1-1 By: Grusendorf (Senate Sponsor - Rosson) H.B. No. 1608
1-2 (In the Senate - Received from the House May 4, 1995;
1-3 May 5, 1995, read first time and referred to Committee on Economic
1-4 Development; May 23, 1995, reported favorably by the following
1-5 vote: Yeas 10, Nays 0; May 23, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the regulation of the sale of checks.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 2, The Sale of Checks Act (Article 489d,
1-11 Vernon's Texas Civil Statutes), is amended by amending Subsection
1-12 (g) and adding Subsection (i) to read as follows:
1-13 (g) "Commissioner" means the Commissioner of the <State>
1-14 Banking Department of Texas.
1-15 (i) "Commission" means The Finance Commission of Texas.
1-16 SECTION 2. Section 4, The Sale of Checks Act (Article 489d,
1-17 Vernon's Texas Civil Statutes), is amended to read as follows:
1-18 Sec. 4. Exemption from Licensing. (a) No license to sell
1-19 checks as aforesaid shall be required hereunder of any of the
1-20 following:
1-21 (1) <(a)> Banks, credit unions, building and loan
1-22 associations, <and> savings and loan associations, and savings
1-23 banks whether organized under the laws of this state, another
1-24 state, or <of> the United States; provided, however, that they do
1-25 not issue or sell checks, other than traveler's checks, off
1-26 premises and that they do not issue or sell checks, other than
1-27 traveler's checks, through agents who are not directly or
1-28 indirectly owned by them unless the agent is a federally insured
1-29 bank, credit union, savings and loan association, or savings bank;
1-30 (2) <(b) Incorporated telegraph companies insofar as
1-31 they receive money at any of their respective offices or agencies
1-32 for immediate transmission by telegraph;>
1-33 <(c)> Agents of a licensee, as provided in Section 11;
1-34 (3) Escrow or trust fund checks issued by a title
1-35 company or attorney; or
1-36 (4) <(d)> The United States or any department or
1-37 agency of the United States.
1-38 (b) The Commissioner by rule may exempt a person from this
1-39 Act or reduce the requirements of Sections 7, 8, 9A, 9B, and 9C of
1-40 this Act if:
1-41 (1) the sale of checks is ancillary to the person's
1-42 business, is limited to commercial contracts in interstate
1-43 commerce, and the person does not engage in the business of selling
1-44 checks to the public; and
1-45 (2) the Commissioner determines that the exemption or
1-46 reduced requirement is in the public interest.
1-47 SECTION 3. Section 5, The Sale of Checks Act (Article 489d,
1-48 Vernon's Texas Civil Statutes), is amended to read as follows:
1-49 Sec. 5. Qualifications. (a) <To qualify for a license
1-50 hereunder an applicant shall meet the following requirements:>
1-51 <(a) The applicant shall have a net worth of at least
1-52 Five Hundred Thousand Dollars ($500,000), computed according to
1-53 generally accepted accounting principles.>
1-54 <(b)> The financial responsibility, financial
1-55 condition, and business experience, and character and general
1-56 fitness of an <the> applicant for a license shall be such as
1-57 reasonably to warrant the belief that issuance of a license is in
1-58 the public interest <applicant's business will be conducted
1-59 honestly, carefully and efficiently>. To the extent deemed
1-60 advisable by the Commissioner, the Commissioner may investigate and
1-61 consider the qualifications of officers and directors of an
1-62 applicant in determining whether this qualification has been met.
1-63 (b) To qualify for a license under this Act an applicant:
1-64 (1) must have a net worth of at least Five Hundred
1-65 Thousand Dollars ($500,000), computed according to generally
1-66 accepted accounting principles;
1-67 (2) must be in a financial condition that will enable
1-68 the applicant to safely and soundly engage in the business of
2-1 selling checks;
2-2 (3) may not have been convicted of a felony or a crime
2-3 involving moral turpitude that is reasonably related to an
2-4 applicant's fitness to hold a license under this Act, regardless of
2-5 whether the punishment received was a suspended sentence,
2-6 probation, or nonadjudicated conviction, if the applicant is an
2-7 individual;
2-8 (4) must provide a truthful and complete response to
2-9 requests for information contained in an application for a license;
2-10 (5) may not be indebted to the state for a fee or
2-11 penalty imposed under this Act or a rule of the commission;
2-12 (6) must have good moral character and a reputation as
2-13 a peaceable, law-abiding citizen in the community where the
2-14 applicant resides, if the applicant is an individual; and
2-15 (7) may not be engaged in an activity or practice that
2-16 the commissioner finds adversely affects the financial safety and
2-17 soundness of the applicant.
2-18 (c) The commission may adopt rules relating to an
2-19 application for a license.
2-20 SECTION 4. Section 7, The Sale of Checks Act (Article 489d,
2-21 Vernon's Texas Civil Statutes), is amended to read as follows:
2-22 Sec. 7. Accompanying Fee, Statements and Bond. Each
2-23 application for a license shall be accompanied by:
2-24 (a) An investigation fee in an amount set by the
2-25 Commissioner that is sufficient to administer this Act <of Five
2-26 Hundred Dollars ($500)> which shall not be subject to refund but
2-27 which, if the license be granted, shall constitute the license fee
2-28 for the first license year or part thereof;
2-29 (b) Audited financial statements reasonably satisfactory to
2-30 the Commissioner;
2-31 (c) A surety bond issued by a bonding company or insurance
2-32 company authorized to do business in this state, in the principal
2-33 sum of One Hundred Thousand Dollars ($100,000), and, except as
2-34 provided by this subsection, an additional principal sum of Fifty
2-35 Thousand Dollars ($50,000) for each location, in excess of one but
2-36 for not more than the first nine locations, at which the applicant
2-37 proposes to sell checks in this state. The maximum amount of a
2-38 surety bond required under this subsection is Five Hundred Thousand
2-39 Dollars ($500,000), except the Commissioner, subject to Section 15
2-40 of this Act, may require a licensee to provide an additional amount
2-41 over the Five Hundred Thousand Dollars ($500,000) up to a total
2-42 maximum amount of One Million Dollars ($1,000,000), based on the
2-43 licensee's financial condition, considered in relation to the
2-44 dollar volume of the licensee's outstanding checks. Each<, but in
2-45 no event shall the bond be required to be in excess of Five Hundred
2-46 Thousand Dollars ($500,000). If the bond accompanying the
2-47 application be in a principal sum of less than Five Hundred
2-48 Thousand Dollars ($500,000), the> application shall also be
2-49 accompanied by a list of the locations at which the business is to
2-50 be conducted. The bond shall be in form satisfactory to the
2-51 Commissioner and represents money held in trust for the benefit of
2-52 check purchasers. The bond shall run to the state for the benefit
2-53 of any claimants against the applicant or his agents to secure the
2-54 faithful performance of the obligations of the applicant and his
2-55 agents with respect to the receipt, handling, transmission and
2-56 payment of money in connection with the sale of checks. The
2-57 aggregate liability of the surety in no event shall exceed the
2-58 principal sum of the bond. If a licensee is in bankruptcy or
2-59 receivership, claimants against the licensee or the licensee's
2-60 agents may bring suit directly on the bond for an amount equal to
2-61 the amount of an unpaid judgment against the licensee or may assert
2-62 a claim against the bond. The <Such claimants against the
2-63 applicant or his agents may themselves bring suit directly on the
2-64 bond, or the> Attorney General may bring suit in a district court
2-65 in Travis County on <thereon in> behalf of such claimants, either
2-66 in one action or successive actions; or
2-67 (d) In lieu of such corporate surety bond or bonds, or of
2-68 any portion of the principal thereof as required by this Section,
2-69 the applicant may deposit with the Commissioner, or with such banks
2-70 or trust companies or national banks in this state as such
3-1 applicant may designate and the Commissioner may approve, cash,
3-2 certificates of deposit, interest-bearing stocks and bonds, notes,
3-3 debentures or other obligations of the United States or any agency
3-4 or instrumentality thereof, or guaranteed by the United States, or
3-5 of this state, or of a city, county, town, village, school district
3-6 or instrumentality of this state, or guaranteed by this state, or
3-7 other similar security devices acceptable to the Commissioner, to
3-8 an aggregate amount, based upon principal amount or market value,
3-9 whichever is lower, of not less than the amount of the required
3-10 corporate surety bond or portion thereof. A deposit made with the
3-11 Commissioner under this subsection shall be held in trust for the
3-12 benefit of check purchasers. The deposit shall be <The securities
3-13 shall be deposited as aforesaid and> held to secure the same
3-14 obligations as would the surety bond, but the licensee <depositor>
3-15 shall be entitled to receive all interest and dividends thereon,
3-16 shall have the right, with the approval of the Commissioner, to
3-17 substitute other securities for those deposited, and shall be
3-18 required so to do on written order of the Commissioner made for
3-19 good cause shown.
3-20 SECTION 5. Section 9, The Sale of Checks Act (Article 489d,
3-21 Vernon's Texas Civil Statutes), is amended to read as follows:
3-22 Sec. 9. Obligations of Licensee. Each person holding a
3-23 license under this Act shall at all times when the license is in
3-24 effect:
3-25 (a) Maintain the bond or securities in the amount
3-26 prescribed by Section 7 and if<;>
3-27 <(b) If> the licensee does not have on file or deposit
3-28 a bond or securities, as aforesaid, in the undiminished principal
3-29 sum of at least Five Hundred Thousand Dollars ($500,000), file
3-30 quarterly reports with the Commissioner setting forth the locations
3-31 at which he sells checks in this state not later than the 45th day
3-32 after the date of the last day of each quarter of the licensee's
3-33 fiscal year <as of January 1, April 1, July 1, and October 1 in
3-34 each year, the report for each such date being due on or before the
3-35 15th day thereafter>;
3-36 (1) Within ten (10) days following the filing of
3-37 such a report, the principal sum of the bond or securities shall be
3-38 increased to reflect any increase in the number of locations, and
3-39 may be decreased to reflect any decrease in the number of
3-40 locations;
3-41 (2) If the Commissioner shall at any time
3-42 reasonably determine that the bond or securities aforesaid are
3-43 insecure, deficient in amount, or exhausted in whole or part, the
3-44 Commissioner <he> may by written order require the filing of a new
3-45 or supplemental bond or the deposit of new or additional securities
3-46 in order to secure compliance with this Act, such order to be
3-47 complied with within thirty (30) days following service thereof
3-48 upon the licensee;
3-49 (b) <(c)> Maintain a net worth equal to or greater
3-50 than the amount then currently prescribed by Section 5 for license
3-51 applicants; and
3-52 (c) <(d)> Have on hand permissible investments in an
3-53 amount equal to the aggregate face amount of all outstanding checks
3-54 sold in the United States, except traveler's checks, for which the
3-55 licensee is liable for payment; however, this subsection does not
3-56 apply to any licensee with a net worth of not less than Five
3-57 Million Dollars ($5 million) as shown by audited financial
3-58 statements reasonably satisfactory to the Commissioner; statements
3-59 filed under Section 9B of this Act may be used to satisfy this
3-60 requirement.
3-61 SECTION 6. Section 9B(a), The Sale of Checks Act (Article
3-62 489d, Vernon's Texas Civil Statutes), is amended to read as
3-63 follows:
3-64 (a) Each year, on a quarterly basis not later than the 45th
3-65 day after the date of the last day of each quarter of the
3-66 licensee's fiscal year <May 15, August 15, November 15, and
3-67 February 15>, each licensee shall file with the Commissioner an
3-68 unconsolidated financial statement as of the last day of the
3-69 preceding quarter, including balance sheet, and required reports
3-70 regarding maintaining permissible investments pursuant to Section 9
4-1 for the preceding <calendar> quarter submitted on forms furnished
4-2 by the Commissioner. In addition, each licensee is <Each year at
4-3 least one of these unconsolidated financial statements must have
4-4 been audited before filing. Licensees who maintain a corporate
4-5 surety bond or securities, as described by Section 7(c), in a
4-6 principal sum of at least Five Hundred Thousand Dollars ($500,000)
4-7 are> required<, however, only> to file an <the> annual audited
4-8 unconsolidated financial statement not later than the 120th day
4-9 after the date of the last day of the licensee's fiscal year.
4-10 SECTION 7. Section 9C, The Sale of Checks Act (Article 489d,
4-11 Vernon's Texas Civil Statutes), is amended to read as follows:
4-12 Sec. 9C. Trust Imposed on Sales Proceeds. Licensees and
4-13 agents <Agents> of licensees shall hold in trust from the moment of
4-14 receipt the proceeds of a sale or delivery of the licensee's
4-15 checks. An agent of a licensee may not commingle the proceeds with
4-16 his own property or funds, except to use the funds in the ordinary
4-17 course of its business for the purpose of making change, if the
4-18 proceeds are accounted for at the end of each business day. If any
4-19 licensee or agent of a licensee commingles any proceeds received
4-20 from the sale of checks <issued by the licensee> with any other
4-21 funds or property owned or controlled by the licensee or agent, all
4-22 commingled proceeds and other property shall be impressed with a
4-23 trust. In the case of a licensee, the trust is in favor of the
4-24 holders of the checks. In the case of an agent, the trust is in
4-25 favor of the licensee. The trust is in an amount equal to the
4-26 amount of the proceeds <due the licensee> from the sale of checks
4-27 less the amount of fees paid for <due the agent from> the sale of
4-28 checks. In the event that a licensee's license is revoked by the
4-29 Commissioner pursuant to Section 14, all sales proceeds then held
4-30 in trust by the licensee and its agents <of that licensee> shall be
4-31 deemed to have been assigned to the Commissioner for the benefit of
4-32 holders of the checks.
4-33 SECTION 8. The Sale of Checks Act (Article 489d, Vernon's
4-34 Texas Civil Statutes) is amended by adding Sections 9D and 9E to
4-35 read as follows:
4-36 Sec. 9D. MANDATORY REMITTANCE BY AGENT. (a) An agent of a
4-37 licensee shall remit to the licensee all funds due from the sale of
4-38 a check within:
4-39 (1) 10 business days after the date of the sale,
4-40 unless otherwise ordered by the Commissioner, or a shorter period
4-41 as the licensee may require; or
4-42 (2) a period exceeding 10 business days after the date
4-43 of the sale if the agent has previously deposited with, and during
4-44 the period maintains on deposit with, an office of a federally
4-45 insured bank, savings and loan association, or savings bank located
4-46 in the United States in an account that is in the sole and
4-47 exclusive name of the licensee an amount that, for each day by
4-48 which the period exceeds 10 business days, is not less than the
4-49 aggregate face amount of checks issued by the licensee that the
4-50 agent usually sells daily.
4-51 (b) The phrase "business day" as used in this section shall
4-52 not include Saturdays, Sundays, and legal public holidays (as
4-53 designated in 5 U.S.C. Section 6103).
4-54 Sec. 9E. ADMINISTRATION; RULES. The Banking Department of
4-55 Texas shall administer this Act. The commission may adopt rules
4-56 necessary for the enforcement and orderly administration of this
4-57 Act. A rule adopted under this section may not directly apply to
4-58 an agent or sub-agent of a licensee.
4-59 SECTION 9. Section 13, The Sale of Checks Act (Article 489d,
4-60 Vernon's Texas Civil Statutes), is amended to read as follows:
4-61 Sec. 13. DISCLOSURE OF RESPONSIBILITY. Every check sold by
4-62 a licensee, directly or through an agent, shall bear the name and
4-63 mailing address or telephone number of the licensee clearly
4-64 imprinted thereon or be accompanied by a written notice delivered
4-65 to the purchaser at the time of sale containing that information.
4-66 SECTION 10. Section 15, The Sale of Checks Act (Article
4-67 489d, Vernon's Texas Civil Statutes), is amended to read as
4-68 follows:
4-69 Sec. 15. HEARINGS. No license shall be denied or revoked
4-70 except after a hearing thereon. The Commissioner shall give the
5-1 applicant or licensee at least twenty (20) days written notice of
5-2 the time and place of such hearing by registered or certified mail
5-3 addressed to the principal place of business of such applicant or
5-4 licensee. Any order of the Commissioner denying or revoking such
5-5 license shall state the grounds upon which it is based and shall
5-6 not be effective until twenty (20) days after written notice
5-7 thereof has been sent by registered or certified mail to the
5-8 applicant or licensee at such principal place of business, unless
5-9 the Commissioner finds that an imminent peril to public health,
5-10 safety, or welfare exists, in which event the Commissioner may make
5-11 the order effective immediately. A licensee may seek court review
5-12 of the Commissioner's findings and order under Chapter 2001,
5-13 Government Code.
5-14 SECTION 11. The Sale of Checks Act (Article 489d, Vernon's
5-15 Texas Civil Statutes) is amended by adding Section 15A to read as
5-16 follows:
5-17 Sec. 15A. CEASE AND DESIST ORDERS. (a) The Commissioner
5-18 may issue an order to cease and desist from certain violations and
5-19 practices if the Commissioner determines that a licensee or a
5-20 person acting on behalf of the licensee has:
5-21 (1) violated this Act or a rule adopted under this Act
5-22 or has violated any other law applicable to the sale of checks or a
5-23 rule adopted under the other law;
5-24 (2) committed a breach of trust or of a fiduciary
5-25 duty;
5-26 (3) committed a fraudulent act;
5-27 (4) refused to submit to an examination by the
5-28 Commissioner;
5-29 (5) conducted the licensee's business in an unsafe or
5-30 unauthorized manner; or
5-31 (6) violated a condition of the licensee's license or
5-32 an agreement between the licensee and the Commissioner.
5-33 (b) A copy of the order must be served on the licensee and
5-34 any other person named in the order. An order takes effect on the
5-35 date specified in the order but not before the 10th day after the
5-36 date of its receipt by the licensee or other person named in the
5-37 order unless the Commissioner finds that immediate and irreparable
5-38 harm is threatened to the licensee, purchasers or potential
5-39 purchasers of checks, or the general public. The licensee shall
5-40 certify to the Commissioner in writing that each person named in
5-41 the order and, if the licensee is a corporation, each member of the
5-42 licensee's board of directors has read and understood the order.
5-43 (c) A licensee or other person named in the order may appeal
5-44 the Commissioner's order to the commission by filing a notice of
5-45 appeal with the commission not later than the 10th day after the
5-46 date of receipt of notice of the order.
5-47 (d) On receipt of a timely notice of appeal, the commission
5-48 shall set a time and place for hearing the appeal of the order and
5-49 give reasonable notice of the hearing to the party filing the
5-50 appeal. Unless otherwise provided by this Act, the hearing before
5-51 the commission shall be conducted in accordance with Chapter 2001,
5-52 Government Code. If the commission finds that a party filing an
5-53 appeal has committed one or more of the violations or practices
5-54 charged by the Commissioner and that the order is necessary or in
5-55 the best interests of purchasers of checks, the commission shall
5-56 affirm the order. If the commission finds otherwise, the
5-57 commission shall set aside the order. The licensee or other person
5-58 named in the order may appeal the decision of the commission to a
5-59 district court in Travis County in accordance with Chapter 2001,
5-60 Government Code.
5-61 (e) If a licensee or other person named in an order does not
5-62 comply with a final order, the Attorney General, if requested by
5-63 the Commissioner, may bring suit in a district court in Travis
5-64 County against the licensee or other person to enjoin violation of
5-65 the order.
5-66 (f) Nothing in this section diminishes the regulatory or
5-67 enforcement powers of the Commissioner or the commission under
5-68 other provisions of this Act or other applicable law. The
5-69 Commissioner is not required to proceed under this section before
5-70 taking regulatory action under Section 14 or 16 of this Act or
6-1 under any other applicable law.
6-2 SECTION 12. Section 16(c), The Sale of Checks Act (Article
6-3 489d, Vernon's Texas Civil Statutes), is amended to read as
6-4 follows:
6-5 (c) If, after notice and a hearing, the Commissioner finds
6-6 that a person has violated this Act, <or> a rule adopted under this
6-7 Act, or an order of the Commissioner issued under this Act, the
6-8 Commissioner may order the person to pay to the Commissioner a
6-9 civil penalty in the amount that the Commissioner specifies, except
6-10 that the amount of the civil penalty may not exceed One Thousand
6-11 Dollars ($1,000) for each violation or, in the case of a continuing
6-12 violation, One Thousand Dollars ($1,000) for each day that the
6-13 violation continues.
6-14 SECTION 13. The Sale of Checks Act (Article 489d, Vernon's
6-15 Texas Civil Statutes) is amended by adding Section 18 to read as
6-16 follows:
6-17 Sec. 18. CONFIDENTIAL INFORMATION. (a) Except as provided
6-18 by Subsection (b) of this section, information obtained by the
6-19 Commissioner or the commission under this Act from a licensee or
6-20 through an examination and a file or record of the Banking
6-21 Department of Texas relating to that information is confidential
6-22 and may not be disclosed if the information:
6-23 (1) relates to the financial condition of the
6-24 licensee; or
6-25 (2) is proprietary information of the licensee, as
6-26 determined by the Commissioner in the Commissioner's sole
6-27 discretion.
6-28 (b) The Commissioner may release confidential information
6-29 if:
6-30 (1) the Commissioner finds that immediate and
6-31 irreparable harm is threatened to purchasers or potential
6-32 purchasers of checks or the general public;
6-33 (2) the licensee consents to the release or has
6-34 published the information contained in the release;
6-35 (3) the Commissioner finds that release of the
6-36 information is required for an administrative hearing, in which
6-37 case the information may be released to the parties to the hearing
6-38 on order of the hearings officer; or
6-39 (4) the Commissioner finds that the release is
6-40 reasonably necessary for the protection of the public and in the
6-41 interest of justice, in which case the information may be released
6-42 only to a representative of an agency, department, or
6-43 instrumentality of this state, another state, or the federal
6-44 government.
6-45 (c) Before releasing information that the Commissioner
6-46 determines is not proprietary under Subsection (a)(2) of this
6-47 section, the Commissioner shall give the licensee notice of the
6-48 release.
6-49 SECTION 14. This Act takes effect September 1, 1995.
6-50 SECTION 15. The importance of this legislation and the
6-51 crowded condition of the calendars in both houses create an
6-52 emergency and an imperative public necessity that the
6-53 constitutional rule requiring bills to be read on three several
6-54 days in each house be suspended, and this rule is hereby suspended.
6-55 * * * * *