86R3280 BRG-D

By: Phelan H.B. No. 632

A BILL TO BE ENTITLED

AN ACT

relating to a pilot program for the recovery of delinquent state obligations owed to certain state agencies.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 2107, Government Code, is amended by designating Sections 2107.001 through 2107.008 as Subchapter A and adding a subchapter heading to read as follows:

SUBCHAPTER A. COLLECTION OF DELINQUENT OBLIGATIONS BY ATTORNEY

GENERAL

SECTION 2. Chapter 2107, Government Code, is amended by adding Subchapter B to read as follows:

SUBCHAPTER B. PILOT PROGRAM FOR RECOVERY OF OBLIGATIONS OWED TO

STATE AGENCIES

Sec. 2107.051. DEFINITIONS. In this subchapter:

(1) "Contractor" means an entity selected by the attorney general under Section 2107.052(a).

(2) "Debtor" means a person who is indebted to a state agency for any delinquent account, charge, fee, loan, or other form of indebtedness.

(3) "Financial institution" means a bank or any other form of depository institution, credit union, benefit association, insurance entity, safe deposit entity, bond fund, money market mutual fund, or mutual fund of any kind or character.

Sec. 2107.052. PILOT PROGRAM FOR DELINQUENT STATE OBLIGATION RECOVERY. (a) The attorney general shall contract with one or more entities to collect delinquent obligations owed to state agencies as provided by this subchapter.

(b) The attorney general shall provide for a contractor selected by the attorney general under Subsection (a) to conduct an assessment of all nontax delinquent obligations owed to all state agencies and identify for participation in a pilot program the 75 state agencies that have the highest percentage of recoverable obligations.

(c) A state agency that is identified for participation in the pilot program under Subsection (b) shall refer outstanding obligations owed to the agency to a contractor for collection in accordance with this subchapter to the extent the referral is allowable under state and federal law.

(d) In addition to the state agencies identified by a contractor under Subsection (b), an entity in the state judicial system or a public institution of higher education may refer outstanding obligations owed to the entity or institution to a contractor for collection in accordance with this subchapter to the extent the referral is allowable under state and federal law.

Sec. 2107.053. POWERS AND DUTIES OF CONTRACTOR. (a) A contractor shall attempt to collect each obligation referred to the contractor by a state agency.

(b) A contractor is not a debt collection agency. The nature of an obligation owed to a state agency and referred to a contractor does not change as a result of the referral.

(c) With respect to a referred obligation, a contractor may:

(1) sue;

(2) file a lien;

(3) enter into a payment agreement with the debtor, subject to Section 55, Article III, Texas Constitution;

(4) impose a cost recovery fee;

(5) collect information for obligation recovery purposes;

(6) exercise any settlement authority the referring state agency is authorized by law to exercise and delegates to the contractor;

(7) seek a judicial or administrative determination of a referred obligation and, following the rendering of the determination:

(A) deliver a notice of levy to a financial institution possessing or controlling assets or funds owned by, or owed to, a debtor; or

(B) impose income garnishment or withholding against a debtor to the extent permitted by law;

(8) create and maintain a data match system with financial institutions;

(9) create and maintain a centralized electronic obligation management system to collect, track, and maintain information relating to obligation recovery under this subchapter;

(10) reduce the amount of any money to be paid to a debtor by this state by the amount of the referred obligation;

(11) enter into contracts with one or more third-party debt collectors to collect the obligation on behalf of the contractor;

(12) use any other debt collection method authorized by state law; and

(13) use any other power this subchapter grants the contractor.

(d) The contractor may determine the method or methods that are most suitable to use in attempting to collect a referred obligation.

(e) A contractor selected by the attorney general under Section 2107.052(b) shall perform annually an assessment of all outstanding obligations owed to state agencies that are eligible for referral to the contractor.

Sec. 2107.054. NOTICE OF REFERRAL OF OBLIGATION TO CONTRACTOR. (a) Before referring a delinquent obligation to a contractor for collection, the state agency to which the obligation is owed must provide a final notice to the debtor stating that:

(1) the debt will be referred to a contractor for collection; and

(2) a cost recovery fee of 30 percent of the total amount due on the date of the referral will be added to the total amount owed if the obligation is referred to a contractor.

(b) A state agency may enter into a contract with a contractor that, using a benefits-funded model, enables the contractor to:

(1) provide the final notice required by Subsection (a) to debtors on behalf of the agency; or

(2) collect delinquent obligations that are owed to the agency on behalf of the agency, before the referral of the obligations to the contractor by the agency in accordance with the pilot program created under this subchapter.

(c) The attorney general shall create a process for a debtor to challenge the recovery of an obligation by a contractor under this subchapter. The process must provide that a challenge to the recovery of an obligation by a contractor may be made only by the debtor and must be made in writing.

Sec. 2107.055. COLLECTION OF INFORMATION. (a) Information regarding an obligation referred to a contractor for collection under this subchapter is confidential.

(b) Notwithstanding any other law, a state agency that refers an obligation to a contractor for collection may share any information with the contractor that the contractor considers relevant and necessary to assist in the collection of the obligation.

(c) Information a state agency provides to a contractor may be used only for the purpose of collecting a referred obligation.

(d) Any information, record, or file used by a contractor to collect an obligation under this subchapter is privileged and confidential. A person may not disclose any information obtained from the information, records, or files used by a contractor, except in relation to the administration or enforcement of an obligation.

(e) A contractor may not use any information, record, or file that contains information protected by the Health Insurance Portability and Accountability Act and Privacy Standards, as that term is defined by Section 181.001, Health and Safety Code, to collect an obligation.

Sec. 2107.056. COST RECOVERY FEE. (a) To fund the obligation recovery authorized under this subchapter, a contractor shall impose a cost recovery fee for any referred obligation. The cost recovery fee is a debt owed by the debtor and is in addition to the amount of the referred obligation.

(b) The amount of the cost recovery fee is equal to 30 percent of the total amount due on the date of the referral.

(c) A contractor may use any debt collection method authorized by law for collecting a referred debt to collect the cost recovery fee.

Sec. 2107.057. COLLECTION OF OBLIGATION BY CONTRACTOR. (a) Notwithstanding any other provision of law providing for execution, attachment, garnishment, or levy against a person's accounts, a contractor may seek income garnishment or a notice of levy for a financial institution to collect an obligation referred to the contractor.

(b) If a debtor has an outstanding obligation that has been referred to a contractor for collection, any payment made by the debtor to the state is subject to offset by the contractor unless:

(1) the debtor has paid the referred obligation and cost recovery charge in full; or

(2) the debtor has entered into a payment plan with the contractor and is not delinquent.

(c) If a contractor is unable to recover an obligation, the contractor, subject to approval by the referring state agency, may forward the obligation to a collection agency. A collection agency that is forwarded an obligation under this subsection may impose an additional collection charge to the obligation.

Sec. 2107.058. ALLOCATION, REMITTANCE, AND DEPOSIT OF COLLECTED AMOUNTS. (a) A contractor shall remit any money recovered from a debtor, less the cost recovery fee, to the comptroller not later than the 30th day after the last day of the month in which the contractor recovered the money from the debtor.

(b) The comptroller shall deposit any money a contractor remits under Subsection (a) to the credit of the foundation school fund.

(c) If a contractor collects on a referred obligation in an amount that is less than the total amount owed on the obligation, including the cost recovery fee, the amount collected is allocated proportionally between:

(1) the total amount of the referred obligation; and

(2) the cost recovery fee.

(d) If more than one obligation owed by the same debtor is referred to a contractor, amounts the contractor collects from the debtor are allocated to each referred obligation and cost recovery fee imposed in the order in which the obligations were referred to the contractor. If the obligations were referred concurrently, amounts the contractor collects from the debtor shall be allocated proportionally between each referred obligation and cost recovery fee.

Sec. 2107.059. RULES. The attorney general may adopt rules necessary to implement this subchapter.

Sec. 2107.060. REPORT. (a) Not later than October 1 of each year, the attorney general shall provide a report to the legislature regarding:

(1) the collection of referred obligations by a contractor under this subchapter during the preceding fiscal year; and

(2) any recommendations to improve or enhance the pilot program created under this subchapter.

(b) A contractor shall maintain any information necessary to allow for statistical measurements and evaluations of the operation of the obligation recovery pilot program under this subchapter.

SECTION 3. Not later than March 1, 2020, the attorney general shall contract with one or more entities to create the delinquent state obligation recovery pilot program, as provided under Subchapter B, Chapter 2107, Government Code, as added by this Act.

SECTION 4. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect on the 91st day after the last day of the legislative session.