79R5727 DWS-F
By: Solomons H.B. No. 955
Substitute the following for H.B. No. 955:
By: Solomons C.S.H.B. No. 955
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of financial businesses and practices;
providing civil penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. CONSUMER PROTECTION
SECTION 1.01. Subtitle A, Title 4, Finance Code, is amended
by adding Chapter 308 to read as follows:
CHAPTER 308. CONSUMER CREDIT PROTECTIONS
Sec. 308.001. APPLICABILITY. This chapter applies to a
person regularly engaged in the business of extending credit under
this subtitle primarily for personal, family, or household use and
not for a business, commercial, investment, or agricultural
purpose. This chapter does not apply to a transaction primarily for
a business, commercial, investment, or agricultural purpose.
Sec. 308.002. FALSE, MISLEADING, OR DECEPTIVE ADVERTISING.
(a) A creditor may not, in any manner, advertise or cause to be
advertised a false, misleading, or deceptive statement or
representation relating to a rate, term, or condition of a credit
transaction or advertise credit terms that the person does not
intend to offer to consumers who qualify for those terms.
(b) This section does not create a private right of action.
(c) In interpreting this section, an administrative agency
or a court shall be guided by the applicable advertising provisions
of:
(1) Part C of 15 U.S.C. Chapter 41 Subchapter I (15
U.S.C. Section 1601 et seq.);
(2) 12 C.F.R. Part 226.1 et seq. adopted by the Board
of Governors of the Federal Reserve System; and
(3) the Official Staff Commentary and other
interpretations of that statute and regulation by the Board of
Governors of the Federal Reserve System and its staff.
(d) If a requirement of this section and a requirement of a
federal law, including a regulation or an interpretation of federal
law, are inconsistent or in conflict, federal law controls and the
inconsistent or conflicting requirements of this chapter do not
apply.
(e) A creditor who complies with the Truth in Lending Act
(15 U.S.C. Section 1601 et seq.) and Federal Reserve Regulation Z
(12 C.F.R. Part 226) in advertising a credit transaction is
considered to have fully complied with this section.
Sec. 308.003. NO DOUBLE LIABILITY OR ENFORCEMENT FOR SAME
ACT OR PRACTICE. A judgment, consent decree, assurance of
compliance, or other resolution of a claimed violation asserted by
a federal agency under the Consumer Credit Protection Act (15
U.S.C. Section 1601 et seq.) bars a subsequent action or other
enforcement under this chapter with respect to the same act or
practice.
SECTION 1.02. Section 341.402(c), Finance Code, is amended
to read as follows:
(c) In addition to the other liabilities prescribed by this
section, a person holding a license issued under this subtitle
[that is held by a person] who violates Section 341.401 is subject
to revocation or suspension of the license or the assessment of
civil penalties by the commissioner.
SECTION 1.03. Section 341.403(a), Finance Code, is amended
to read as follows:
(a) A person may not, in any manner, advertise or cause to be
advertised a false, misleading, or deceptive statement or
representation relating to a rate, term, or condition of a credit
transaction, including a loan, regulated under this subtitle,
Subtitle C, or Chapter 394, or advertise credit terms that the
person does not intend to offer to consumers who qualify for those
terms.
SECTION 1.04. Subtitle B, Title 4, Finance Code, is amended
by adding Chapter 350 to read as follows:
CHAPTER 350. REQUIREMENTS AND LIMITATIONS APPLICABLE TO CONSUMER
CREDITORS NOT LICENSED OR REGISTERED UNDER THIS TITLE
Sec. 350.001. APPLICABILITY. (a) This chapter applies to a
person who extends credit primarily for personal, family, or
household use and not for a business, commercial, investment, or
agricultural purpose. For the purposes of this chapter, credit
means the right granted to a debtor to defer payment of debt or to
incur debt and defer its payment. A creditor is subject to this
chapter if the creditor charges a finance charge or extends credit
payable in one or more installments.
(b) This chapter does not apply to a person who is:
(1) licensed or registered under Title 3 or 4; or
(2) exempt from licensing or registration under this
title.
Sec. 350.002. PREVENTION OF EVASION. A person may not use
any device, subterfuge, or pretense to evade the application of
this section.
Sec. 350.003. COMPLIANCE WITH FAIR TRADE PRACTICES ACT. A
creditor who is not licensed, registered, or otherwise exempt under
this title must comply with the requirements of 15 U.S.C. Section
45. An enforcement action to compel compliance under this section
may include an action to enjoin illegal activities or order
restitution.
Sec. 350.004. PENALTIES. Chapter 349 applies to violations
of this chapter and the rules adopted under this chapter.
ARTICLE 2. USURY REFORM
SECTION 2.01. Section 301.002(4), Finance Code, is amended
to read as follows:
(4) "Interest" means compensation for the use,
forbearance, or detention of money. The term does not include time
price differential, regardless of how it is denominated. The term
does not include compensation or other amounts that are determined
or stated by this code or other applicable law not to constitute
interest or that are permitted to be contracted for, charged, or
received in addition to interest in connection with an extension of
credit.
SECTION 2.02. Sections 303.009(a)-(d), Finance Code, are
amended to read as follows:
(a) If [Except as provided by Subsection (e), if] the rate
computed for the weekly, monthly, quarterly, or annualized ceiling
is less than 18 percent a year, the ceiling is 18 percent a year.
(b) Except as provided by Subsection (c), [(d), or (e),] if
the rate computed for the weekly, monthly, quarterly, or annualized
ceiling is more than 24 percent a year, the ceiling is 24 percent a
year.
(c) For a contract made, extended, or renewed under which
credit is extended for a business, commercial, investment, or
similar purpose, [and the amount of the credit extension is
$250,000 or more, the 24-percent limitation on the ceilings in
Subsection (b) does not apply, and] the limitation on the ceilings
determined by those computations is 28 percent a year.
(d) For an open-end account credit agreement that provides
for credit card transactions on which a merchant discount is not
imposed or received by the creditor, [if the rate computed for the
weekly ceiling, monthly ceiling, quarterly ceiling, or annualized
ceiling is more than 21 percent a year,] the ceiling is 21 percent a
year.
SECTION 2.03. Subchapter A, Chapter 303, Finance Code, is
amended by adding Section 303.017 to read as follows:
Sec. 303.017. VARIOUS CHARGES ON CONSUMER LOANS MADE BY
PARTICULAR LENDERS. Notwithstanding Section 342.005, a bank,
savings association, savings bank, or credit union making a loan
primarily for personal, family, or household use under authority of
this chapter may charge all reasonable expenses and fees incurred
in connection with making, closing, disbursing, extending,
readjusting, or renewing a loan, regardless of whether those
expenses or fees are paid to third parties. Those reasonable
expenses and fees paid to third parties are not interest.
SECTION 2.04. Section 303.201, Finance Code, is amended to
read as follows:
Sec. 303.201. LICENSE REQUIRED. A person engaged in the
business of making loans for personal, family, or household use for
which the rate is authorized under this chapter must obtain a
license under Chapter 342 unless the person is not required to
obtain a license under Section 342.051.
SECTION 2.05. Section 305.001, Finance Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) A creditor who contracts for, charges, or receives
interest that is greater than the amount authorized by this
subtitle in connection with a transaction for personal, family, or
household use is liable to the obligor for an amount that is equal
to the greater of:
(1) three times the amount computed by subtracting the
amount of interest allowed by law from the total amount of interest
contracted for, charged, or received; or
(2) $2,000 or 20 percent of the amount of the
principal, whichever is less.
(a-1) A creditor who contracts for or receives interest that
is greater than the amount authorized by this subtitle in
connection with a commercial transaction is liable to the obligor
for an amount that is equal to three times the amount computed by
subtracting the amount of interest allowed by law from the total
amount of interest contracted for or received.
SECTION 2.06. Section 305.002(b), Finance Code, is amended
to read as follows:
(b) This section applies only to a contract or transaction
for personal, family, or household use subject to this subtitle.
SECTION 2.07. Sections 305.006(b) and (d), Finance Code,
are amended to read as follows:
(b) Not later than the 61st day before the date an obligor
files a suit seeking penalties for a transaction in which a creditor
has contracted for, [or] charged, or received usurious interest,
the obligor shall give the creditor written notice stating in
reasonable detail the nature and amount of the violation.
(d) With respect to [The notice requirement of Subsection
(b) does not apply to] a defendant filing a counterclaim action
alleging usurious interest in an original action by the creditor,
the defendant shall provide notice complying with Subsection (b) at
the time of filing the counterclaim and, on application to the
court, the action is subject to abatement for a period of 60 days
from the date of the court order. During the abatement period the
creditor may correct a violation. As part of the correction of the
violation, the creditor shall offer to pay the obligor's reasonable
attorney's fees as determined by the court based on the hours
reasonably expended by the obligor's counsel with regard to the
alleged violation before the abatement. A creditor who corrects a
violation as provided by this subsection is not liable to an obligor
for the violation.
SECTION 2.08. Sections 306.001(2) and (8), Finance Code,
are amended to read as follows:
(2) "Affiliate of an obligor" means a person who
directly or indirectly, or through one or more intermediaries or
other entities, owns an interest in, controls, is controlled by, or
is under common control with the obligor, or a person in which the
obligor directly or indirectly, or through one or more
intermediaries or other entities, owns an interest. In this
subdivision "control" means the possession, directly or
indirectly, or with one or more other persons, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise.
(8) "Prepayment premium [penalty]" means compensation
paid by or that is or will become due from an obligor to a creditor
solely as a result or condition of the payment or maturity of all or
a portion of the principal amount of a loan before its stated
maturity or a regularly scheduled date of payment, as a result of
the obligor's election to pay all or a portion of the principal
amount before its stated maturity or a regularly scheduled date of
payment.
SECTION 2.09. Section 306.001, Finance Code, is amended by
adding Subdivision (5-a) and amending Subdivision (9) to read as
follows:
(5-a) "Exempt commercial loan" means a commercial loan
in which one or more persons as part of the same transaction lends,
advances, borrows, or receives, or is obligated to lend or advance
or entitled to borrow or receive, money or credit with an aggregate
value of:
(A) $7 million or more if the commercial loan is
primarily secured by real property; or
(B) $500,000 or more if the commercial loan is
not primarily secured by real property.
(9) "Qualified commercial loan":
(A) means:
(i) a commercial loan in which one or more
persons as part of the same transaction lends, advances, borrows,
or receives, or is obligated to lend or advance or entitled to
borrow or receive, money or credit with an aggregate value of:
(a) $1 [$3] million or more but less
than $7 million if the commercial loan is primarily secured by real
property; or
(b) $100,000 [$250,000] or more but
less than $500,000 if the commercial loan is not primarily secured
by real property and[, if the aggregate value of the commercial loan
is less than $500,000,] the loan documents contain a written
verification from the borrower that:
(1) the borrower has been
advised by the lender to seek the advice of an attorney and an
accountant in connection with the commercial loan; and
(2) the borrower has had the
opportunity to seek the advice of an attorney and accountant of the
borrower's choice in connection with the commercial loan; and
(ii) a renewal or extension of a commercial
loan described by this paragraph [Paragraph (A)], regardless of the
principal amount of the loan at the time of the renewal or
extension; and
(B) does not include a commercial loan made for
the purpose of financing a business licensed by the Motor Vehicle
Board of the Texas Department of Transportation under Section
2301.251(a), Occupations Code.
SECTION 2.10. Section 306.002, Finance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) Except as provided by Section 306.1015, a [A] creditor
may contract for, charge, and receive from an obligor on a
commercial loan a rate or amount of interest that does not exceed
the applicable ceilings computed in accordance with Chapter 303.
(c) This chapter does not affect transactions that are not
subject to this chapter or affect or negatively impact any rule of
law applicable to transactions not subject to this chapter.
SECTION 2.11. Subchapter B, Chapter 306, Finance Code, is
amended by adding Section 306.1015 to read as follows:
Sec. 306.1015. EXEMPT COMMERCIAL LOAN--RATE CEILINGS
INAPPLICABLE. (a) The parties to an exempt commercial loan
agreement may contract for, charge, and receive any rate or amount
of interest to which the parties agree, however computed.
(b) A rate ceiling provided by this title or another law of
this state does not apply to an exempt commercial loan.
SECTION 2.12. Section 306.005, Finance Code, is amended to
read as follows:
Sec. 306.005. PREPAYMENT PREMIUMS AND SIMILAR AMOUNTS
[PENALTY]. With respect to a loan subject to this chapter, a [A]
creditor and an obligor may agree to a prepayment premium,
make-whole premium, or similar fee or charge, whether payable in
the event of voluntary prepayment, involuntary prepayment,
acceleration of maturity, or other cause that involves premature
termination of the loan, and those amounts do not constitute
interest [penalty in a loan subject to this chapter. A prepayment
penalty is not interest].
SECTION 2.13. Section 306.006, Finance Code, is amended to
read as follows:
Sec. 306.006. CERTAIN AUTHORIZED CHARGES ON COMMERCIAL
LOANS. In addition to the interest authorized by this chapter, the
parties to a commercial loan may agree and stipulate for:
(1) a delinquency charge on the amount of any
installment or other amount in default for a period of not less than
10 days in an [a reasonable] amount not to exceed five percent of
the total amount of the installment; and
(2) a returned check fee in an amount that does not
[to] exceed the maximum fee authorized in Section 3.506, Business &
Commerce Code, [$25] on any check, draft, order, or other
instrument or form of remittance that is returned unpaid or
dishonored for any reason.
SECTION 2.14. Subchapter A, Chapter 306, Finance Code, is
amended by adding Section 306.007 to read as follows:
Sec. 306.007. GUARANTY, ASSUMPTION, PAYMENT, OR OTHER
AGREEMENT. With respect to a commercial loan, an obligor may be
required to assume, pay, or provide a guaranty of another person's
existing or future obligation as a condition of the obligor's own
use, forbearance, or detention of money. The amount of the other
person's obligation required to be assumed, paid, or guaranteed
does not constitute interest with respect to any obligation of the
obligor.
SECTION 2.15. Section 345.104(a), Finance Code, is amended
to read as follows:
(a) As an alternative to the maximum rate or amount
authorized for a time price differential under Section 345.103, a
retail charge agreement may provide for a rate or amount of time
price differential that does not exceed[:
[(1)] the rate or amount authorized by Chapter 303[;
or
[(2) the rate or amount of the applicable market
competitive rate ceiling published under Subchapter D].
SECTION 2.16. Section 346.004, Finance Code, is amended to
read as follows:
Sec. 346.004. APPLICATION OF CHAPTER TO REVOLVING CREDIT
ACCOUNTS. (a) Unless the contract for the account provides
otherwise, this chapter applies to a revolving credit account
described by Section 346.003 if the loan or extension of credit is
primarily for personal, family, or household use.
(b) Unless the contract for account provides that this
chapter applies [otherwise], this chapter does not apply [applies]
to a revolving credit account described by Section 346.003 if
[regardless of whether] the loan or extension of credit is for
[consumer or] business, commercial, investment, or similar
purposes.
SECTION 2.17. Subchapter A, Chapter 347, Finance Code, is
amended by adding Section 347.007 to read as follows:
Sec. 347.007. APPLICATION OF CHAPTER TO COMMERCIAL LOANS.
This chapter does not apply to a credit transaction that is entered
into primarily for commercial or business purposes.
SECTION 2.18. Section 348.001, Finance Code, is amended by
amending Subdivision (4) and adding Subdivisions (3-a) and (10-a)
to read as follows:
(3-a) "Motor home" means a motor vehicle that is
designed to provide temporary living quarters and that:
(A) is built on a motor vehicle chassis as an
integral part of or a permanent attachment to the chassis; and
(B) contains at least four of the following
independent life support systems that are permanently installed and
designed to be removed only for repair or replacement and that meet
the standards of the American National Standards Institute,
Standards for Recreational Vehicles:
(i) a cooking facility with an on-board
fuel source;
(ii) a gas or electric refrigerator;
(iii) a toilet with exterior evacuation;
(iv) a heating or air-conditioning system
with an on-board power or fuel source separate from the vehicle
engine;
(v) a potable water supply system that
includes at least a sink, a faucet, and a water tank with an
exterior service supply connection; or
(vi) a 110-125 volt electric power supply.
(4) "Motor vehicle" means an automobile, motor
[mobile] home, truck, truck tractor, trailer, semitrailer, or bus
designed and used primarily to transport persons or property on a
highway. The term includes a commercial vehicle or heavy
commercial vehicle. The term does not include:
(A) a boat trailer;
(B) a vehicle propelled or drawn exclusively by
muscular power;
(C) a vehicle that is designed to run only on
rails or tracks; or
(D) machinery that is not designed primarily for
highway transportation but may incidentally transport persons or
property on a public highway.
(10-a) "Towable recreation vehicle" means a
nonmotorized vehicle that:
(A) was originally designed and manufactured
primarily to provide temporary human habitation in conjunction with
recreational, camping, or seasonal use;
(B) is titled and registered with the Texas
Department of Transportation as a travel trailer through a county
tax assessor-collector;
(C) is permanently built on a single chassis;
(D) contains at least one life support system;
and
(E) is designed to be towable by a motor vehicle.
SECTION 2.19. Section 348.007, Finance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) A transaction in which a retail buyer purchases a
towable recreation vehicle from a retail seller other than
principally for the purpose of resale and agrees with the retail
seller to pay part or all of the cash price in one or more deferred
installments may be subject to this chapter instead of Chapter 345
at the option of the seller.
ARTICLE 3. TEXAS SAVINGS AND MORTGAGE LENDING DEPARTMENT
SECTION 3.01. The legislature finds that:
(1) the Savings and Loan Department regulates
state-chartered savings and loan institutions, savings banks,
licensed mortgage brokers, and loan officers and registers mortgage
bankers;
(2) there is one state-chartered savings and loan
institution that has not converted to a state-chartered savings
bank or other form of institution; and
(3) the department's name no longer fits the
activities and regulatory responsibilities of the department, and
does not provide sufficient clarity of its functions to the public.
SECTION 3.02. Chapter 13, Finance Code, is amended by
adding Section 13.0015 to read as follows:
Sec. 13.0015. NAME CHANGES. (a) The Savings and Loan
Department is renamed the Department of Savings and Mortgage
Lending and the savings and loan commissioner is renamed the
savings and mortgage lending commissioner.
(b) A reference in a statute or rule to the Savings and Loan
Department means the Department of Savings and Mortgage Lending.
(c) A reference in a statute or rule to the savings and loan
commissioner means the savings and mortgage lending commissioner.
SECTION 3.03. Section 13.008(a), Finance Code, is amended
to read as follows:
(a) The finance commission shall establish reasonable and
necessary fees for the administration of Subtitles B and C, Title 3,
and Chapters 156 and 157, and for the support of the finance
commission as provided by Subchapter C, Chapter 11. In
establishing the reasonable and necessary fees for the
administration of Chapters 156 and 157, the commissioner and the
finance commission may not exceed the limit on the fees set forth in
those chapters.
SECTION 3.04. Section 119.201(a), Finance Code, is amended
to read as follows:
(a) The commissioner may require a savings bank that
knowingly violates this subtitle or a rule adopted under this
subtitle to pay to the department [Savings and Loan Department] an
administrative penalty not to exceed $10,000 [$1,000] for each day
that the violation occurs after notice of the violation is given by
the commissioner.
SECTION 3.05. The savings and mortgage lending commissioner
shall study the desirability and feasibility of developing
alternative thrift charters, including special purpose charters,
and shall issue a report, including findings and legislative
recommendations, to the legislature not later than December 31,
2006.
ARTICLE 4. CONSUMER CREDIT COMMISSIONER
SECTION 4.01. Section 14.208, Finance Code, is amended to
read as follows:
Sec. 14.208. INJUNCTION; APPEAL. (a) If the commissioner
has reasonable cause to believe that a person is violating a statute
to which this chapter applies, the commissioner, in addition to any
other authorized action, may issue an order [the person] to cease
and desist [refrain] from the violation or an order to take
affirmative action, or both, to enforce compliance. A person may
appeal the order to the finance commission as provided by
Subsection (d) or directly to district court in accordance with
Chapter 2001, Government Code.
(b) If a person against whom an order under this section is
made requests a hearing not later than the 30th day after the date
the order is served, the commissioner shall set and give notice of a
hearing before a hearings officer. The hearing is governed by
Chapter 2001, Government Code. Based on the findings of fact,
conclusions of law, and recommendations of the commissioner or
hearings officer, the commissioner by order may find whether a
violation has occurred.
(c) If a hearing is not timely requested under Subsection
(b), the order is considered final and becomes enforceable. The
commissioner, after giving notice, may impose against a person who
violates a cease and desist order an administrative penalty in an
amount not to exceed $1,000 for each day of violation. In addition
to any other remedy provided by law, the commissioner on relation of
the attorney general may institute in district court a suit for
injunctive relief and to collect an administrative penalty. A bond
is not required of the commissioner with respect to injunctive
relief granted under this section. [The commissioner, on relation
of the attorney general at the request of the commissioner, may also
bring an action in district court to enjoin the person from engaging
in or continuing the violation or doing an act that furthers the
violation.] In the action, the court may enter as proper an order
awarding a preliminary or final injunction.
(d) If a party seeks review of the order by the finance
commission, the party shall file a petition for review with the
finance commission not later than the 30th day after the date of the
issuance of the commissioner's decision. The finance commission
may affirm, vacate, or modify an order issued by the commissioner.
A party aggrieved by a final decision of the finance commission is
entitled to judicial review. The party may appeal the decision of
the finance commission by the filing of a motion for rehearing with
the finance commission and then filing a petition initiating
judicial review.
SECTION 4.02. The heading to Subchapter F, Chapter 14,
Finance Code, is amended to read as follows:
SUBCHAPTER F. ADMINISTRATIVE PENALTY; RESTITUTION ORDER;
ASSURANCE OF VOLUNTARY COMPLIANCE
SECTION 4.03. Section 14.252(b), Finance Code, is amended
to read as follows:
(b) The aggregate amount of penalties under this subchapter
that the commissioner may assess against a person during one
calendar year may not exceed the lesser of:
(1) $100,000 [$50,000]; or
(2) an amount that is equal to the greater of five
percent of the net worth of the creditor or $5,000 [for each
business location at which an element of a violation occurred].
SECTION 4.04. Section 14.258, Finance Code, is amended to
read as follows:
Sec. 14.258. STAY OF PENALTY; SUIT BY ATTORNEY GENERAL
[COURT ORDERS]. (a) The enforcement of the penalty may be stayed
during the time the order is under judicial review if the person
pays the penalty to the clerk of the court or files a supersedeas
bond with the court in the amount of the penalty. A person who
cannot afford to pay the penalty or file the bond may stay the
enforcement by filing an affidavit in the manner required by the
Texas Rules of Civil Procedure for a party who cannot afford to file
security for costs, subject to the right of the commissioner to
contest the affidavit as provided by those rules.
(b) The attorney general may sue to collect the penalty.
(c) A court that sustains the occurrence of a violation may
uphold or reduce the amount of the administrative penalty and order
the person to pay that amount.
(d) [(b)] A court that does not sustain the occurrence of a
violation shall order that no penalty is owed.
(e) [(c)] If a person has paid a penalty and a court in a
final judgment reduces or does not uphold the amount, the court
shall order that the appropriate amount plus accrued interest be
remitted to the person. The interest rate is the rate authorized by
Chapter 304, and interest shall be paid for the period beginning on
the date the penalty was paid and ending on the date the penalty is
remitted.
SECTION 4.05. Subchapter F, Chapter 14, Finance Code, is
amended by adding Sections 14.261-14.264 to read as follows:
Sec. 14.261. ACCEPTANCE OF ASSURANCE. (a) In
administering this chapter, the commissioner may accept assurance
of voluntary compliance from a person who is engaging in or has
engaged in an act or practice in violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
(b) The assurance must be in writing and be filed with the
commissioner.
(c) The commissioner may condition acceptance of an
assurance of voluntary compliance on the stipulation that the
person offering the assurance restore to a person in interest money
that may have been acquired by the act or practice described by
Subsection (a).
(d) The finance commission may adopt rules to establish the
form of the assurance or require certain information be contained
in an assurance.
Sec. 14.262. EFFECT OF ASSURANCE. (a) An assurance of
voluntary compliance is not an admission of a violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
(b) Unless an assurance of voluntary compliance is
rescinded by agreement or voided by a court for good cause, a
subsequent failure to comply with the assurance is prima facie
evidence of a violation of:
(1) this chapter or a rule adopted under this chapter;
(2) Chapter 394; or
(3) Subtitle B, Title 4, or a rule adopted under
Subtitle B, Title 4.
Sec. 14.263. REOPENING. A matter closed by the filing of an
assurance of voluntary compliance may be reopened at any time.
Sec. 14.264. RIGHT TO BRING ACTION NOT AFFECTED. (a) An
assurance of voluntary compliance does not affect the right of an
individual to bring an action, except as provided in Chapter 349 and
except that the right of an individual in relation to money received
according to a stipulation under Section 14.261(c) is governed by
the terms of the assurance.
(b) A person entering into an assurance of voluntary
compliance may, not later than the 60th day after the date of filing
of the assurance, correct the violation under Section 349.201.
Amounts paid as restitution and other acts taken in accordance with
an assurance of voluntary compliance shall be considered for
purposes of determining whether the obligor has made a correction
under Section 349.201, 349.202, or 349.203. With respect to
corrections of violations or possible violations relating to
matters addressed in the assurance of voluntary compliance, the
date of filing of the assurance is considered to be the date of:
(1) actual discovery of the violation or possible
violation;
(2) written notice; and
(3) filing of the action alleging the violation.
SECTION 4.06. Section 371.303(b), Finance Code, is amended
to read as follows:
(b) The commissioner may assess the administrative penalty
in an amount[:
[(1) equal to the average profit made by the pawnshop
on a business day in the six months before the date the violation
occurred, not to exceed $1,000; or
[(2) for a violation of Section 371.304,] not to
exceed $1,000.
SECTION 4.07. Subchapter B, Chapter 349, Finance Code, is
amended by adding Section 349.103 to read as follows:
Sec. 349.103. LIMITATION ON MULTIPLE RECOVERY OF PENALTIES.
(a) An administrative penalty, fine, settlement, or assurance of
voluntary compliance under this title or federal law that is
assessed by or agreed to with an administrative agency or the
attorney general shall be considered and applied as a bar or credit
to recovery of further fines, penalties, or enhanced damages for
substantially the same act, practice, or violation in a suit or
other proceeding brought by a private litigant under this title,
the Business & Commerce Code, or other applicable law of this state.
This section does not apply to a claim for restitution for
unreimbursed actual damages.
(b) A suit or other proceeding by a private litigant does
not affect or restrict any state or federal agency from pursuing a
person for any administrative remedy, including an administrative
penalty. An administrative agency of this state, however, shall
consider as a mitigating factor any relief recovered in a private
suit or proceeding when the agency determines an administrative
remedy.
ARTICLE 5. SAVINGS BANKS AND LIMITED SAVINGS BANKS
SECTION 5.01. Section 91.002, Finance Code, is amended by
amending Subdivisions (2) and (18) and adding Subdivision (16-a) to
read as follows:
(2) "Board" means the board of directors of a savings
bank or the managers of a savings bank organized as a limited
savings bank.
(16-a) "Limited savings bank" means a savings bank
electing to be organized as a limited liability company under this
subtitle.
(18) "Member" means:
(A) [,] with respect to a mutual savings bank, a
person:
(i) [(A)] holding an account with the
mutual savings bank;
(ii) [(B)] assuming or obligated on a loan
in which the mutual savings bank has an interest; or
(iii) [(C)] owning property that secures a
loan in which the mutual savings bank has an interest; or
(B) with respect to a savings bank organized as a
limited savings bank, a person who owns a membership interest in the
limited savings bank.
SECTION 5.02. Section 92.001, Finance Code, is amended to
read as follows:
Sec. 92.001. APPLICABILITY OF OTHER LAW. (a) With respect
to a savings bank, other than a savings bank organized as a limited
savings bank, organized before January 1, 2006, the [The] Texas
Business Corporation Act, the Texas Miscellaneous Corporation Laws
Act (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes), and
other law relating to general business corporations apply to a
savings bank to the extent not inconsistent with this subtitle or
the proper business of a savings bank.
(b) With respect to a savings bank organized as a limited
savings bank before January 1, 2006, the Texas Limited Liability
Company Act (Article 1528n, Vernon's Texas Civil Statutes) and any
other law relating to a limited liability company organized in
Texas apply to a limited savings bank to the extent not inconsistent
with this subtitle or the proper business of a limited savings bank.
(c) With respect to a savings bank, other than a savings
bank organized as a limited savings bank, organized on or after
January 1, 2006, the provisions of the Business Organizations Code
applicable to general business corporations apply to a savings bank
to the extent not inconsistent with this subtitle or the proper
business of a savings bank.
(d) With respect to a savings bank organized as a limited
savings bank on or after January 1, 2006, the provisions of the
Business Organizations Code applicable to a limited liability
company organized in this state apply to a limited savings bank to
the extent not inconsistent with this subtitle or the proper
business of a limited savings bank.
(e) With respect to a savings bank or limited savings bank
organized before January 1, 2006, the finance commission may
establish rules permitting a savings bank or limited savings bank
to elect to be governed by the provisions of the Business
Organizations Code to the extent not inconsistent with this
subtitle or the proper business of a savings bank or limited savings
bank.
SECTION 5.03. Section 92.101, Finance Code, is amended to
read as follows:
Sec. 92.101. PURPOSE OF INCORPORATION. A person may apply
to incorporate a savings bank for the purpose of:
(1) purchasing the assets, assuming the liabilities
other than liability to shareholders, and continuing the business
of a financial institution the commissioner considers to be in an
unsafe condition; [or]
(2) acquiring an existing financial institution by
merger; or
(3) facilitating a reorganization or merger with or
into a savings bank under rules adopted by the finance commission.
SECTION 5.04. Section 92.102, Finance Code, is amended by
amending Subsection (d) and adding Subsection (e) to read as
follows:
(d) Chapter 2001, Government Code, does not apply to the
application if:
(1) [If] the commissioner considers the financial
institution to be reorganized or merged to be in an unsafe
condition; or
(2) the savings bank incorporated under this
subchapter does not survive the merger or is facilitating the
continuation of an existing savings bank corporate reorganization
as defined by rules adopted by the finance commission.
(e) If the commissioner considers the financial institution
to be reorganized or merged to be in an unsafe condition, [:
[(1) Chapter 2001, Government Code, does not apply to
the application; and
[(2)] the application and all information relating to
the application are confidential and not subject to public
disclosure.
SECTION 5.05. Section 92.156, Finance Code, is amended by
amending Subsections (a) and (c) and adding Subsection (e) to read
as follows:
(a) A savings bank shall maintain [on file with the
commissioner] a blanket indemnity bond with an adequate corporate
surety protecting the savings bank from loss by or through
dishonest or criminal action or omission, including fraud, theft,
robbery, or burglary, by an officer or employee of the savings bank
or a director of the savings bank when the director performs the
duty of an officer or employee.
(c) Subject to rules adopted under Subsection (e), the [The]
board shall [and the commissioner must] approve:
(1) the amount and form of the bond; and
(2) the sufficiency of the surety.
(e) The finance commission may adopt rules establishing the
amount and form of the bond and the sufficiency of the surety.
SECTION 5.06. Section 92.204, Finance Code, is amended to
read as follows:
Sec. 92.204. [QUALIFICATION UNDER ASSET TEST OR] QUALIFIED
THRIFT LENDER TEST. (a) A savings bank must [qualify under and
continue to meet]:
(1) qualify under and continue to meet [the asset test
of Section 7701(a)(19), Internal Revenue Code of 1986 (26 U.S.C.
Section 7701(a)(19)); or
[(2)] the qualified thrift lender test of Section
10(m), Home Owners' Loan Act (12 U.S.C. Section 1467a(m)); or
(2) maintain more than 50 percent of its portfolio
assets in qualified thrift assets on a monthly average basis in at
least nine out of 12 months.
(b) For purposes of Subsection (a)(2), "qualified thrift
assets" means:
(1) qualified thrift investments as defined by 12
U.S.C. Section 1467a(m)(4)(C); and
(2) other assets determined by the commissioner, under
rules adopted by the finance commission, to be substantially
equivalent to qualified thrift investments described by
Subdivision (1) or which further residential lending or community
development.
(c) The commissioner may grant temporary or limited
exceptions to the requirements of this section as the commissioner
considers necessary.
SECTION 5.07. Section 92.207, Finance Code, is amended to
read as follows:
Sec. 92.207. LIMITATION ON ISSUANCE OF SECURITIES. A
savings bank may issue a form of stock, share, account, or
investment certificate only as authorized by this subtitle or as
permitted for a national bank, federal savings and loan
association, federal savings bank, or state bank.
SECTION 5.08. Section 92.208, Finance Code, is amended by
amending Subsection (c) and adding Subsection (e) to read as
follows:
(c) A savings bank may not purchase, directly or indirectly,
its own issued common stock, except under a stock repurchase plan
approved in advance by the commissioner.
(e) Subsections (b) and (c) apply to the securities of the
savings bank's holding company and affiliates.
SECTION 5.09. Section 92.211, Finance Code, is amended to
read as follows:
Sec. 92.211. DIVIDENDS ON CAPITAL STOCK. (a) The board of
a capital stock savings bank may declare and pay a dividend out of
current or retained income, in cash or additional stock, to the
holders of record of the stock outstanding on the date the dividend
is declared.
(b) Without the prior approval of the commissioner, a cash
dividend may not be declared by the board of a savings bank that the
commissioner considers:
(1) to be in an unsafe condition; or
(2) to have less than zero total retained income on the
date of the dividend declaration.
SECTION 5.10. Section 92.252(b), Finance Code, is amended
to read as follows:
(b) The application to convert must:
(1) be filed in the office of the commissioner not
later than the 30th [10th] day after the date of the meeting; and
(2) include a copy of the minutes of the meeting, sworn
to by the secretary or an assistant secretary.
SECTION 5.11. Section 92.301(b), Finance Code, is amended
to read as follows:
(b) The application to convert must:
(1) be submitted to the commissioner and mailed to the
appropriate banking agency not later than the 30th [10th] day after
the date of the meeting; and
(2) include a copy of the minutes of the meeting, sworn
to by the secretary or an assistant secretary.
SECTION 5.12. Sections 92.302(b) and (c), Finance Code, are
amended to read as follows:
(b) The directors, or the president and secretary, shall
execute two copies of an application for certificate of
incorporation as provided by Subchapter B.
(c) Each director, or the president and secretary, shall
sign and acknowledge the application for certificate of
incorporation as a subscriber and shall sign and acknowledge the
bylaws as an incorporator.
SECTION 5.13. Section 92.351(a), Finance Code, is amended
to read as follows:
(a) A savings bank may reorganize, merge, or consolidate
with a corporation, another financial institution, or another
entity under a plan adopted by the board.
SECTION 5.14. Chapter 92, Finance Code, is amended by
adding Subchapter M to read as follows:
SUBCHAPTER M. LIMITED SAVINGS BANK
Sec. 92.601. APPLICATION TO ORGANIZE. (a) Five or more
adult residents of this state may apply to organize a savings bank
as a limited savings bank by submitting to the commissioner:
(1) an application to organize a limited savings bank
that is:
(A) in a form specified by the commissioner; and
(B) signed by each organizer; and
(2) the filing fee.
(b) An application must contain:
(1) two copies of the limited savings bank's
certificate of formation containing:
(A) the name of the savings bank;
(B) the location of the principal office;
(C) the names and addresses of the initial
managers; and
(D) to the extent not inconsistent with this
subtitle, the proper business of a savings bank, or a rule adopted
by the finance commission related to savings banks, other
provisions included in:
(i) the articles of organization of a
limited liability company organized under the Texas Limited
Liability Company Act (Article 1528n, Vernon's Texas Civil
Statutes) if the limited savings bank was organized before January
1, 2006; or
(ii) the certificate of formation of a
limited liability company organized under Chapter 101, Business
Organizations Code, if:
(a) the limited savings bank was
organized on or after January 1, 2006; or
(b) the organizers elect to include
those provisions, if the limited savings bank was organized before
January 1, 2006;
(2) two copies of the savings bank's company
agreement;
(3) data sufficiently detailed and comprehensive in
nature to enable the commissioner to make findings under Section
92.058, including statements, exhibits, and maps;
(4) financial information about each applicant,
organizer, manager, officer, or member that the finance commission
requires by rule; and
(5) other information relating to the savings bank and
its operation that the finance commission requires by rule.
(c) Financial information described by Subsection (b) is
confidential and not subject to public disclosure unless the
commissioner finds that disclosure is necessary and in the public
interest.
(d) The statement of fact must be signed and sworn to.
(e) Subchapter B, Chapter 92, applies to the organization of
a limited savings bank except to the extent inconsistent with this
section.
Sec. 92.602. LIABILITY OF MEMBERS AND MANAGERS. A member,
transferee of a member, or manager of a limited savings bank is not
liable for a debt, obligation, or liability of the limited savings
bank, including a debt, obligation, or liability under a judgment,
decree, or order of a court. A member or a manager of a limited
savings bank is not a proper party to a proceeding by or against a
limited savings bank unless the object of the proceeding is to
enforce a member's or manager's right against or liability to a
limited savings bank.
Sec. 92.603. CONTRIBUTIONS. A member of a limited savings
bank is obligated to make contributions as required in the company
agreement.
Sec. 92.604. MANAGERS OF A LIMITED SAVINGS BANK. (a)
Management of a limited savings bank shall be exercised by a board
of managers consisting of not fewer than five or more than 21
persons.
(b) A manager must meet the qualifications for a director
under Section 92.153.
(c) The governing documents of a limited savings bank may
use "director" instead of "manager" and "board" instead of "board
of managers."
Sec. 92.605. WITHDRAWAL OR REDUCTION OF MEMBER'S
CONTRIBUTION. (a) A member may not receive from a limited savings
bank any part of the member's contribution except as provided by
rule adopted by the finance commission regulating withdrawal or
reduction.
(b) A member may not receive any part of the member's
contribution if, after the withdrawal or reduction, the capital of
the savings bank would be reduced to less than the minimum capital
established for the incorporation or operation of a savings bank by
this subtitle or a rule adopted under this subtitle.
Sec. 92.606. COMPANY AGREEMENT OF LIMITED SAVINGS BANK.
(a) A limited savings bank shall adopt a company agreement that
contains provisions regulating the management and organization of
the limited savings bank. The agreement is subject to the approval
of the commissioner and must contain provisions the finance
commission may require by a rule adopted under this subchapter.
(b) At the option of the limited savings bank, the term
"bylaws" may be substituted for the term "company agreement."
Sec. 92.607. DISSOLUTION. (a) A limited savings bank
organized under this chapter is dissolved on:
(1) the expiration of the period fixed for the
duration of the limited savings bank; or
(2) the occurrence of events specified in the
certificate of formation or company agreement to cause dissolution.
(b) A dissolution under this section is considered a
resolution to close the savings bank under Section 96.251.
Sec. 92.608. ALLOCATION OF PROFITS AND LOSSES. The profits
and losses of a limited savings bank may be allocated among the
members and among classes of members as provided by the company
agreement. Without the prior written approval of the commissioner
to use a different allocation method, the profits and losses must be
allocated according to the relative interests of the members in the
limited savings bank.
Sec. 92.609. DISTRIBUTIONS. Subject to rules adopted by
the finance commission, distributions of cash or other assets of a
limited savings bank may be made to the members as provided by the
company agreement. Without the prior written approval of the
commissioner to use a different distribution method, distributions
must be made to the members according to the relative interests of
the members as reflected in the governing documents of the limited
savings bank filed with and approved by the commissioner.
Sec. 92.610. AMENDMENT OF GOVERNING DOCUMENTS. (a) A
limited savings bank may amend its certificate of formation by a
majority vote of the members cast at any annual meeting or a special
meeting called for that purpose unless the certificate of formation
requires a higher percentage.
(b) If provided in the governing documents, the company
agreement of a limited savings bank may be amended by a majority
vote of the board of managers unless the governing documents
require a higher percentage. In the absence of an express provision
in the governing documents, the company agreement may be amended by
a majority vote of the members cast at any annual meeting or special
meeting called for that purpose.
(c) An amendment to the governing documents may not take
effect before it is filed with and approved by the commissioner.
Sec. 92.611. APPLICATION OF OTHER PROVISIONS TO LIMITED
SAVINGS BANKS; MISCELLANEOUS PROVISIONS. (a) This subtitle
applies to a savings bank organized as a limited savings bank under
this subchapter. In the event of a conflict between this subchapter
and a provision of this subtitle, this subchapter controls unless
the finance commission by rule provides that this subtitle
controls.
(b) For purposes of provisions of this chapter other than
this subchapter, as the context requires:
(1) a manager is considered to be a director and the
board of managers is considered to be the board of directors;
(2) a member is considered to be a shareholder; and
(3) a distribution is considered to be a dividend.
(c) A reference in a statute or rule to a savings bank
includes a savings bank organized as a limited savings bank unless
the context clearly requires that a limited savings bank is not
included within the term or the provision contains express language
excluding a limited savings bank.
(d) In this subchapter, "governing document" means a
limited savings bank's certificate of formation or company
agreement.
SECTION 5.15. Section 93.001(c), Finance Code, is amended
to read as follows:
(c) A savings bank may:
(1) sue and be sued in its corporate name;
(2) adopt and operate a reasonable bonus plan,
profit-sharing plan, stock bonus plan, stock option plan, pension
plan, or similar incentive plan for its directors, officers, or
employees, subject to any limitations under this subtitle or rules
adopted under this subtitle;
(3) make reasonable donations for the public welfare
or for a charitable, scientific, religious, or educational purpose;
(4) pledge its assets to secure deposits of public
money of the United States, if required by the United States,
including revenue and money the deposit of which is subject to
control or regulation of the United States;
(5) pledge its assets to secure deposits of public
money of any state or of a political corporation or political
subdivision of any state or of any other entity that serves a public
purpose according to rules adopted by the finance commission;
(6) become a member of or deal with any corporation or
agency of the United States or this state, to the extent that the
corporation or agency assists in furthering the purposes or powers
of savings banks, and for that purpose may purchase stock or
securities of the corporation or agency or deposit money with the
corporation or agency and may comply with any other condition of
membership credit;
(7) become a member of a federal home loan bank or the
Federal Reserve System;
(8) hold title to any assets acquired because of the
collection or liquidation of a loan, investment, or discount and
may administer those assets as necessary;
(9) receive and repay any deposit or account in
accordance with this subtitle and rules of the finance commission;
and
(10) lend and invest its money as authorized by this
subtitle and rules of the finance commission.
SECTION 5.16. Section 93.008, Finance Code, is amended to
read as follows:
Sec. 93.008. POWERS RELATIVE TO OTHER FINANCIAL
INSTITUTIONS. (a) Subject to limitations prescribed by rule of the
finance commission, a savings bank may make a loan or investment or
engage in an activity permitted:
(1) under state law for a bank or savings and loan
association; or
(2) under federal law for a federal savings and loan
association, savings bank, or national bank if the financial
institution's principal office is located in this state.
(b) Notwithstanding any other law, a savings bank organized
and chartered under this chapter may perform an act, own property,
or offer a product or service that is at the time permissible within
the United States for a depository institution organized under
federal law or the law of this state or another state if the
commissioner approves the exercise of the power as provided by this
section, subject to the same limitations and restrictions
applicable to the other depository institution by pertinent law,
except to the extent the limitations and restrictions are modified
by rules adopted under Subsection (e). This section may not be used
to alter or negate the application of the laws of this state with
respect to:
(1) establishment and maintenance of a branch in this
state or another state or country;
(2) permissible interest rates and loan fees
chargeable in this state;
(3) fiduciary duties owed to a client or customer by
the bank in its capacity as fiduciary in this state;
(4) consumer protection laws applicable to
transactions in this state; or
(5) compliance with the qualified thrift assets test
contained in Section 92.204.
(c) A savings bank that intends to exercise a power,
directly or through a subsidiary, granted by Subsection (b) that is
not otherwise authorized for savings banks under the statutes of
this state shall submit a letter to the commissioner describing in
detail the power that the savings bank proposes to exercise and the
specific authority of another depository institution to exercise
the power. The savings bank shall attach copies, if available, of
relevant law, regulations, and interpretive letters. The
commissioner may deny the bank from exercising the power if the
commissioner finds that:
(1) specific authority does not exist for another
depository institution to exercise the proposed power;
(2) if the savings bank is insured by the Federal
Deposit Insurance Corporation, the savings bank is prohibited from
exercising the power under Section 24, Federal Deposit Insurance
Act (12 U.S.C. Section 1831a), and related regulations;
(3) the exercise of the power by the bank would
adversely affect the safety and soundness of the bank; or
(4) at the time the application is made, the savings
bank is not well capitalized and well managed.
(d) A savings bank that is denied the requested power by the
commissioner under this section may appeal. The notice of appeal
must be in writing and must be received by the commissioner not
later than the 30th day after the date of the denial. An appeal
under this section is a contested case under Chapter 2001,
Government Code.
(e) To effectuate this section, the finance commission may
adopt rules implementing the method or manner in which a savings
bank exercises specific powers granted under this section,
including rules regarding the exercise of a power that would be
prohibited to savings banks under state law but for this section.
(f) The exercise of a power by a savings bank in compliance
with and in the manner authorized by this section is not a violation
of any statute of this state.
SECTION 5.17. Section 94.201, Finance Code, is amended to
read as follows:
Sec. 94.201. REQUIRED INVESTMENTS. A savings bank shall
maintain in the savings bank's portfolio not less than 15 percent of
the savings bank's deposits from its local service area designated
under Section 94.202 in:
(1) first and second lien residential mortgage loans,
home equity loans, or foreclosed residential mortgage loans
originated in the savings bank's local service area;
(2) home improvement loans;
(3) interim residential construction loans;
(4) mortgage-backed securities secured by loans in the
savings bank's local service area; [and]
(5) loans for community reinvestment; and
(6) other loans made to customers in the savings bank's
local service area that meet the definition of qualified thrift
assets under Section 92.204.
SECTION 5.18. Section 96.053(a), Finance Code, is amended
to read as follows:
(a) Before March [February] 1 of each year, a savings bank
shall provide to the commissioner on a form to be prescribed and
furnished by the commissioner a written report of its affairs and
operations, including a complete statement of its financial
condition with a statement of income and expenses since its last
annual report under this section. The report must be signed by the
president, vice president, or secretary of the savings bank.
SECTION 5.19. Sections 97.001-97.007, Finance Code, are
designated as Subchapter A, Chapter 97, Finance Code, and a
subchapter heading is added to read as follows:
SUBCHAPTER A. GENERAL PROVISIONS APPLICABLE TO HOLDING COMPANIES
SECTION 5.20. Chapter 97, Finance Code, is amended by
adding Subchapter B to read as follows:
SUBCHAPTER B. MUTUAL HOLDING COMPANIES
Sec. 97.051. REORGANIZATION TO BECOME MUTUAL HOLDING
COMPANY. (a) Notwithstanding any other law, a savings bank may be
reorganized as a mutual holding company by submitting to the
commissioner an application for approval of reorganization.
(b) Before submission, an application for reorganization
must be approved by a majority vote of the members or shareholders
of the savings bank cast at an annual meeting or a special meeting
called to consider the reorganization.
Sec. 97.052. APPLICATION FOR APPROVAL OF REORGANIZATION.
The application for approval of reorganization must contain:
(1) a brief statement summarizing a reorganization
plan;
(2) two copies of the proposed articles of
incorporation of the subsidiary savings bank acknowledged by the
incorporators of the subsidiary savings bank;
(3) two copies of the proposed bylaws of the savings
bank;
(4) a statement that the plan of reorganization was
advised, authorized, and approved by the savings bank in the manner
and by the vote required by its charter and the laws of this state;
and
(5) a statement of the manner of approval.
Sec. 97.053. PLAN OF REORGANIZATION. (a) The plan of
reorganization must provide that:
(1) a subsidiary savings bank shall:
(A) be incorporated under Subchapter B, Chapter
92; or
(B) on prior approval of the commissioner, be
incorporated under Subchapter C, Chapter 92;
(2) the savings bank shall transfer a substantial part
of its assets to the subsidiary savings bank, and the subsidiary
savings bank shall assume a substantial part of the savings bank's
liabilities, including all depository liabilities;
(3) as a result of the reorganization, the mutual
holding company must hold more than 50 percent of the stock of the
subsidiary savings bank; and
(4) after transfer and assumption, persons with prior
corresponding rights as depositors or creditors against a savings
bank have the same rights with respect to the mutual holding company
and the subsidiary savings bank.
(b) The plan of reorganization must set forth the necessary
corporate steps for the savings bank to reorganize into a mutual
holding company, including:
(1) all required charter amendments; and
(2) a description of the corporate management of the
reorganized mutual holding company.
(c) The plan of reorganization may contain any other
provision not inconsistent with law or finance commission rules.
ARTICLE 6. AMENDMENTS TO MORTGAGE BROKER LICENSE ACT
SECTION 6.01. Section 156.005, Finance Code, is amended to
read as follows:
Sec. 156.005. AFFILIATED BUSINESS ARRANGEMENTS. Unless
prohibited by federal or state law, this chapter may not be
construed to prevent affiliated or controlled business
arrangements or loan origination services by or between mortgage
brokers and other professionals if the mortgage broker complies
with all applicable federal and state laws permitting those
arrangements or services.
SECTION 6.02. Section 156.102(d), Finance Code, is amended
to read as follows:
(d) The finance commission shall consult with the
commissioner [mortgage broker advisory committee] when proposing
and adopting rules under this chapter.
SECTION 6.03. Section 156.104, Finance Code, is amended by
amending Subsection (h) and adding Subsections (j) and (k) to read
as follows:
(h) In addition to other powers and duties delegated to it
by the commissioner, the advisory committee shall advise the
[finance commission and] commissioner with respect to:
(1) the proposal and adoption of rules relating to:
(A) the licensing of mortgage brokers and loan
officers;
(B) the education and experience requirements
for licensing mortgage brokers and loan officers;
(C) conduct and ethics of mortgage brokers and
loan officers;
(D) continuing education for licensed mortgage
brokers and loan officers and the types of courses acceptable as
continuing education courses under this chapter; and
(E) the granting or denying of an application or
request for renewal for a mortgage broker license or loan officer
license;
(2) the form of or format for any applications or other
documents under this chapter; and
(3) the interpretation, implementation, and
enforcement of this chapter.
(j) The advisory committee shall take a record vote on any
matter described by Subsection (h)(1). The commissioner shall
inform the finance commission of:
(1) the result of the vote; and
(2) any additional information the commissioner
considers necessary to ensure the finance commission is
sufficiently notified of the advisory committee's recommendations.
(k) A record vote taken by the advisory committee under
Subsection (j) is only a recommendation and does not supersede the
rulemaking authority of the finance commission under this
subchapter.
SECTION 6.04. Section 156.201(c), Finance Code, is amended
to read as follows:
(c) Each mortgage broker licensed under this chapter is
responsible to the commissioner and members of the public for any
act or conduct performed [under this chapter] by the mortgage
broker or a loan officer sponsored by or acting for the mortgage
broker in connection with:
(1) the origination of a mortgage loan; or
(2) a transaction that is related to the origination
of a mortgage loan in which the mortgage broker knew or should have
known of the transaction.
SECTION 6.05. Section 156.202, Finance Code, is amended to
read as follows:
Sec. 156.202. EXEMPTIONS. This chapter does not apply to:
(1) any of the following entities or an employee of any
of the following entities provided the employee is acting for the
benefit of the employer:
(A) a bank, savings bank, or savings and loan
association, or a subsidiary or an affiliate of a bank, savings
bank, or savings and loan association;
(B) a state or federal credit union, or a
subsidiary, affiliate, or credit union service organization of a
state or federal credit union;
(C) an insurance company licensed or authorized
to do business in this state under the Insurance Code;
(D) a mortgage banker registered under Chapter
157;
(E) an organization that qualifies for an
exemption from state franchise and sales tax as a 501(c)(3)
organization;
(F) a Farm Credit System institution; or
(G) a political subdivision of this state
involved in affordable home ownership programs;
(2) an individual who makes a mortgage loan from the
individual's own funds to a spouse, former spouse, or persons in the
lineal line of consanguinity of the individual lending the money;
(3) an owner of real property who makes a mortgage loan
to a purchaser of the property for all or part of the purchase price
of the real estate against which the mortgage is secured; or
(4) an individual who:
(A) makes a mortgage loan from the individual's
own funds;
(B) is not an authorized lender under Chapter
342, Finance Code; and
(C) does not regularly engage in the business of
making or brokering mortgage loans.
SECTION 6.06. Section 156.203(d), Finance Code, is amended
to read as follows:
(d) An application fee under this section is not refundable
and may not be credited or applied to any other fee or indebtedness
owed by the person paying the fee.
SECTION 6.07. Sections 156.204(a) and (c), Finance Code, as
amended by Chapters 170 and 171, Acts of the 78th Legislature,
Regular Session, 2003, are reenacted and amended to read as
follows:
(a) To be eligible to be licensed as a mortgage broker a
person must:
(1) be an individual who is at least 18 years of age;
(2) be a citizen of the United States or a lawfully
admitted alien;
(3) maintain a physical office in this state and
designate that office in the application;
(4) provide the commissioner with satisfactory
evidence that the applicant satisfies one of the following:
(A) the person has received a bachelor's degree
in an area relating to finance, banking, or business administration
from an accredited college or university and has 18 months of
experience in the mortgage or lending field as evidenced by
documentary proof of full-time employment as a mortgage broker or
loan officer with a mortgage broker or a person exempt under Section
156.202;
(B) the person is licensed in this state as:
(i) an active real estate broker under
Chapter 1101, Occupations Code;
(ii) an active attorney; or
(iii) a local recording agent or insurance
solicitor or agent for a legal reserve life insurance company under
Chapter 21, Insurance Code, or holds an equivalent license under
Chapter 21, Insurance Code; or
(C) the person has three years of experience in
the mortgage lending field as evidenced by documentary proof of
full-time employment as a loan officer with a mortgage broker or a
person exempt under Section 156.202;
(5) provide the commissioner with satisfactory
evidence of:
(A) having passed an examination, offered by a
testing service or company approved by the finance commission, that
demonstrates knowledge of:
(i) the mortgage industry; and
(ii) the role and responsibilities of a
mortgage broker; and
(B) compliance with the financial requirements
of this chapter; [and]
(6) not have been convicted of a criminal offense that
the commissioner determines directly relates to the occupation of a
mortgage broker as provided by Chapter 53, Occupations Code;
(7) satisfy the commissioner as to the individual's
good moral character, including the individual's honesty,
trustworthiness, and integrity; and
(8) not be in violation of this chapter, a rule adopted
under this chapter, or any order previously issued to the
individual by the commissioner.
(c) To be eligible to be licensed as a loan officer a person
must:
(1) be an individual who is at least 18 years of age;
(2) be a citizen of the United States or a lawfully
admitted alien;
(3) designate in the application the name of the
mortgage broker sponsoring the loan officer;
(4) provide the commissioner with satisfactory
evidence that the applicant satisfies one of the following:
(A) the person meets one of the requirements
described by Subsection (a)(4);
(B) the person has successfully completed 30 [15]
hours of education courses approved by the commissioner under this
section;
(C) the person has 18 months of experience as a
loan officer as evidenced by documentary proof of full-time
employment as a loan officer with a mortgage broker or a person
exempt under Section 156.202; or
(D) for applications received prior to January 1,
2000, the mortgage broker that will sponsor the applicant provides
a certification under oath that the applicant has been provided
necessary and appropriate education and training regarding all
applicable state and federal law and regulations relating to
mortgage loans;
(5) not have been convicted of a criminal offense that
the commissioner determines directly relates to the occupation of a
loan officer as provided by Chapter 53, Occupations Code;
(6) satisfy the commissioner as to the individual's
good moral character, including the individual's honesty,
trustworthiness, and integrity; [and]
(7) [(6)] provide the commissioner with satisfactory
evidence of having passed an examination, offered by a testing
service or company approved by the finance commission, that
demonstrates knowledge of:
(A) the mortgage industry; and
(B) the role and responsibilities of a loan
officer; and[.]
(8) [(7)] not be in violation of this chapter, a rule
adopted under this chapter, or any order previously issued to the
individual by the commissioner.
SECTION 6.08. Sections 156.205(a) and (b), Finance Code,
are amended to read as follows:
(a) In this section, "net assets" means the difference
between total assets and total liabilities, as determined by
generally acceptable accounting principles, and does not include
any assets that are exempt under state or federal law. All assets
and liabilities are subject to verification by the commissioner.
(b) A mortgage broker must maintain net assets of at least
$25,000 or a surety bond in the amount of at least $50,000. The term
of the surety bond must coincide with the term of the license. The
finance commission may adopt rules establishing the terms and
conditions of the surety bond and the qualifications of the surety.
SECTION 6.09. Section 156.208, Finance Code, is amended by
amending Subsection (e) and adding Subsection (i) to read as
follows:
(e) A renewal fee is not refundable and may not be credited
or applied to any other fee or indebtedness owed by the person
paying the fee.
(i) The commissioner may deny the renewal of a mortgage
broker license or a loan officer license if:
(1) the mortgage broker or loan officer is in
violation of this chapter, a rule adopted under this chapter, or any
order previously issued to the individual by the commissioner; or
(2) the mortgage broker or loan officer is in default
in the payment of any administrative penalty, fee, charge, or other
indebtedness owed under this title.
SECTION 6.10. Sections 156.2081(c)-(f), Finance Code, are
amended to read as follows:
(c) A person whose license has been expired for 91 days or
more may not renew the license. The person may obtain a new license
by complying with the requirements and procedures for obtaining an
original license. [more than 90 days but less than one year but who
is otherwise eligible to renew a license may renew the license by
paying to the commissioner a renewal fee that is equal to two times
the normally required renewal fee.
[(d) A person whose license has been expired for one year or
more may not renew the license. The person may obtain a new license
by complying with the requirements and procedures for obtaining an
original license.]
(d) [(e)] A person who was licensed in this state, moved to
another state, and is currently licensed and has been in practice in
the other state for the two years preceding the date of application
may obtain a new license by paying to the commissioner a fee that is
equal to two times the normally required renewal fee for the
license.
(e) [(f)] Not later than the 60th [30th] day before the date
a person's license is scheduled to expire, the commissioner shall
send written notice of the impending expiration to the person at the
person's last known address according to the records of the
Department of Savings and Mortgage Lending [Loan Department].
SECTION 6.11. Section 156.209, Finance Code, is amended by
amending Subsection (c) and adding Subsections (f) and (g) to read
as follows:
(c) The designated hearings officer shall set the time and
place for a hearing requested under Subsection (b) not later than
the 90th [30th] day after the date on which the appeal is received.
The hearings officer shall provide at least 10 days' notice of the
hearing to the applicant or person requesting the renewal. The time
of the hearing may be continued periodically with the consent of the
applicant or person requesting the renewal. After the hearing, the
commissioner shall enter an order from the findings of fact,
conclusions of law, and recommendations of the hearings officer.
(f) A person who requests a hearing under this section shall
be required to pay a deposit to secure the payment of the costs of
the hearing in an amount to be determined by the commissioner not to
exceed $500. The entire deposit shall be refunded to the person if
the person prevails in the contested case hearing. If the person
does not prevail, any portion of the deposit in excess of the costs
of the hearing assessed against that person shall be refundable.
(g) A person whose application for a license has been denied
is not eligible to be licensed for a period of two years after the
date the denial becomes final, or a shorter period determined by the
commissioner after evaluating the specific circumstances of the
person's subsequent application. The finance commission may adopt
rules to provide conditions for which the commissioner may shorten
the time of disqualification.
SECTION 6.12. Section 156.211(c), Finance Code, is amended
to read as follows:
(c) A fee under this section is not refundable and may not be
credited or applied to any other fee or indebtedness owed by the
person paying the fee.
SECTION 6.13. Section 156.301, Finance Code, is amended by
adding Subsection (g) to read as follows:
(g) The commissioner may share information gathered during
an investigation or inspection with any state or federal agency.
SECTION 6.14. Subchapter D, Chapter 156, Finance Code, is
amended by adding Section 156.3011 to read as follows:
Sec. 156.3011. ISSUANCE AND ENFORCEMENT OF SUBPOENA. (a)
During an investigation, the commissioner may issue a subpoena that
is addressed to a peace officer of this state or other person
authorized by law to serve citation or perfect service. The
subpoena may require a person to give a deposition, produce
documents, or both.
(b) If a person disobeys a subpoena or if a person appearing
in a deposition in connection with the investigation refuses to
testify, the commissioner may petition a district court in Travis
County to issue an order requiring the person to obey the subpoena,
testify, or produce documents relating to the matter. The court
shall promptly set an application to enforce a subpoena issued
under Subsection (a) for hearing and shall cause notice of the
application and the hearing to be served upon the person to whom the
subpoena is directed.
SECTION 6.15. Section 156.303, Finance Code, is amended by
amending Subsection (a) and adding Subsections (f)-(i) to read as
follows:
(a) The commissioner may order disciplinary action against
a licensed mortgage broker or a licensed loan officer when the
commissioner, after a hearing, has determined that the person:
(1) obtained a license, including a renewal of a
license, under this chapter through a false or fraudulent
representation or made a material misrepresentation in an
application for a license or for the renewal of a license under this
chapter;
(2) published or caused to be published an
advertisement related to the business of a mortgage broker or loan
officer that:
(A) is misleading;
(B) is likely to deceive the public;
(C) in any manner tends to create a misleading
impression;
(D) fails to identify as a mortgage broker or
loan officer the person causing the advertisement to be published;
or
(E) violates federal or state law;
(3) while performing an act for which a license under
this chapter is required, engaged in conduct that constitutes
improper, fraudulent, or dishonest dealings;
(4) entered a plea of guilty or nolo contendere to, or
is convicted of, a criminal offense that is a felony or that
involves fraud or moral turpitude in a court of this or another
state or in a federal court [failed to notify the commissioner not
later than the 30th day after the date of the final conviction if
the person, in a court of this or another state or in a federal
court, has been convicted of or entered a plea of guilty or nolo
contendere to a felony or a criminal offense involving fraud];
(5) failed to use a fee collected in advance of closing
of a mortgage loan for a purpose for which the fee was paid;
(6) charged or received, directly or indirectly, a fee
for assisting a mortgage applicant in obtaining a mortgage loan
before all of the services that the person agreed to perform for the
mortgage applicant are completed, and the proceeds of the mortgage
loan have been disbursed to or on behalf of the mortgage applicant,
except as provided by Section 156.304;
(7) failed within a reasonable time to honor a check
issued to the commissioner after the commissioner has mailed a
request for payment by certified mail to the person's last known
business address as reflected by the commissioner's records;
(8) paid compensation to a person who is not licensed
or exempt under this chapter for acts for which a license under this
chapter is required;
(9) induced or attempted to induce a party to a
contract to breach the contract so the person may make a mortgage
loan;
(10) published or circulated an unjustified or
unwarranted threat of legal proceedings in matters related to the
person's actions or services as a mortgage broker or loan officer,
as applicable;
(11) established an association, by employment or
otherwise, with a person not licensed or exempt under this chapter
who was expected or required to act as a mortgage broker or loan
officer;
(12) aided, abetted, or conspired with a person to
circumvent the requirements of this chapter;
(13) acted in the dual capacity of a mortgage broker or
loan officer and real estate broker, salesperson, or attorney in a
transaction without the knowledge and written consent of the
mortgage applicant or in violation of applicable requirements under
federal law;
(14) discriminated against a prospective borrower on
the basis of race, color, religion, sex, national origin, ancestry,
familial status, or a disability;
(15) failed or refused on demand to:
(A) produce a document, book, or record
concerning a mortgage loan transaction conducted by the mortgage
broker or loan officer for inspection by the commissioner or the
commissioner's authorized personnel or representative;
(B) give the commissioner or the commissioner's
authorized personnel or representative free access to the books or
records relating to the person's business kept by an officer,
agent, or employee of the person or any business entity through
which the person conducts mortgage brokerage activities, including
a subsidiary or holding company affiliate; or
(C) provide information requested by the
commissioner as a result of a formal or informal complaint made to
the commissioner;
(16) failed without just cause to surrender, on
demand, a copy of a document or other instrument coming into the
person's possession that was provided to the person by another
person making the demand or that the person making the demand is
under law entitled to receive; or
(17) disregarded or violated this chapter, a rule
adopted by the finance commission under this chapter, or an order
issued by the commissioner under this chapter.
(f) For purposes of Subsection (a), a person is considered
convicted if a sentence is imposed on the person, the person
receives community supervision, including deferred adjudication
community supervision, or the court defers final disposition of the
person's case.
(g) If a person fails to pay an administrative penalty that
has become final or fails to comply with an order of the
commissioner that has become final, in addition to any other remedy
provided under law the commissioner, on not less than 10 days'
notice to the person, may without a prior hearing suspend the
person's mortgage broker license or loan officer license. The
suspension shall continue until the person has complied with the
cease and desist order or paid the administrative penalty. During
the period of suspension, the person may not originate a mortgage
loan and all compensation received by the person during the period
of suspension is subject to forfeiture as provided by Section
156.406(b).
(h) An order of suspension under Subsection (g) may be
appealed. An appeal is a contested case governed by Chapter 2001,
Government Code. A hearing of an appeal of an order of suspension
issued under Subsection (g) shall be held not later than the 15th
day after the date of receipt of the notice of appeal. The
appellant shall be provided at least three days' notice of the time
and place of the hearing.
(i) An order revoking the license of a mortgage broker or
loan officer may provide that the person is prohibited, without
obtaining prior written consent of the commissioner, from:
(1) engaging in the business of originating or making
mortgage loans;
(2) being an employee, officer, director, manager,
shareholder, member, agent, contractor, or processor of a mortgage
broker or loan officer; or
(3) otherwise affiliating with a person for the
purpose of engaging in the business of originating or making
mortgage loans.
SECTION 6.16. Subchapter D, Chapter 156, Finance Code, is
amended by adding Section 156.305 to read as follows:
Sec. 156.305. RESTITUTION. The commissioner may order a
person to make restitution for any amount received by that person in
violation of this chapter. A mortgage broker may be required to
make restitution for any amount received by a sponsored loan
officer in violation of this chapter.
SECTION 6.17. Section 156.406(c), Finance Code, is amended
to read as follows:
(c) If the commissioner has reasonable cause to believe that
a person who is not licensed or exempt under this chapter has
engaged, or is about to engage, in an act or practice for which a
license is required under this chapter, the commissioner may issue
without notice and hearing an order to cease and desist from
continuing a particular action or an order to take affirmative
action, or both, to enforce compliance with this chapter. The order
shall contain a reasonably detailed statement of the facts on which
the order is made. The order may assess an administrative penalty
in an amount not to exceed $1,000 per day for each violation and may
require a person to pay to a mortgage applicant any compensation
received by the person from the applicant in violation of this
chapter. If a person against whom the order is made requests a
hearing, the commissioner shall set and give notice of a hearing
before the commissioner or a hearings officer. The hearing shall be
governed by Chapter 2001, Government Code. An order under this
subsection becomes final unless the person to whom the order is
issued requests a hearing not later than the 30th day after the date
the order is issued. [Based on the findings of fact, conclusions of
law, and recommendations of the hearings officer, the commissioner
by order may find a violation has occurred or not occurred.]
SECTION 6.18. Section 156.501(b), Finance Code, is amended
to read as follows:
(b) The fund shall be used to reimburse aggrieved persons to
whom a court awards actual damages because of certain acts
committed by a mortgage broker or loan officer who was licensed
under this chapter when the act was committed. The use of the fund
is limited to an act that constitutes a violation of Section
156.303(a)(2), (3), (5), (6), (8), (9), (10), (11), (12), (13), or
(16) or 156.304. Payments from the fund may not be made to a lender
who makes a mortgage loan originated by the mortgage broker or loan
officer or who acquires a mortgage loan originated by the mortgage
broker or loan officer.
ARTICLE 7. MISCELLANEOUS PROVISIONS
SECTION 7.01. Section 304.003(c), Finance Code, is amended
to read as follows:
(c) The postjudgment interest rate is:
(1) the prime rate as published by the Board of
Governors of the Federal Reserve System [Federal Reserve Bank of
New York] on the date of computation;
(2) five percent a year if the prime rate as published
by the Board of Governors of the Federal Reserve System [Federal
Reserve Bank of New York] described by Subdivision (1) is less than
five percent; or
(3) 15 percent a year if the prime rate as published by
the Board of Governors of the Federal Reserve System [Federal
Reserve Bank of New York] described by Subdivision (1) is more than
15 percent.
SECTION 7.02. Not later than December 31, 2006, the Finance
Commission of Texas and the Credit Union Commission shall:
(1) compare state laws related to financial
institutions with applicable federal laws;
(2) determine which state laws may be preempted by
federal law, rule, or order;
(3) determine which state laws may be invalidated by
state or federal court ruling; and
(4) report their findings to the legislature, with
recommended statutory changes.
SECTION 7.03. Sections 96.052, 345.151, 345.152, and
345.154, Finance Code, and Sections 2153.103, 2153.251, 2153.253,
2153.256, 2153.257, and 2153.258(b), Occupations Code, are
repealed.
ARTICLE 8. EFFECTIVE DATE
SECTION 8.01. Except as provided by Section 8.02 of this
article, this Act takes effect September 1, 2005.
SECTION 8.02. Sections 2.09, 2.10, and 2.11 of this Act take
effect on the date on which the constitutional amendment proposed
by the 79th Legislature, Regular Session, 2005, authorizing the
legislature to define rates of interest for commercial loans, takes
effect. If that amendment is not approved by the voters, those
sections have no effect.