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A BILL TO BE ENTITLED
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AN ACT
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relating to prohibiting the use of certain credit scores, including |
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environmental, social, or governance scores and social credit |
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scores, by certain financial institutions and other lenders in this |
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state; providing a civil penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle A, Title 5, Business & Commerce Code, is |
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amended by adding Chapter 74 to read as follows: |
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CHAPTER 74. PROHIBITED USE OF CERTAIN CREDIT SCORES IN LENDING |
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Sec. 74.0001. DEFINITIONS. In this chapter: |
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(1) "Credit score" means a number or rating derived |
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from an algorithm, computer application, model, or other process |
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that is based on information related to a customer and used to |
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determine a customer's creditworthiness or credit capacity. |
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(2) "Environmental, social, or governance score" |
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means a credit score that is based on measuring a customer's |
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exposure to long-term environmental, social, and governance risks. |
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(3) "Financial institution" means: |
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(A) a bank chartered under state law, including |
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Chapter 32, Finance Code; |
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(B) a savings and loan association chartered |
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under Chapter 62, Finance Code; |
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(C) a state savings bank chartered under Chapter |
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92, Finance Code; |
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(D) a credit union chartered under Chapter 122, |
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Finance Code; or |
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(E) a trust company chartered under the laws of |
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this state. |
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(4) "Social credit score" means a credit score that is |
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based on measuring a complex combination of personal data such as a |
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person's demographic information, online or offline behaviors, or |
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social network activity. |
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Sec. 74.0002. APPLICABILITY. This chapter applies only to |
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a financial institution or other lender that: |
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(1) is formed or chartered under the laws of this |
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state; and |
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(2) makes loans or other extensions of credit only to |
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customers: |
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(A) who are residents of this state; or |
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(B) that are businesses organized under the laws |
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of this state. |
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Sec. 74.0003. DISCRIMINATION IN USE OF CERTAIN CREDIT |
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SCORES BY FINANCIAL INSTITUTIONS AND OTHER LENDERS PROHIBITED. (a) |
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A financial institution or other lender, either directly or through |
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the use of an outside contractor, may not discriminate against a |
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customer in the price or rate that the financial institution or |
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other lender charges for making a loan or other extension of credit |
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to the customer by basing the price or rate wholly or partly on a |
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credit score, including a social credit score or an environmental, |
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social, or governance score, that is derived from subjective or |
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arbitrary standards such as the customer's: |
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(1) social media posts; |
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(2) participation or membership in an organization; |
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(3) political affiliation; or |
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(4) employer. |
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(b) This section does not prohibit a financial institution |
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or other lender from: |
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(1) entering into a business transaction in which a |
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practice is fully disclosed and explained to the potential customer |
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before the customer agrees to enter into the transaction; or |
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(2) discontinuing or refusing to conduct a transaction |
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with a customer who is an individual account holder or with a |
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potential customer if the discontinuation or refusal is necessary |
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for the physical safety of the employees of the financial |
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institution or other lender. |
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Sec. 74.0004. CIVIL PENALTY; INJUNCTION. (a) A financial |
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institution or other lender that violates Section 74.0003 is liable |
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to this state for a civil penalty in an amount not to exceed: |
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(1) $50,000 for the first violation; and |
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(2) $250,000 for each subsequent violation. |
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(b) The attorney general may bring an action: |
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(1) to collect a civil penalty imposed under this |
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section; and |
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(2) in the name of this state to enjoin a violation of |
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this chapter. |
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(c) The attorney general is entitled to recover reasonable |
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expenses incurred in bringing an action under this section, |
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including reasonable attorney's fees and court costs. |
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SECTION 2. This Act takes effect September 1, 2023. |