
experience, and character and general fitness of an applicant
for a license to be such as to warrant the belief that
issuance of a license is in the public interest, rather than
the applicant's business will be conducted honestly, carefully
and efficiently. Deletes existing Subsection (a).
(b) Sets forth provisions for an applicant to qualify for a
license under this Act.
(c) Authorizes the commissioner to adopt rules relating to an
application for a license.
SECTION 4. Amends Section 7, Article 489d, V.T.C.S., as follows:
Sec. 7. ACCOMPANYING FEE, STATEMENTS AND BOND. Requires each
application for a license to be accompanied by:
(a) an investigation fee in an amount set by the
commissioner that is sufficient to administer this Act,
rather than of $500.
(b) Makes no change.
(c) a surety bond issued by a bonding company or insurance
company authorized to do business in this state, in the
principal sum of $100,000, and except as provided by this
subsection, an additional principal sum of $50,000 for each
location, in excess of one but for not more than the first
nine locations, at which the applicant proposes to sell
checks in this state. Provides that the maximum amount of a
surety bond required under this subsection is $500,000,
except the commissioner, subject to Section 15 of this Act,
may require a licensee to provide an additional amount over
the $500,000 up to a total maximum amount of $1,000,000
based on the licensee's financial condition, considered in
relation to the dollar volume of the licensee's outstanding
checks. Requires each application to be accompanied by a
list of the locations at which the business is to be
conducted. Provides that the bond shall be in form
satisfactory to the commissioner and represents money held
in trust for the benefit of check purchasers. Authorizes
claimants against the licensee or the licensee's agents, if
a licensee is in bankruptcy or receivership, to bring suit
directly on the bond for an amount equal to the amount of an
unpaid judgment against the licensee or to assert a claim
against the bond. Deletes the provision that in no event
shall the bond be required to be in excess of $500,000.
Deletes the provision that claimants against the applicant
may themselves bring suit directly on the bond. Makes a
conforming change.
(d) Adds to the list of items an applicant may deposit, in
lieu of corporate surety bonds, or of any portion of the
principal thereof as required by this section, cash and
certificates of deposit. Provides that the each item an
applicant may deposit may be guaranteed by any security
devices acceptable to the commissioner. Requires a deposit
made with the commissioner under this subsection to be held
in trust for the benefit of check purchasers. Requires the
deposit to be held to secure the same obligations as would
the surety bond, but the licensee, rather than the
depositor, shall be entitled to all rights of the deposit.
SECTION 5. Amends Section 9, Article 489d, V.T.C.S., as follows:
Sec. 9. OBLIGATIONS OF LICENSEE. Requires each person holding
a license under this Act to at all times when the license is
in effect to maintain the bond or securities in the amount
prescribed by Section 7 and if the licensee does not have on
file or deposit a bond or securities in the undiminished
principal sum of at least $500,000, file quarterly reports
with the commissioner setting forth the locations at which he
sells checks in this state no later than 45 days after the
date of the last day of each quarter of the licensee's fiscal
year, rather than as of January 1, April 1, July 1, and
October 1 in each year. Makes nonsubstantive changes.
SECTION 6. Amends Section 9B(a), Article 489d, V.T.C.S., as
follows:
(a) Requires each licensee, each year, on a quarterly basis no
later than 45 days after the last day of each quarter of the
licensee's fiscal year, rather than May 15, August 15,
November 15, and February 15, to file with the commissioner an
unconsolidated financial statement as of the last day of the
preceding quarter. Provides that each licensee is required to
file an annual audited unconsolidated financial statement no
later than 120 days after the date of the last day of the
licensee's fiscal year. Deletes the provision that each year
at least one of these unconsolidated financial statements must
have been audited before filing. Makes conforming and
nonsubstantive changes.
SECTION 7. Amends Section 9C, Article 489d, V.T.C.S., as follows:
Sec. 9C. TRUST IMPOSED ON SALES PROCEEDS. Requires Licensees
and agents of licensees to hold in trust from the moment of
receipt the proceeds of a sale or delivery of the licensee's
checks. Prohibits an agent of a licensee from commingling the
proceeds with the agent's own property or funds if the
proceeds are accounted for at the end of each business day.
Provides that in the case of a licensee, the trust is in favor
of the holders of the checks. Provides that in the case of an
agent, the trust is in favor of the licensee. Provides that
the trust is in an amount equal to the amount of the proceeds
from the sale of checks less the amount of fees paid for the
sale of checks. Requires all sales proceeds held in trust by
the licensee and its agents, in the event that a licensee's
license is revoked by the commissioner pursuant to Section 14,
to be deemed to have been assigned to the commissioner for the
benefit of holders of the checks. Makes nonsubstantive and
conforming changes.
SECTION 8. Amends Article 489d, V.T.C.S., by adding Sections 9D and
9E, as follows:
Sec. 9D. MANDATORY REMITTANCE BY AGENT. (a) Requires an agent
of a licensee to remit to the licensee all funds due from the
sale of a check within a certain period.
(b) Defines "business day."
Sc. 9E. ADMINISTRATION; RULES. Requires the Banking Department
of Texas (department) to administer this Act. Authorizes the
commissioner to adopt rules necessary for the enforcement and
orderly administration of this Act. Prohibits a rule adopted
under this section from directly applying to an agent or sub-agent of a licensee.
SECTION 9. Amends Section 13, Article 489d, V.T.C.S., as follows:
Sec. 13. DISCLOSURE OF RESPONSIBILITY. Requires every check
sold by a licensee to bear the name and mailing address or
telephone number of the licensee clearly imprinted thereon or
be accompanied by a written notice delivered to the purchaser
at the time of sale containing that information.
SECTION 10. Amends Section 15, Article 489d, V.T.C.S., to
provide that any order of the commissioner denying or revoking a
license shall state the grounds upon which it is based and shall
not be effective until 20 days after written notice thereof has
been sent by registered or certified mail to the applicant or
licensee at the principal place of business, unless the
commissioner finds that an imminent peril to public health, safety,
or welfare exists, in which event the commissioner may make the
order effective immediately. Authorizes a licensee to seek court
review of the commissioner's findings and order under Chapter 2001,
Government Code.
SECTION 11. Amends Article 489d, V.T.C.S., by adding Section
15A, as follows:
Sec. 15A. CEASE AND DESIST ORDERS. (a) Authorizes the
commissioner to issue an order to cease and desist from
certain violations and practices if the commissioner makes
certain determinations about the licensee.
(b) Requires a copy of the order to be served on the
licensee and any other person named in the order. Provides
that an order takes effect on the date specified in the
order but not before the 10th day after the date of its
receipt by the licensee or other person named in the order
unless the commissioner finds that immediate an irreparable
harm is threatened to the licensee, purchasers or potential
purchasers of checks, or the general public. Requires the
licensee to certify to the commissioner in writing that each
person named in the order and, if the licensee is a
corporation, each member of the licensee's board of
directors has read and understood the order.
(c) Authorizes a licensee or other person named in the order
to appeal the commissioner's order to the commissioner by
filing a notice of appeal with the commissioner no later
than the 10th day after the date of receipt of notice of the
order.
(d) Requires the Finance Commission of Texas (commission),
on receipt of a notice of appeal, to set a time and place
for hearing the appeal of the order and give notice of the
hearing to the party filing the appeal. Requires the hearing
before the commission to be conducted in accordance with
Chapter 2001, Government Code. Requires the commission to
affirm the order if the commission finds that a party filing
an appeal has committed one or more of the violations or
practices charged by the commissioner and that the order is
necessary or in the best interests of purchasers of checks.
Requires the commissioner to set aside the order if the
commissioner finds otherwise. Authorizes the licensee or
other person named in the order to appeal the decision of
the commission to a district court in Travis County in
accordance with Chapter 2001, Government Code.
(e) Authorizes the attorney general, if a licensee or other
person named in an order does not comply with a final order,
and if requested by the commissioner, to bring suit in a
district court in Travis County against the licensee or
other person to enjoin violation of the order.
(f) Provides that nothing in this section diminishes the
regulatory or enforcement powers of the commissioner or the
commission under other provisions of this Act or other
applicable law. Provides that the commissioner is not
required to proceed under this section before taking
regulatory action under Section 14 or 16 of this Act or
under any other applicable law.
SECTION 12. Amends Section 16(c), Article 489d, V.T.C.S., to
authorize the commissioner, if after notice and hearing the
commissioner finds that a person has violated this Act, a rule
adopted under this Act, or an order of the commissioner issued
under this Act, to order the person to pay to the commissioner a
civil penalty.
SECTION 13. Amends Article 489d, V.T.C.S., as follows:
Sec. 18. CONFIDENTIAL INFORMATION. (a) Sets forth provisions
under which information obtained by the commissioner or the
commission under this Act from a licensee or through an
examination and a file or record of the Banking Department of
Texas relating to that information is confidential and may not
be disclosed.
(b) Sets forth provisions under which the commissioner may
release confidential information.
(c) Requires the commissioner, before releasing information
that the commissioner determines is not proprietary under
Subsection (a)(2) of this section, to give the licensee
notice of the release.
SECTION 14. Effective date: September 1, 1995.
SECTION 15. Emergency clause.