By Grusendorf H.B. No. 1608
74R4582 DWS-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, and savings
1-21 banks whether organized under the laws of this state, another
1-22 state, or <of> the United States; provided, however, that they do
1-23 not issue or sell checks, other than traveler's checks, off
1-24 premises and that they do not issue or sell checks, other than
2-1 traveler's checks, through agents who are not directly or
2-2 indirectly owned by them unless the agent is a federally insured
2-3 bank, credit union, savings and loan association, or savings bank;
2-4 (2) <(b) Incorporated telegraph companies insofar as
2-5 they receive money at any of their respective offices or agencies
2-6 for immediate transmission by telegraph;>
2-7 <(c)> Agents of a licensee, as provided in Section 11;
2-8 <or>
2-9 (3) Escrow or trust fund checks issued by a title
2-10 company or attorney; or
2-11 (4) <(d)> The United States or any department or
2-12 agency of the United States.
2-13 (b) The Commissioner by rule may exempt a person from this
2-14 Act or reduce the requirements of Sections 7, 8, 9A, 9B, and 9C of
2-15 this Act if:
2-16 (1) the sale of checks is ancillary to the person's
2-17 business, is limited to commercial contracts in interstate
2-18 commerce, and the person does not engage in the business of selling
2-19 checks to the public; and
2-20 (2) the Commissioner determines that the exemption or
2-21 reduced requirement is in the public interest.
2-22 SECTION 3. Section 5, The Sale of Checks Act (Article 489d,
2-23 Vernon's Texas Civil Statutes), is amended to read as follows:
2-24 Sec. 5. Qualifications. (a) <To qualify for a license
2-25 hereunder an applicant shall meet the following requirements:>
2-26 <(a) The applicant shall have a net worth of at least
2-27 Five Hundred Thousand Dollars ($500,000), computed according to
3-1 generally accepted accounting principles.>
3-2 <(b)> The financial responsibility, financial
3-3 condition, and business experience, and character and general
3-4 fitness of an <the> applicant for a license shall be such as
3-5 reasonably to warrant the belief that issuance of a license is in
3-6 the public interest <applicant's business will be conducted
3-7 honestly, carefully and efficiently>. To the extent deemed
3-8 advisable by the Commissioner, the Commissioner may investigate and
3-9 consider the qualifications of officers and directors of an
3-10 applicant in determining whether this qualification has been met.
3-11 (b) To qualify for a license under this Act an applicant:
3-12 (1) must have a net worth of at least Five Hundred
3-13 Thousand Dollars ($500,000), computed according to generally
3-14 accepted accounting principles;
3-15 (2) must be in a financial condition that will enable
3-16 the applicant to safely and soundly engage in the business of
3-17 selling checks;
3-18 (3) may not have been convicted of a felony or a crime
3-19 involving moral turpitude that is reasonably related to an
3-20 applicant's fitness to hold a license under this Act, regardless of
3-21 whether the punishment received was a suspended sentence,
3-22 probation, or nonadjudicated conviction, if the applicant is an
3-23 individual;
3-24 (4) must provide a truthful and complete response to
3-25 requests for information contained in an application for a license;
3-26 (5) may not be indebted to the state for a fee or
3-27 penalty imposed under this Act or a rule of the commission;
4-1 (6) must have good moral character and a reputation as
4-2 a peaceable, law-abiding citizen in the community where the
4-3 applicant resides, if the applicant is an individual; and
4-4 (7) may not be engaged in an activity or practice that
4-5 the commissioner finds adversely affects the financial safety and
4-6 soundness of the applicant.
4-7 (c) The commission may adopt rules relating to an
4-8 application for a license.
4-9 SECTION 4. Section 7, The Sale of Checks Act (Article 489d,
4-10 Vernon's Texas Civil Statutes), is amended to read as follows:
4-11 Sec. 7. Accompanying Fee, Statements and Bond. Each
4-12 application for a license shall be accompanied by:
4-13 (a) An investigation fee in an amount set by the
4-14 Commissioner that is sufficient to administer this Act <of Five
4-15 Hundred Dollars ($500)> which shall not be subject to refund but
4-16 which, if the license be granted, shall constitute the license fee
4-17 for the first license year or part thereof;
4-18 (b) Audited financial statements reasonably satisfactory to
4-19 the Commissioner;
4-20 (c) A surety bond issued by a bonding company or insurance
4-21 company authorized to do business in this state, in the principal
4-22 sum of One Hundred Thousand Dollars ($100,000), and, except as
4-23 provided by this subsection, an additional principal sum of Fifty
4-24 Thousand Dollars ($50,000) for each location, in excess of one but
4-25 for not more than the first nine locations, at which the applicant
4-26 proposes to sell checks in this state. The maximum amount of a
4-27 surety bond required under this subsection is Five Hundred Thousand
5-1 Dollars ($500,000), except the Commissioner, subject to Section 15
5-2 of this Act, may require a licensee to provide an additional amount
5-3 over the Five Hundred Thousand Dollars ($500,000) up to a total
5-4 maximum amount of One Million Dollars ($1,000,000), based on the
5-5 licensee's financial condition, considered in relation to the
5-6 dollar volume of the licensee's outstanding checks. Each<, but in
5-7 no event shall the bond be required to be in excess of Five Hundred
5-8 Thousand Dollars ($500,000). If the bond accompanying the
5-9 application be in a principal sum of less than Five Hundred
5-10 Thousand Dollars ($500,000), the> application shall also be
5-11 accompanied by a list of the locations at which the business is to
5-12 be conducted. The bond shall be in form satisfactory to the
5-13 Commissioner and represents money held in trust for the benefit of
5-14 check purchasers. The bond shall run to the state for the benefit
5-15 of any claimants against the applicant or his agents to secure the
5-16 faithful performance of the obligations of the applicant and his
5-17 agents with respect to the receipt, handling, transmission and
5-18 payment of money in connection with the sale of checks. The
5-19 aggregate liability of the surety in no event shall exceed the
5-20 principal sum of the bond. If a licensee is in bankruptcy or
5-21 receivership, claimants against the licensee or the licensee's
5-22 agents may bring suit directly on the bond for an amount equal to
5-23 the amount of an unpaid judgment against the licensee or may assert
5-24 a claim against the bond. The <Such claimants against the
5-25 applicant or his agents may themselves bring suit directly on the
5-26 bond, or the> Attorney General may bring suit in a district court
5-27 in Travis County on <thereon in> behalf of such claimants, either
6-1 in one action or successive actions; or
6-2 (d) In lieu of such corporate surety bond or bonds, or of
6-3 any portion of the principal thereof as required by this Section,
6-4 the applicant may deposit with the Commissioner, or with such banks
6-5 or trust companies or national banks in this state as such
6-6 applicant may designate and the Commissioner may approve, cash,
6-7 certificates of deposit, interest-bearing stocks and bonds, notes,
6-8 debentures or other obligations of the United States or any agency
6-9 or instrumentality thereof, or guaranteed by the United States, or
6-10 of this state, or of a city, county, town, village, school district
6-11 or instrumentality of this state, or guaranteed by this state, or
6-12 other similar security devices acceptable to the Commissioner, to
6-13 an aggregate amount, based upon principal amount or market value,
6-14 whichever is lower, of not less than the amount of the required
6-15 corporate surety bond or portion thereof. A deposit made with the
6-16 Commissioner under this subsection shall be placed with the Texas
6-17 Treasury Safekeeping Trust Company and represents money held in
6-18 trust for the benefit of check purchasers. The deposit shall be
6-19 <The securities shall be deposited as aforesaid and> held to secure
6-20 the same obligations as would the surety bond, but the licensee
6-21 <depositor> shall be entitled to receive all interest and dividends
6-22 thereon, shall have the right, with the approval of the
6-23 Commissioner, to substitute other securities for those deposited,
6-24 and shall be required so to do on written order of the Commissioner
6-25 made for good cause shown.
6-26 SECTION 5. Section 9, The Sale of Checks Act (Article 489d,
6-27 Vernon's Texas Civil Statutes), is amended to read as follows:
7-1 Sec. 9. Obligations of Licensee. Each person holding a
7-2 license under this Act shall at all times when the license is in
7-3 effect:
7-4 (a) Maintain the bond or securities in the amount
7-5 prescribed by Section 7 and if<;>
7-6 <(b) If> the licensee does not have on file or deposit
7-7 a bond or securities, as aforesaid, in the undiminished principal
7-8 sum of at least Five Hundred Thousand Dollars ($500,000), file
7-9 quarterly reports with the Commissioner setting forth the locations
7-10 at which he sells checks in this state not later than the 45th day
7-11 after the date of the last day of each quarter of the licensee's
7-12 fiscal year <as of January 1, April 1, July 1, and October 1 in
7-13 each year, the report for each such date being due on or before the
7-14 15th day thereafter>;
7-15 (1) Within ten (10) days following the filing of
7-16 such a report, the principal sum of the bond or securities shall be
7-17 increased to reflect any increase in the number of locations, and
7-18 may be decreased to reflect any decrease in the number of
7-19 locations;
7-20 (2) If the Commissioner shall at any time
7-21 reasonably determine that the bond or securities aforesaid are
7-22 insecure, deficient in amount, or exhausted in whole or part, the
7-23 Commissioner <he> may by written order require the filing of a new
7-24 or supplemental bond or the deposit of new or additional securities
7-25 in order to secure compliance with this Act, such order to be
7-26 complied with within thirty (30) days following service thereof
7-27 upon the licensee;
8-1 (b) <(c)> Maintain a net worth equal to or greater
8-2 than the amount then currently prescribed by Section 5 for license
8-3 applicants; and
8-4 (c) <(d)> Have on hand permissible investments in an
8-5 amount equal to the aggregate face amount of all outstanding checks
8-6 sold in the United States, except traveler's checks, for which the
8-7 licensee is liable for payment; however, this subsection does not
8-8 apply to any licensee with a net worth of not less than Five
8-9 Million Dollars ($5 million) as shown by audited financial
8-10 statements reasonably satisfactory to the Commissioner; statements
8-11 filed under Section 9B of this Act may be used to satisfy this
8-12 requirement.
8-13 SECTION 6. Section 9B(a), The Sale of Checks Act (Article
8-14 489d, Vernon's Texas Civil Statutes), is amended to read as
8-15 follows:
8-16 (a) Each year, on a quarterly basis not later than the 45th
8-17 day after the date of the last day of each quarter of the
8-18 licensee's fiscal year <May 15, August 15, November 15, and
8-19 February 15>, each licensee shall file with the Commissioner an
8-20 unconsolidated financial statement as of the last day of the
8-21 preceding quarter, including balance sheet, and required reports
8-22 regarding maintaining permissible investments pursuant to Section 9
8-23 for the preceding <calendar> quarter submitted on forms furnished
8-24 by the Commissioner. In addition, each licensee is <Each year at
8-25 least one of these unconsolidated financial statements must have
8-26 been audited before filing. Licensees who maintain a corporate
8-27 surety bond or securities, as described by Section 7(c), in a
9-1 principal sum of at least Five Hundred Thousand Dollars ($500,000)
9-2 are> required<, however, only> to file an <the> annual audited
9-3 unconsolidated financial statement not later than the 120th day
9-4 after the date of the last day of the licensee's fiscal year.
9-5 SECTION 7. Section 9C, The Sale of Checks Act (Article 489d,
9-6 Vernon's Texas Civil Statutes), is amended to read as follows:
9-7 Sec. 9C. Trust Imposed on Sales Proceeds. Licensees and
9-8 agents <Agents> of licensees shall hold in trust from the moment of
9-9 receipt the proceeds of a sale or delivery of the licensee's
9-10 checks. An agent of a licensee may not commingle the proceeds with
9-11 his own property or funds, except to use the funds in the ordinary
9-12 course of its business for the purpose of making change or
9-13 otherwise, if the proceeds are accounted for at the end of each
9-14 business day. If any licensee or agent of a licensee commingles
9-15 any proceeds received from the sale of checks <issued by the
9-16 licensee> with any other funds or property owned or controlled by
9-17 the licensee or agent, all commingled proceeds and other property
9-18 shall be impressed with a trust in favor of the holders of the
9-19 checks <licensee> in an amount equal to the amount of the proceeds
9-20 <due the licensee> from the sale of checks less the amount of fees
9-21 paid for <due the agent from> the sale of checks. In the event
9-22 that a licensee's license is revoked by the Commissioner pursuant
9-23 to Section 14, all sales proceeds then held in trust by the
9-24 licensee and its agents <of that licensee> shall be deemed to have
9-25 been assigned to the Commissioner for the benefit of holders of the
9-26 checks.
9-27 SECTION 8. The Sale of Checks Act (Article 489d, Vernon's
10-1 Texas Civil Statutes) is amended by adding Sections 9D and 9E to
10-2 read as follows:
10-3 Sec. 9D. MANDATORY REMITTANCE BY AGENT. An agent of a
10-4 licensee shall remit to the licensee all funds due from the sale of
10-5 a check within:
10-6 (1) 10 business days after the date of the sale,
10-7 unless otherwise ordered by the Commissioner, or a shorter period
10-8 as the licensee may require; or
10-9 (2) a period exceeding 10 business days after the date
10-10 of the sale if the agent has previously deposited with, and during
10-11 the period maintains on deposit with, an office of a federally
10-12 insured bank, savings and loan association, or savings bank located
10-13 in the United States in an account that is in the sole and
10-14 exclusive name of the licensee an amount that, for each day by
10-15 which the period exceeds 10 business days, is not less than the
10-16 aggregate face amount of checks issued by the licensee that the
10-17 agent usually sells daily.
10-18 Sec. 9E. ADMINISTRATION; RULES. The Banking Department of
10-19 Texas shall administer this Act. The commission may adopt rules
10-20 necessary for the enforcement and orderly administration of this
10-21 Act.
10-22 SECTION 9. Section 13, The Sale of Checks Act (Article 489d,
10-23 Vernon's Texas Civil Statutes), is amended to read as follows:
10-24 Sec. 13. DISCLOSURE OF RESPONSIBILITY. Every check sold by
10-25 a licensee, directly or through an agent, shall bear the name and
10-26 mailing address or telephone number of the licensee clearly
10-27 imprinted thereon or be accompanied by a written notice delivered
11-1 to the purchaser at the time of sale containing that information.
11-2 SECTION 10. Section 15, The Sale of Checks Act (Article
11-3 489d, Vernon's Texas Civil Statutes), is amended to read as
11-4 follows:
11-5 Sec. 15. HEARINGS. No license shall be denied or revoked
11-6 except after a hearing thereon. The Commissioner shall give the
11-7 applicant or licensee at least twenty (20) days written notice of
11-8 the time and place of such hearing by registered or certified mail
11-9 addressed to the principal place of business of such applicant or
11-10 licensee. Any order of the Commissioner denying or revoking such
11-11 license shall state the grounds upon which it is based and shall
11-12 not be effective until twenty (20) days after written notice
11-13 thereof has been sent by registered or certified mail to the
11-14 applicant or licensee at such principal place of business, unless
11-15 the Commissioner finds that an imminent peril to public health,
11-16 safety, or welfare exists, in which event the Commissioner may make
11-17 the order effective immediately. A licensee may seek court review
11-18 of the Commissioner's findings and order under Chapter 2001,
11-19 Government Code.
11-20 SECTION 11. The Sale of Checks Act (Article 489d, Vernon's
11-21 Texas Civil Statutes) is amended by adding Section 15A to read as
11-22 follows:
11-23 Sec. 15A. CEASE AND DESIST ORDERS. (a) The Commissioner
11-24 may issue an order to cease and desist from certain violations and
11-25 practices if the Commissioner determines that a licensee or a
11-26 person acting on behalf of the licensee has:
11-27 (1) violated this Act or a rule adopted under this Act
12-1 or has violated any other law applicable to the sale of checks or a
12-2 rule adopted under the other law;
12-3 (2) committed a breach of trust or of a fiduciary
12-4 duty;
12-5 (3) committed a fraudulent act;
12-6 (4) refused to submit to an examination by the
12-7 Commissioner;
12-8 (5) conducted the licensee's business in an unsafe or
12-9 unauthorized manner; or
12-10 (6) violated a condition of the licensee's license or
12-11 an agreement between the licensee and the Commissioner.
12-12 (b) A copy of the order must be served on the licensee and
12-13 any other person named in the order. An order takes effect on the
12-14 date specified in the order but not before the 10th day after the
12-15 date of its receipt by the licensee or other person named in the
12-16 order unless the Commissioner finds that immediate and irreparable
12-17 harm is threatened to the licensee, purchasers or potential
12-18 purchasers of checks, or the general public. The licensee shall
12-19 certify to the Commissioner in writing that each person named in
12-20 the order and, if the licensee is a corporation, each member of the
12-21 licensee's board of directors has read and understood the order.
12-22 (c) A licensee or other person named in the order may appeal
12-23 the Commissioner's order to the commission by filing a notice of
12-24 appeal with the commission not later than the 10th day after the
12-25 date of receipt of notice of the order.
12-26 (d) On receipt of a timely notice of appeal, the commission
12-27 shall set a time and place for hearing the appeal of the order and
13-1 give reasonable notice of the hearing to the party filing the
13-2 appeal. Unless otherwise provided by this Act, the hearing before
13-3 the commission shall be conducted in accordance with Chapter 2001,
13-4 Government Code. If the commission finds that a party filing an
13-5 appeal has committed one or more of the violations or practices
13-6 charged by the Commissioner and that the order is necessary or in
13-7 the best interests of purchasers of checks, the commission shall
13-8 affirm the order. If the commission finds otherwise, the
13-9 commission shall set aside the order. The licensee or other person
13-10 named in the order may appeal the decision of the commission to a
13-11 district court in Travis County in accordance with Chapter 2001,
13-12 Government Code.
13-13 (e) If a licensee or other person named in an order does not
13-14 comply with a final order, the Attorney General, if requested by
13-15 the Commissioner, may bring suit in a district court in Travis
13-16 County against the licensee or other person to enjoin violation of
13-17 the order.
13-18 (f) Nothing in this section diminishes the regulatory or
13-19 enforcement powers of the Commissioner or the commission under
13-20 other provisions of this Act or other applicable law. The
13-21 Commissioner is not required to proceed under this section before
13-22 taking regulatory action under Section 14 or 16 of this Act or
13-23 under any other applicable law.
13-24 SECTION 12. Section 16(c), The Sale of Checks Act (Article
13-25 489d, Vernon's Texas Civil Statutes), is amended to read as
13-26 follows:
13-27 (c) If, after notice and a hearing, the Commissioner finds
14-1 that a person has violated this Act, <or> a rule adopted under this
14-2 Act, or an order of the Commissioner issued under this Act, the
14-3 Commissioner may order the person to pay to the Commissioner a
14-4 civil penalty in the amount that the Commissioner specifies, except
14-5 that the amount of the civil penalty may not exceed One Thousand
14-6 Dollars ($1,000) for each violation or, in the case of a continuing
14-7 violation, One Thousand Dollars ($1,000) for each day that the
14-8 violation continues.
14-9 SECTION 13. The Sale of Checks Act (Article 489d, Vernon's
14-10 Texas Civil Statutes) is amended by adding Section 18 to read as
14-11 follows:
14-12 Sec. 18. CONFIDENTIAL INFORMATION. (a) Except as provided
14-13 by Subsection (b) of this section, information obtained by the
14-14 Commissioner or the commission under this Act from a licensee or
14-15 through an examination and a file or record of the Banking
14-16 Department of Texas relating to that information is confidential
14-17 and may not be disclosed if the information:
14-18 (1) relates to the financial condition of the
14-19 licensee; or
14-20 (2) is proprietary information of the licensee, as
14-21 determined by the Commissioner in the Commissioner's sole
14-22 discretion.
14-23 (b) The Commissioner may release confidential information
14-24 if:
14-25 (1) the information is an annual audited
14-26 unconsolidated financial statement filed by a licensee as required
14-27 by Section 9B of this Act;
15-1 (2) the Commissioner finds that immediate and
15-2 irreparable harm is threatened to purchasers or potential
15-3 purchasers of checks or the general public;
15-4 (3) the licensee consents to the release or has
15-5 published the information contained in the release;
15-6 (4) the Commissioner finds that release of the
15-7 information is required for an administrative hearing, in which
15-8 case the information may be released to the parties to the hearing
15-9 on order of the hearings officer; or
15-10 (5) the Commissioner finds that the release is
15-11 reasonably necessary for the protection of the public and in the
15-12 interest of justice, in which case the information may be released
15-13 only to a representative of an agency, department, or
15-14 instrumentality of this state, another state, or the federal
15-15 government.
15-16 (c) Before releasing information that the Commissioner
15-17 determines is not proprietary under Subsection (a)(2) of this
15-18 section, the Commissioner shall give the licensee notice of the
15-19 release.
15-20 SECTION 14. This Act takes effect September 1, 1995.
15-21 SECTION 15. The importance of this legislation and the
15-22 crowded condition of the calendars in both houses create an
15-23 emergency and an imperative public necessity that the
15-24 constitutional rule requiring bills to be read on three several
15-25 days in each house be suspended, and this rule is hereby suspended.