89R8609 PRL-F

By: Oliverson H.B. No. 5462

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of earned income access providers and earned income access transactions; requiring an occupational license; authorizing fees; providing an administrative penalty; creating a criminal offense.

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

SECTION 1. Section 14.107, Finance Code, is amended to read as follows:

Sec. 14.107. FEES. (a) The finance commission shall establish reasonable and necessary fees for carrying out the commissioner's powers and duties under this chapter, Title 4, Chapter 393 with respect to a credit access business, and Chapters 371, 392, [and] 394, and 398 and under Chapters 51, 302, 601, and 621, Business & Commerce Code.

(b) The finance commission by rule shall set the fees for licensing and examination, as applicable, under Chapter 393 with respect to a credit access business or Chapter 342, 347, 348, 351, 353, [or] 371, or 398 at amounts or rates necessary to recover the costs of administering those chapters. The rules may provide that the amount of a fee charged to a license holder is based on the volume of the license holder's regulated business and other key factors. The commissioner may provide for collection of a single fee for the term of the license from a person licensed under Subchapter G of Chapter 393 or Chapter 342, 347, 348, 351, or 371. The fee must include amounts due for both licensing and examination.

SECTION 2. Section 14.112(a), Finance Code, is amended to read as follows:

(a) The finance commission by rule shall prescribe the licensing or registration period for licenses and registrations issued under Chapters 342, 345, 347, 348, 351, 352, 353, 371, 393, [and] 394, and 398 of this code and Chapter 1956, Occupations Code, not to exceed two years.

SECTION 3. Section 14.201, Finance Code, is amended to read as follows:

Sec. 14.201. INVESTIGATION AND ENFORCEMENT AUTHORITY. Investigative and enforcement authority under this subchapter applies only to:

(1) this chapter;

(2) Subtitles B and C, Title 4;

(3) Chapter 393 with respect to a credit access business;

(4) Chapter 394;

(5) Chapter 398; and

(6) [(5)] Subchapter B, Chapter 1956, Occupations Code.

SECTION 4. Sections 14.251(a) and (b), Finance Code, are amended to read as follows:

(a) The commissioner may assess an administrative penalty against a person who knowingly and wilfully violates or causes a violation of this chapter, Chapter 394, Chapter 398, or Subtitle B, Title 4, or a rule adopted under this chapter, Chapter 394, Chapter 398, or Subtitle B, Title 4.

(b) The commissioner may order the following businesses or other persons to pay restitution to an identifiable person:

(1) a person who violates or causes a violation of this chapter, Chapter 394, or Subtitle B, Title 4, or a rule adopted under this chapter, Chapter 394, or Subtitle B, Title 4;

(2) a credit access business who violates or causes a violation of Chapter 393 or a rule adopted under Chapter 393;

(3) an earned income access provider who violates or causes a violation of Chapter 398 or a rule adopted under Chapter 398; or

(4) [(3)] a person who violates or causes a violation of Subchapter B, Chapter 1956, Occupations Code, or a rule adopted under that subchapter.

SECTION 5. Title 5, Finance Code, is amended by adding Chapter 398 to read as follows:

CHAPTER 398. EARNED INCOME ACCESS TRANSACTIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 398.001. SHORT TITLE. This chapter may be cited as the Texas Earned Income Access Act.

Sec. 398.002. DEFINITIONS. In this chapter:

(1) "Commissioner" means the consumer credit commissioner.

(2) "Consumer" means an individual who resides in this state.

(3) "Debt collection activity" means:

(A) the business of collecting any debts, directly or indirectly, owed or due another person or any debts asserted to be owed or due another person;

(B) the business of a buyer of debts seeking to collect the debts, directly or indirectly; or

(C) the business of a creditor collecting its own debts if the creditor uses a name other than the creditor's own name that would suggest or indicate that someone other than the creditor is collecting or attempting to collect the debts.

(4) "Earned but unpaid income" means salary, wages, or compensation that has been earned by, or has accrued to the benefit of, a consumer for labor or services performed for or on behalf of an obligor but has not, at the time of the payment of proceeds, been paid to the consumer by the obligor.

(5) "Earned income access provider" or "provider" means a person that:

(A) provides or offers to provide, on behalf of an obligor, an earned income access transaction to a consumer earning salary, wages, or compensation from the obligor;

(B) offers an earned income access transaction to a consumer; or

(C) enters into an earned income access transaction with a consumer.

(6) "Earned income access rate cap" means the limit, established by the commissioner, on the amount that may be charged to or received from a consumer for an earned income access transaction, without option to the consumer.

(7) "Earned income access transaction" means a payment of earned but unpaid income to a consumer occurring on a day other than:

(A) the consumer's regular payday; or

(B) a regularly scheduled day on which the obligor pays to the consumer wages or compensation that has been earned by or has accrued to the benefit of the consumer.

(8) "Fee":

(A) means:

(i) an amount charged to a consumer by a provider for an earned income access transaction; and

(ii) an amount received by a provider from a consumer for an earned income access transaction; and

(B) includes an amount paid voluntarily as described by Section 398.103(a)(11).

(9) "Finance commission" means the Finance Commission of Texas.

(10) "Legal representative" means an executor, administrator, trustee, conservator, receiver, or other person appointed by a court or by trust or will to be empowered to control the person or property of any person. The term includes a successor to the person in accordance with the provisions of the appointment.

(11) "Nonrecourse" means, with respect to an earned income access transaction, the unavailability of a legal cause of action or remedy that may be brought against a consumer relating to the transaction.

(12) "Obligor" means a person who is obligated to pay a consumer a sum of money on an hourly, project-based, piecework, or other basis for labor or services performed by the consumer for or on behalf of the person. The term does not include:

(A) a customer of an obligor; or

(B) a third party, other than a person described by Paragraph (A), that has an obligation to make a payment to a consumer based solely on the consumer's agency relationship with the obligor.

(13) "Proceeds" means money received by a consumer under an earned income access transaction.

Sec. 398.003. CONTROL. (a) For purposes of this chapter, a person has control of another person if the person has possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the other person through the ownership of voting shares or in another manner.

(b) The following create a presumption that a person has control of another person:

(1) a person's ownership of, control of, or having the power to vote 20 percent or more of:

(A) another person's outstanding voting shares; or

(B) the outstanding voting shares of a person that owns, controls, or holds the power to vote 10 percent or more of the outstanding voting shares of a person described by Paragraph (A); or

(2) subject to Subsection (c), a person who, directly or indirectly, could effectively shut down the operations of another person by the person's voting activities or by authorities that lie within the other person's established corporate governance structure.

(c) A person is not considered to have control of another person who is a company solely by virtue of being an officer or director of the company.

Sec. 398.004. RULES. The finance commission may adopt rules as necessary to implement this chapter.

SUBCHAPTER B. LICENSE REQUIREMENT

Sec. 398.051. LICENSE REQUIRED; EXEMPTION. (a) Except as provided by Subsection (b), a person must hold a license under this chapter to engage in the business of:

(A) providing or offering to provide, on behalf of an obligor, an earned income access transaction to a consumer earning a salary, wages, or compensation from the obligor;

(B) offering an earned income access transaction to a consumer; or

(C) entering into an earned income access transaction with a consumer.

(b) The following persons are not required to obtain a license under Subsection (a):

(1) a bank, credit union, savings bank, or savings and loan association organized under the laws of the United States or under the laws of the financial institution's state of domicile;

(2) a service provider, including a payroll service provider, whose role may include verifying available earnings, but who is not contractually obligated to pay earned but unpaid income as part of an earned income access transaction; or

(3) an obligor that offers a portion of salary, wages, or compensation directly to the obligor's employees or independent contractors before the normally scheduled pay date.

(c) An application for a license under this subchapter must:

(1) be in writing and made under oath;

(2) be filed with and in the form prescribed by the commissioner; and

(3) be accompanied by a license fee and investigation fee, in amounts set by finance commission rule.

(d) On filing the application, the applicant shall pay an application fee, in an amount not to exceed $375 as determined by the commissioner.

Sec. 398.052. APPROVAL OR DENIAL OF APPLICATION; ISSUANCE OF LICENSE. (a) On receipt of an application and payment of the fees under Section 398.051, the commissioner shall review the application. Except as provided by Subsection (b), if the commissioner determines that the application is complete, the commissioner shall issue a license to the applicant.

(b) The commissioner may refuse to issue a license if, after an investigation, the commissioner finds the financial condition and responsibility, business experience, character, and general fitness of the applicant or any person associated with the applicant are not sufficient to command the confidence of the public and to warrant the belief that the business will be operated honestly and fairly within the purposes of this chapter.

(c) For the purposes of this section:

(1) an applicant that is a partnership or unincorporated association is considered to include all the members of the partnership or unincorporated association; and

(2) an applicant that is a corporation is considered to include all the shareholders, officers, and directors of the corporation.

(d) The license to engage in business at the location specified in the application must be executed in triplicate by the commissioner. The commissioner shall send one copy to the applicant, file a copy with the Office of Consumer Credit Commissioner, and file a copy with the county clerk of the county of the location designated in the license. For purposes of this subsection, the location specified in an application may be online.

(e) If the commissioner refuses to issue a license, the commissioner shall:

(1) notify the applicant of the denial;

(2) return the license fee to the applicant; and

(3) retain the investigation fee to cover the costs of investigating the applicant.

(f) A license issued under this subchapter remains in effect until the license expires, is surrendered by the license holder, or is revoked or suspended by the commissioner.

Sec. 398.053. LICENSE PROVISIONS AND POSTING. (a) A license under this subchapter must state:

(1) the name and address of the license holder;

(2) if the license holder is a partnership or association, the names of each member of the partnership or association; and

(3) if the license holder is a corporation, the date of the license holder's incorporation or formation and the state or country of formation or incorporation.

(b) A license holder shall post the license in a conspicuous place at the location of the license holder's principal office and on the mobile application or Internet website of the license holder.

Sec. 398.054. TRANSFER OR ASSIGNMENT OF LICENSE. A license may not be transferred or assigned.

Sec. 398.055. GROUNDS FOR SUSPENSION OR REVOCATION OF LICENSE; PROCEDURE. (a) The commissioner shall revoke, suspend, or refuse to renew a license issued under this subchapter, after notice and opportunity for a hearing, if the commissioner determines that:

(1) the license holder has violated or failed to comply with:

(A) this chapter;

(B) a rule adopted under this chapter; or

(C) an order issued by the commissioner under this chapter;

(2) the license holder has been convicted of a crime for an offense involving moral turpitude, including forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or any other similar offense;

(3) a fact or condition exists that, if it had existed when the license holder applied for a license, would have been grounds for denying the license; or

(4) a fact or condition exists that the commissioner was not aware of when the license holder applied for a license and would have been grounds for denying the license.

(b) If the commissioner revokes or suspends a license issued under this subchapter, the commissioner shall execute in triplicate a written order to that effect. The commissioner shall:

(1) file a copy of the order with the Office of the Consumer Credit Commissioner;

(2) file a copy of the order with the office of the county clerk of the county in which the principal office of the license holder is located; and

(3) provide a copy of the order to the license holder.

(c) A hearing under this section must be held not later than the 30th day after the date the commissioner issues the order of suspension or revocation.

(d) If there is a substantial risk of public harm, the commissioner may, on good cause shown and without notice and a hearing, suspend a license issued under this subchapter for a period not to exceed 30 days pending investigation. For purposes of this subsection, "good cause" exists only if the license holder:

(1) has engaged in or is likely to engage in a practice prohibited by this chapter; or

(2) engages in a dishonest or inequitable practice that may cause substantial harm to persons afforded the protections of this chapter.

Sec. 398.056. SURRENDER OF LICENSE. (a) A license holder may surrender the holder's license by delivering the original license to the commissioner along with a written or electronic notice of surrender.

(b) The surrender of a license does not affect any civil or criminal liability of the license holder arising from any acts or omissions before the surrender of the license.

Sec. 398.057. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE OF NEW LICENSE AFTER REVOCATION. The commissioner may reinstate a suspended license or issue a new license on application to a person whose license has been revoked if at the time of the reinstatement or issuance no fact or condition exists that clearly would have justified the commissioner's denial of an original application for the license.

Sec. 398.058. INVESTIGATION AND EXAMINATION. (a) The commissioner may conduct an investigation as the commissioner considers necessary to determine whether:

(1) a provider or another person has violated this chapter; or

(2) a license holder has engaged in conduct in a manner that would justify the revocation of the holder's license.

(b) Notwithstanding any other law, the investigation and examination authority of the commissioner under Subchapter E, Chapter 14, applies to an investigation conducted under this section.

SUBCHAPTER C. DUTIES AND PROHIBITED ACTIVITIES

Sec. 398.101. COMPLIANCE REQUIREMENTS. An earned income access provider shall:

(1) if the provider takes custody of a consumer's earned but unpaid income before paying proceeds to the consumer, ensure the proceeds are insured by the Federal Deposit Insurance Corporation at the consumer's individual account level;

(2) comply with National Automated Clearing House Association rules and ensure that when a debit is initiated to a consumer's account for a payment and the debit is returned for insufficient or uncollected funds, that the debit can be reinitiated only in accordance with Section 398.103(a)(5); and

(3) comply with applicable privacy and information security laws of this state.

Sec. 398.102. NOTICE REQUIREMENTS. (a) An earned income access provider shall provide notice to the consumer of the costs of earned income access transactions in accordance with rules adopted by the finance commission. The notice must be displayed in a clear and conspicuous manner.

(b) An earned income access provider shall provide, each quarter, to each consumer to whom the provider has paid proceeds during the preceding quarter written notice that contains the following information:

(1) an itemization of transactions and costs;

(2) the total amount the consumer has paid in fees;

(3) the process for reporting complaints to the provider and to the commissioner;

(4) definitions of terms used in the notice; and

(5) an explanation of the costs of the services provided.

Sec. 398.103. EARNED INCOME ACCESS TRANSACTIONS. (a) An earned income access provider may not conduct an earned income access transaction unless:

(1) the consumer is 18 years of age or older;

(2) the transaction is a nonrecourse transaction;

(3) the provider has a reasonable basis to believe that the total amount of the proceeds and mandatory fees associated with the transaction does not exceed a percentage, to be set by the commissioner, of the consumer's earned but unpaid income;

(4) the provider does not engage in debt collection activity or retain the services of another person to engage in debt collection activity in connection with the earned income access transaction and does not convey the debt itself;

(5) if repayment is made by the provider through a debit of a consumer's account, the debit is made in accordance with rules of the finance commission;

(6) the provider charges or receives:

(A) a fee for the transaction that does not exceed the earned income access rate cap; or

(B) no fee for the transaction;

(7) no portion of the earned but unpaid income to be paid as part of the transaction is used before receipt by the consumer to settle or pay down an obligation arising from a prior earned income access transaction and no proceeds roll over or are structured in any way to create a continuing obligation of the consumer to the provider;

(8) the provider offers the consumer at least one reasonable option to obtain proceeds at no additional charge to the consumer and explains in a clear manner how to elect the no-charge option;

(9) the provider initiates all payment of proceeds not later than the next business day after the date on which a consumer makes a request for funds;

(10) before a consumer enters into the transaction, the provider gives the consumer written notice of all fees associated with the transaction and the full potential cost of the transaction, including any expediting fees, suggested tips, and other potential charges a provider may impose on a consumer, and the cost expressed as an annual percentage rate;

(11) if the provider offers a consumer the opportunity to pay an additional amount for an earned income access transaction voluntarily, such as a tip or donation:

(A) the provider gives written notice to the consumer stating that payment of an additional amount is not required in order for the consumer to receive the proceeds; and

(B) the provider offers no amount of money by:

(i) offering the consumer amount options from which the consumer may select or pre-fill an amount in a form used in the transaction process; or

(ii) otherwise using a transaction process designed to require the consumer to take affirmative action to avoid or opt out of paying the additional amount;

(12) the provider does not charge a late fee or prepayment penalty on the transaction;

(13) the provider does not obtain a credit report or otherwise assess credit risk of the consumer before, during, or after the transaction, except that the provider may verify the consumer's source of income as part of determining the amount of the proceeds;

(14) the provider does not report on the transaction to a consumer reporting agency at any time before, during, or after the transaction;

(15) the provider does not require a consumer to waive the right to class action proceedings for claims against the provider to engage in an earned income access transaction;

(16) the provider gives a consumer written notice of any amendment to the contract or terms of service for earned income access transactions and the consumer agrees to the amendment before proceeding with any earned income access transaction to which the amendment would apply; and

(17) if the provider charges a subscription or membership fee, the fee is optional and for a bona fide group of services that include earned income access transactions.

(b) An earned income access transaction made in accordance with this section is not subject to:

(1) Subtitles A and B, Title 4;

(2) Chapter 152; or

(3) the laws of this state governing:

(i) deductions from wages or payroll; or

(ii) the purchase, sale, or assignment of, or an order for, earned but unpaid income.

Sec. 398.104. MANDATORY TRANSACTION FEES. Mandatory transaction fees charged by a provider may not exceed the maximum allowable amount as set by the commissioner.

Sec. 398.105. AVAILABLE LEGAL REMEDIES. Notwithstanding any other law, a provider may avail itself of any available contractual or other legal remedies to seek and collect payment of any outstanding proceeds, charges, fees, or other amounts if a consumer:

(1) provides materially false information during the process of procuring an earned income access transaction; or

(2) received the amounts or proceeds through fraud or other unlawful means.

Sec. 398.106. MISLEADING OR DECEPTIVE ADVERTISING. (a) An advertisement for an earned income access transaction service may not be misleading or deceptive.

(b) An advertisement for an earned income access transaction service must clearly and accurately disclose the costs of the service to consumers.

(c) The finance commission may adopt rules governing advertising of earned income access transaction services consistent with the purposes of this section.

Sec. 398.107. APPROVAL OF CHANGES IN CONTROL. (a) An action that would result in a change of control of the business of a license holder may not be taken without the prior approval of the commissioner as specified by this section.

(b) Before a proposed change of control, the person desiring to acquire control of the business of a license holder must file a written application with the commissioner and pay an investigation fee.

(c) The application must contain information the commissioner prescribes as necessary or appropriate for the purpose of making the determination required by Subsection (d).

(d) On receipt of an application and payment of the fee under Subsection (b), the commissioner shall approve the change of control, unless the commissioner determines the change of control to be against the public interest.

(e) For a six-month period beginning on the date of qualification and for an additional period the commissioner may prescribe, Subsections (b), (c), and (d) do not apply to a transfer of control by operation of law to the legal representative of a person who has control of a license holder. After the expiration of the period prescribed by this subsection, the legal representative must file an application with the commissioner that complies with the requirements of this section.

(f) On application of a license holder or a person who may exercise control over the license holder, the commissioner may, in the commissioner's discretion, determine whether the ownership, control, or holding of the voting stock constitutes or would constitute control of the license holder for purposes of this section.

Sec. 398.108. BOOKS, ACCOUNTS, AND RECORDS. (a) A license holder shall maintain books, accounts, and records in sufficient detail to enable the commissioner to determine whether the license holder is in compliance with this chapter and rules adopted by the finance commission.

(b) A license holder shall maintain for inspection the license holder's books, accounts, and records for at least six years after the date the final entry of an earned income access transaction is recorded in those books, accounts, and records.

(c) The preservation of a photographic reproduction or records in photographic form constitute compliance with the requirements of this section.

Sec. 398.109. ANNUAL AND OTHER REPORTS. (a) Not later than January 1 of each year, an earned income access provider shall file a report with the commissioner containing, for the preceding calendar year:

(1) any information the commissioner requires concerning the provider's earned income access business;

(2) any information the commissioner requires concerning any business entity with which the earned income access business is operationally or financially consolidated; and

(3) the provider's earned income access business operations in this state.

(b) In addition to the report required under Subsection (a), the commissioner may require a provider to submit a regular or special report if the commissioner considers the report necessary for the proper supervision of providers under this chapter.

(c) A report under Subsection (a) or (b) must:

(1) be in the form prescribed by the commissioner; and

(2) be subscribed and affirmed by the provider as true under penalty of perjury.

Sec. 398.110. REPRESENTATION REGARDING LICENSURE. (a) A provider may not, directly or indirectly, make a representation that the provider is licensed under Subtitle A, Title 3.

(b) A provider licensed under Subchapter B may make a representation that the provider is licensed as an earned income access provider under this chapter.

SUBCHAPTER D. ENFORCEMENT

Sec. 398.151. CRIMINAL OFFENSE. (a) In this section, "person" includes a member, officer, director, or employee of an earned income access provider.

(b) A person commits an offense if the person:

(1) violates or knowingly participates in a violation of this chapter;

(2) knowingly makes an incorrect statement of a material fact in an application, report, or statement filed under this chapter;

(3) knowingly fails to state a material fact necessary to give the commissioner information lawfully required by the commissioner under this chapter; or

(4) refuses to permit an investigation or examination authorized under this chapter.

(c) An offense under this section is a Class B misdemeanor.

SECTION 6. Section 411.095(a), Government Code, is amended to read as follows:

(a) The consumer credit commissioner is entitled to obtain criminal history record information as provided by Subsection (a-1) that relates to a person who is:

(1) an applicant for or holder of a license or registration under Chapter 180, 342, 347, 348, 351, 353, 371, 393, [or] 394, or 398, Finance Code;

(2) an employee of or volunteer with the Office of Consumer Credit Commissioner;

(3) an applicant for employment with the Office of Consumer Credit Commissioner;

(4) a contractor or subcontractor of the Office of Consumer Credit Commissioner; or

(5) an officer, director, owner, or employee of a person described by Subdivision (1) or another person having a substantial relationship with that person under Chapter 180, 342, 347, 348, 351, 353, 371, 393, [or] 394, or 398, Finance Code.

SECTION 7. A person engaging in business as an earned income access provider on the effective date of this Act must obtain a license in accordance with Chapter 398, Finance Code, as added by this Act, not later than January 1, 2026.

SECTION 8. Sections 398.102 and 398.103, Finance Code, as added by this Act, apply only to an earned income access transaction made on or after the effective date of this Act.

SECTION 9. (a) Except as provided by Subsection (b) of this section, this Act takes effect September 1, 2025.

(b) Section 398.151, Finance Code, as added by this Act, takes effect January 1, 2026.