SRC-LBB S.B. 654 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 654
By: Shapleigh
State Affairs
3/18/2003
As Filed


DIGEST AND PURPOSE 

Currently, Texas regulations and programs relating to access to capital
and credit for Texas borrowers create barriers for people trying to access
home loans, small business loans and personal loans. Moreover, individuals
with limited borrowing experience or credit histories are often excluded
from traditional loans.  As proposed, S.B. 654 creates broader programs to
increase the availability of funds for loans within Texas.  This bill
requires the Finance Commission of Texas, the Texas Department of Economic
Development, and the Texas Department of Housing and Community Affairs, to
jointly prepare a biennial strategic plan relating to access to capital in
unserved and underserved areas of the state.  Additionally, S.B 654
requires information regarding borrowing issues and lending practices to
be available to the public on the Internet.  This bill establishes
programs and develops regulations to strengthen the economy by expanding
the opportunity for all citizens to access capital and credit. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the finance commission in
SECTION 2 (Section 279.005, Finance Code), to the Texas Department of
Economic Development in SECTION 7 (Section 481.415, Government Code) and
to the comptroller in SECTION 10 (Article 4.52, Insurance Code) of this
bill.  

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Title 3Z, Finance Code, by adding Chapter 278, as
follows: 

CHAPTER 278.  ACCESS TO FINANCIAL CAPITAL

Sec. 278.001.  DUTY OF CERTAIN AGENCIES TO PREPARE STRATEGIC PLAN
CONCERNING ACCESS TO FINANCIAL CAPITAL.  Requires the Finance Commission
of Texas (SFC), the Texas Department of Economic Development (TDED), and
the Texas Department of Housing and Community Affairs (TDHCA) to jointly
prepare a biennial strategic plan relating to access to capital in
unserved and underserved areas of the state. 

Sec. 278.002.  SUBMISSION OF PLAN AND RECOMMENDATIONS.  Requires the
agencies, not later than November 1 of each even-numbered year, to jointly
submit the strategic plan required by this chapter to the lieutenant
governor, the speaker of the house of representatives, and the presiding
officers of the senate business and commerce and house business and
industry committees and make recommendations on actions that the
legislature may take to improve access to capital in unserved and
underserved areas of the state. 

Sec. 278.003.  CONTENTS OF PLAN.  Requires the strategic plan to follow
certain guidelines. 

Sec. 278.004.  FINANCIAL CAPITAL INFORMATION AVAILABLE ON INTERNET.
Requires the agencies to create and maintain an Internet site through the
Texas Online government portal or any successor to that portal that
includes certain information. 
   
Sec. 278.005.  INTEGRATED BUDGET.  Requires the agencies to work together
to determine whether an integrated budget is appropriate and necessary for
purposes of creating the strategic plan required by this chapter.
Requires the agencies to present to the Legislative Budget Board
recommendations concerning the distribution of funds to each of the
agencies, if the agencies determine that an integrated budget is
appropriate and necessary.  

SECTION 2.  (a)  Amends Title 3Z, Finance Code,  by adding Chapter 279, as
follows: 

CHAPTER 279.  COMMUNITY REINVESTMENT PLANS
 
Sec. 279.001.  DEFINITIONS.  Defines "community development financial
institution," "community reinvestment plan," "finance commission," and
"underserved area."  
Sec.  279.002.  APPLICABILITY.  Provides that this chapter applies only to
a lender that is subject to a corporate franchise tax. 

Sec. 279.003.  COMMUNITY REINVESTMENT STRATEGIC PLAN.  Authorizes a
lender, in accordance with rules adopted by the finance commission under
Section 279.005, to develop and implement an annual community reinvestment
strategic plan in order to be eligible to receive a tax credit as provided
by Section 279.004.  Requires a lender's plan to include the lender's
specific targets for the expenditure of funds for community reinvestment
purposes, including certain items. 
 
Sec. 279.004.  TAX CREDIT.  Requires a lender to meet each of the targets
set by the lender's community reinvestment plan, as certified by rule of
the finance commission, in order to be eligible for a tax credit as
provided by Subchapter V, Chapter 171, Tax Code. 

Sec. 279.005.  DUTIES OF FINANCE COMMISSION; RULEMAKING AUTHORITY. (a)
Requires SFC, in consultation with TDED and TDHCA to assist lenders in
identifying and setting community reinvestment targets for the submission
of community reinvestment plans. 

(b)  Requires SFC to adopt policies and rules as necessary to implement
this chapter, including policies and rules that provide lenders with
specific guidelines and procedures for the adoption and submission to the
commission of community reinvestment plans, including a reasonable time
frame for implementation of the plan and create a certification process
for lenders that meets each of the targets set under their respective
plan. 

 (c)  Authorizes SFC to consult with and request information relevant to
this chapter from TDED and TDHCA.  Requires SFC, in developing rules and
policies under this section, to consider any information obtained under
this subsection. 

Sec. 279.006.  INTERNET POSTING.  (a)  Authorizes a  lender to post the
lender's community reinvestment plan on any Internet website maintained by
the lender.  Requires the plan to be posted in a format that is readily
accessible to and understandable by a member of the public.  Requires the
lender to notify SFC if it posts a plan. 

(b)  Requires SFC to maintain on its Internet website a link to each
lender's community reinvestment plan that is posted on the Internet. 

 (b)  Amends Chapter 171, Tax Code, by adding Subchapter V, as follows:

SUBCHAPTER V. TAX CREDIT FOR ACHIEVING COMMUNITY REINVESTMENT TARGETS

 Sec. 171.901.  APPLICATION OF SUBCHAPTER.  Provides that this subchapter
applies only to a corporation that is certified by the SFC as having met
the targets of a community reinvestment plan submitted by the corporation
under Chapter 279, Finance Code. 

Sec. 171.902.  CREDIT.  Provides that a corporation that meets the
eligibility requirements under this subchapter is entitled to a credit in
the amount allowed by this subchapter against the tax imposed under this
chapter. 

Sec. 171.903.  CREDIT FOR EXPENDITURE.  Authorizes a corporation to claim
a credit under this subchapter only for a qualifying expenditure relating
to the implementation of the corporation's community reinvestment plan.
Provides that a qualifying expenditure includes an expenditure of funds
described by Section 279.003, Finance Code. 

Sec. 171.904.  LIMITATION.  (a)  Prohibits the total credit claimed under
this subchapter for a period from exceeding 15 percent of the amount of
franchise tax due for the report after any other applicable tax credits. 

(b)  Authorizes a corporation to claim a credit under this subchapter for
a contribution made during an accounting period only against the tax owed
for the corresponding reporting period. 

Sec. 171.905.  APPLICATION FOR CREDIT.  (a)  Requires a corporation to
apply for a credit under this subchapter on or with the tax report for the
period for which the credit is claimed. 

(b)  Requires the comptroller to adopt a form for the application for the
credit. Requires a corporation to use this form in applying for the
credit. 

Sec. 171.906.  ASSIGNMENT PROHIBITED.  Prohibits a corporation from
conveying, assigning, or transferring the credit allowed under this
subchapter to another entity unless all of the assets of the corporation
are conveyed, assigned, or transferred in the same transaction. 

(c)  Provides that Chapter 171V, Tax Code, as added by this section,
applies only to a report due on or after January 1, 2004. 

(d)  Authorizes a corporation to claim a credit under Chapter 171V, Tax
Code, as added by this section, only for a qualified expenditure made on
or after January 1, 2004. 

(e)  Requires SFC, not later than November 1, 2003, to adopt rules under
Chapter 279, Finance Code, as added by this section. 

SECTION 3.  (a)  Amends Section 393.001, Finance Code, by amending
Subdivisions (1) and (3) and adding Subdivision (5), as follows: 

  (1)  Redefines "consumer."

  (3)  Redefines "credit services organization."  Makes conforming changes.

  (5)  Defines "office."

(b)  Amends Section 393.002, Finance Code, by amending Subsection (a) and
adding Subsection (c), as follows: 

  (a)  Creates an exception.  Deletes reference to Finance Code in
Subdivision (11). 
 
(c)  Provides that this chapter applies to any person, including a person
listed in Subsection (a), who enters into a valid debt-pooling contract
with a consumer under Chapter 394B. 
 (c)  Amends Sections 393.101(a), (c), and (d), Finance Code, as follows:
 
(a)  Requires a credit services organization to register with the Office
of Consumer Credit Commissioner (CCC), rather than the secretary of state
(SOS), by filing a statement that contains certain items. 
  
  (c)  Makes a conforming change.

  (d)  Makes a conforming change.

 (d)  Amends Section 393.104, Finance Code,  to make a conforming change.
.
 (e)  Amends Section 393.401(b), Finance Code, to make a conforming change.

 (f)  Amends Section 393.402(b), Finance Code, to make a conforming change.

 (g)  Amends Section 393.407, Finance Code, to make a conforming change.
 
(h)  Provides that on September 1, 2003, certain functions and activities
performed by the SOS are transferred to the CCC. 
 
SECTION 4.  (a)  Amends Title 5, Finance Code, by adding Chapter 397 as
follows: 

CHAPTER 397.  DISCLOSURE OF INFORMATION TO CONSUMERS IN
CERTAIN HOME LOAN CONTRACTS

SUBCHAPTER A.  GENERAL PROVISIONS
 
Sec. 397.001.  DEFINITIONS.  Defines "consumer reporting agency," "credit
score," "enterprise," "residential mortgage loan," and "residential real
property."  

[Reserves Sections 397.002-397.050 for expansion.]

SUBCHAPTER B.  CREDIT SCORE DISCLOSURE

Sec. 397.051.  APPLICABILITY OF SUBCHAPTER.  Provides that this subchapter
applies only to a person other than an enterprise who is engaged in the
business of making or arranging a residential mortgage loan and uses a
credit score in connection with an application initiated by a prospective
borrower. 

Sec. 397.052.  DISCLOSURE OF CREDIT SCORE AND OTHER INFORMATION.  (a)
Requires a lender, as soon as reasonably practicable, to  provide certain
information to a prospective borrower. 
  
(b)  Requires the notice required by Subsection (a)(2) to include the
name, address, and telephone number of each consumer reporting agency that
submitted the customer's credit score that was used by the lender to
comply with Subsection (a). 

(c)  Requires the lender to disclose to a prospective borrower any
numerical credit score that is generated by an automated underwriting
system used by an enterprise if that score is disclosed to the lender. 

 (d)  Requires a prospective borrower's credit score disclosed under
Subsection (a)(1)(B) to include any key factors, not to exceed four, that
may have adversely affected that credit score if the lender used another
credit score in its determination to make the loan to the borrower or uses
an automated underwriting system to underwrite the loan.  Defines "key
factors."  

Sec. 397.053.  EXEMPTION FROM DISCLOSURE REQUIREMENT.  Provides that the
lender is not required to provide the disclosure and other information
required by this chapter if the prospective borrower has received the same
information for that loan transaction from another person. 

Sec. 397.054.  DUTY OF PROSPECTIVE BORROWER.  Requires a prospective
borrower, at the time a loan transaction is initiated, to disclose to the
lender, at the lender's request, whether the borrower has received or is
in the process of receiving the disclosure and other information required
by this chapter from a consumer reporting agency or another person. 

Sec. 397.055.  DUTIES OF LENDER.  Provides that a lender is not required
to explain the information disclosed under Section 397.052(a)(1), disclose
a credit score or related information obtained by the lender after the
date on which the loan is closed or provide more than one disclosure for
each loan transaction. 

Sec. 397.056.  LIABILITY OF LENDER.  (a)  Prohibits a lender from being
held liable under this subchapter for the content of any information the
lender obtains from a consumer reporting agency or any other person about
a prospective borrower or the omission of any information from a credit
file provided by a consumer reporting agency to the lender or a
prospective borrower under this subchapter. 

(b)  Prohibits a lender from being held liable under a contractual
provision for disclosure of a credit score. 

Sec. 397.057.  WAIVER PROHIBITED.  Provides that a provision in a contract
that prohibits a lender from disclosing a credit score as required by this
subchapter is void. 

Sec. 397.058.  VIOLATION OF SUBCHAPTER.  Provides that a person who
violates this subchapter commits an offense.  Provides that an offense
under this section is a Class C misdemeanor. 

(b)  Amends Section 20.01, Business & Commerce Code, by adding Subdivision
(5-1) to define "credit score." 

(c)  Amends the heading to Section 20.03, Business & Commerce Code, to
read as follows: 

   Sec. 20.03.  DISCLOSURE OF CONSUMER FILE.

(d)  Amends Section 20.03, Business & Commerce Code, by adding Subsection
(d) to require a consumer reporting agency to provide to the consumer a
statement indicating that the consumer is entitled to receive a credit
score as provided by Section 20.035, if a consumer requests a consumer
file without requesting a consumer score.  

(e)  Amends Chapter 20, Business & Commerce Code, by adding Section 20.035
as follows: 

Sec. 20.035.  DISCLOSURE OF CREDIT SCORE.  (a)  Provides that this section
applies only to a consumer reporting agency that distributes a credit
score that is used in connection with a residential real property loan or
develops a credit score that assists a credit provider in evaluating a
consumer's general creditworthiness and predicting the consumer's future
credit  standing. 

(b)  Requires a consumer reporting agency, on request for a credit score
and presentation of proper identification provided by a consumer, to
provide certain information. 

(c)  Requires a consumer reporting agency, in complying with
Subsection(b)(1), to provide to the consumer a credit score that meets
certain criteria. 
  
(d)  Requires the information required by this section to be disclosed
within the same time and in the same manner as a consumer's credit file is
required to be disclosed under this chapter. 

(e)  Provides that a consumer reporting agency that distributes a credit
score developed by another person or entity is not required to provide a
further explanation of that score. Requires the agency to provide the
consumer with the name, the address, and any electronic mail address for
contacting the person or entity who developed the credit score or the
credit score's methodology. 

(f)  Prohibits this section from being construed to require a consumer
reporting agency to maintain a credit score in a consumer's credit file. 

  (g)  Defines "key factors."

(f)  Amends Section 20.04, Business & Commerce Code, by adding Subsection
(c) to authorize a consumer reporting agency to impose a reasonable charge
for the disclosure of a credit score.  Prohibits the amount of the charge
from exceeding the amount of a charge imposed under Subsection (a). 

SECTION 5.  (a)  Amends Subchapter B, Government Code, by adding Section
481.030,  as follows: 

Sec. 481.030.  REDISTRIBUTION OF CERTAIN COMMUNITY DEVELOPMENT OR
REINVESTMENT FUNDS.  (a)  Requires the Texas Department of Economic
Development (TDED), not earlier than the 90th day before the end of each
fiscal year, to determine the amount of each appropriation or other funds
of TDED intended for the administration of community reinvestment or
community development programs or activities that will remain unexpended
or unobligated at the end of the fiscal year. 

(b)  Requires TDED, before the end of the fiscal year, to distribute each
amount determined under Subsection (a), if any,  to a community
development center, community development financial institution, or other
similar entity that agrees to use the amount under the direction of the
department for any purpose for which the appropriation was made or the
funds were intended. 

(b)  Amends Chapter 2306E, Government Code, by adding Section 2306.101, as
follows: 
 
Sec. 2306.101.  REDISTRIBUTION OF CERTAIN COMMUNITY DEVELOPMENT OR
REINVESTMENT FUNDS.  (a)  Requires the Texas Department of Housing and
Community Affairs (TDHCA), not earlier than the 90th day before the end of
each fiscal year, to determine the amount of each appropriation or other
funds of TDHCA intended for the administration of community reinvestment
or community development programs or activities that will remain
unexpended or unobligated at the end of the fiscal year. 

(b)  Requires the TDHCA, before the end of the fiscal year, to distribute
each amount determined under Subsection (a), if any, to a community
development center,  community development financial institution, or other
similar entity that agrees to use the amount under the direction of TDHCA
for any purpose for which the appropriation was made or the funds were
intended. 

SECTION 6.  Amends Section 481.198, Government Code, as follows:
 
(a)  Requires TDHCA to aggressively promote the linked deposit program
established by this subchapter to eligible borrowers and financial
institutions that make commercial loans and are depositories of state
funds.  Requires TDHCA's  promotion efforts to be designed to maximize use
of the program. 

(a-1)  Requires TDHCA to provide information on the linked deposit program
in English and in Spanish on TDHCA's Internet website. 

(c)  Requires the report required by Subsection (b) to include any factors
identified by TDHCA that may inhibit the use of the linked deposit program
and any recommended action for increasing the use of the linked deposit
program. 

SECTION 7.  Amends Chapter 481BB, Government Code,  by adding Section
481.415, as follows: 

Sec. 481.415.  COMMUNITY INVESTMENT PROGRAM.  (a)  Defines "community
development financial institution," "community development
investment,""community development loan," and "eligible institution."  

(b)  Requires TDHCA, notwithstanding any other law, to establish a
community investment program in which TDHCA makes grants or interest-free
loans, using money in the fund, to eligible institutions that use the
money to make community development loans in distressed areas of the state
or to assist low-income areas by providing basic consumer financial
services. 

(c)  Requires TDHCA to determine the eligibility of an institution by
verifying that the institution meets the minimum selection criteria
described by 12 U.S.C. Section 4704, as amended.  Authorizes TDHCA to set
a limit on the number of eligible institutions that may participate in the
community investment program.  Requires an eligible institution, that
wants to participate in the community investment program, to enter into a
participation agreement with TDHCA that sets out the terms and conditions
under which TDHCA will make a grant or loan to the eligible institution. 
 
(d)  Authorizes TDHCA to make a grant to an institution or nonprofit
organization to assist the institution or organization to meet the minimum
selection criteria described by 12 U.S.C. Section 4704, as amended, or to
otherwise obtain assistance under 12 U.S.C. Section 4701 et seq., as
amended and become an eligible institution and participate in the
community investment program. 

(e)  Authorizes TDHCA to make a grant to a nonprofit organization TDHCA
determines is performing activities consistent with the goals of this
section to provide the organization operating support, technical
assistance, and training assistance. 

(f)  Requires TDHCA to adopt rules relating to the implementation of the
community investment program and any other rules necessary to accomplish
the purposes of this section. 

(g)  Authorizes an eligible institution to file a grant or loan
application with TDHCA. Requires the application to be in a form approved
by TDHCA and include a plan of investment that includes the type and
number of community development loans or  investments that the institution
plans to make using money from the community investment program.  Requires
TDHCA to act on a completed application not later than the 30th day after
the date on which the application is filed with TDHCA. 

(h)  Provides that all income received on a loan or investment made with
money received under the community investment program is the property of
the eligible institution that makes the loan or investment. 

(i)  Requires the eligible institution to submit a report to TDHCA that
states in detail the status of each investment or loan made under the
community investment program, not later than the 30th day after the
expiration of each six-month period for which there is a participation
agreement in effect between TDHCA and an eligible institution.  Requires
the report to be in a form prescribed by TDHCA and must contain all
information required by TDHCA as part of the institution's participation
agreement. 

(j)  Requires the participation agreement between the eligible institution
and TDHCA to provide for an annual audit.  Requires TDHCA to adopt rules
relating to the format of the audit, including rules allowing not more
than $5,000 of the amount received by the eligible institution under the
community investment program to be used to finance the audit. 

SECTION 8.  (a)  Amends Chapter 531B, Government Code,  by adding Section
531.063  as follows: 

Sec. 531.063.  ELIGIBILITY FOR PUBLIC ASSISTANCE: EXCLUSION OF CERTAIN
INCOME AND RESOURCES.  (a)  Defines "individual development account." 

(b)  Prohibits, to the extent authorized by federal law, the Health and
Human Services Commission (HHS) and each health and human services agency
from considering money contributed to an individual development account
established for a recipient of public assistance benefits as income or the
balance of the account as a resource in determining whether the recipient
meets household income and resource requirements for eligibility for
public assistance benefits. 

(c)  Provides that this section applies to an individual development
account established for certain low-income individuals under the pilot
program required by Section 301.068, Labor Code. 

(b)  Requires an agency affected by the provision, if before implementing
any provision of Section 531.063, Government Code, as added by this
section, it determines that a waiver or authorization from a federal
agency is necessary for implementation of that provision,  to request the
waiver or authorization and authorizes an agency to delay implementing
that provision until the waiver or authorization is granted. 
 
(c)  Provides that Section 531.063, Government Code, as added by this
section, applies to a person receiving public assistance benefits on or
after that date, regardless of the date on which eligibility for those
benefits was determined. 

SECTION 9.  (a)  Amends Chapter 1372B, Government Code,  by adding Section
1372.0262 as follows: 

Sec. 1372.0262.  RECOMMENDED ALLOCATION FOR HOUSING FINANCE CORPORATIONS.
(a)  Defines "economic submarket" and "geographic submarket."  

(b)  Requires a housing finance corporation to attempt to allocate not
less than 40  percent of its total single-family mortgage revenue bond
loan volume to meet the credit needs of borrowers in underserved economic
and geographic submarkets in the state, as indicated by the market study
results provided to the Bond Review Board under Section 2306.142, in the
state fiscal year beginning on September 1, 2004, and in each subsequent
state fiscal year. 

(c)  Requires the housing finance corporation to annually report to the
Bond Review Board and to TDHCA on the extent to which the corporation
achieves the goals of this section in a state fiscal year.  Requires the
corporation to include in its report the reasons why the loan volume was
not allocated as recommended by this section, including reasons regarding
unfeasibility, adverse financial effect, and low market volume demand, if
applicable, if, in any state fiscal year, the housing finance corporation
fails to achieve the goals of this section.  

(b)  Amends Section 394.027(b), Local Government Code, to include
additional information required in the report.  Makes conforming changes. 

SECTION 10.  (a)  Amends Articles 4.74(a), (c), and (d), Insurance Code,
as follows: 

(a)  Authorizes the comptroller, notwithstanding any other provision of
this subchapter, to implement this subchapter only if the comptroller
determines, on the basis of a revenue estimate made under this article,
that revenues are anticipated in amounts sufficient to finance all
appropriations made by the legislature, after making deductions for all
reductions in taxes, including the reduction in premium tax through
premium tax credits authorized under this subchapter.  Requires the
comptroller, until the comptroller implements this subchapter as required
by this article, to review the revenue estimate as required by this
subsection after adjournment sine die of each legislative session during
which the legislature enacts a General Appropriations Act that becomes
law. 

(c)  Requires the comptroller, on a determination by the comptroller to
implement this subchapter under Subsection (a) or (b) of this article, to
specify a date, not later than the 90th day after the date of adjournment
sine die of the appropriate legislative session, as the implementation
date. Makes nonsubstantive changes. 

(d)  Requires the comptroller, after each legislative session during which
the legislature enacts a General Appropriations Act that becomes law, to
notify the governor, lieutenant governor, and speaker of the house of
representatives of the determination made under this article. 

(b)  Amends Article 4.52, Insurance Code, to require the comptroller to
adopt rules and forms as necessary to implement this subchapter not later
than the 90th day after the implementation date established under Article
4.74 of this code. 

(c)  Amends article 4.53, Insurance Code, by adding Subsection (f), to
require the comptroller to begin accepting applications for certification
under this article not later than the 120th day after the implementation
date established under article 4.74 of this code. 

(d)  Amends Article 4.65, Insurance Code, by adding Subsection (d) to
prohibit a  certified investor from making an investment with a certified
capital company before the 225th day after the implementation date after
the implementation date established under Article 4.74 of this code. 

(e)  Amends Article 4.66(a), Insurance Code, to change the date by which a
certified capital company is required to file a claim with the comptroller
from February 15, 2002, to the 225th day after the implementation date
established under Article 4.74 of this code. 
 
(f)  Amends Article 4.68(c), Insurance Code, to change the date by which
the comptroller is required to notify each certified capital company of
tax credits allocated to investors, from March 1, 2002, to the 240th day
after the implementation date established under Article 4.74 of this code. 

(g)  Amends Article 4.73(a), Insurance Code, to require the comptroller to
prepare a report after implementation of this subchapter under Article
4.74 of this code and to make a change in a date in the required  report. 

SECTION 11.  (a)  Requires the comptroller to conduct a study of the
availability of venture capital in this state and to compare the
availability of venture capital in this state to its availability in the
other states.  Authorizes the comptroller to recommend actions that the
legislature may take to improve the availability of venture capital in
this state. 

(b)  Requires the comptroller, before November 1, 2005, to report the
comptroller's findings of the study conducted under Section 11(a) of this
Act to the speaker of the house of representatives, the lieutenant
governor, and the presiding officers of the senate business and commerce
and house business and industry committees. 

SECTION 12.  Effective date:  September 1, 2003.