BILL ANALYSIS

C.S.H.B. 2575

By: Phillips

Transportation

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The Texas Department of Motor Vehicles (TxDMV) has developed an electronic system for perfecting, assigning, discharging, and canceling security interests in motor vehicle titles.  Participation by a lienholder in the system is voluntary.  Interested parties report that the electronic lien system is running well and uses a competitive mix of vendors that lienholders use as electronic intermediaries with the system.  However, it is also noted that only a fraction of the total transactions that could be performed each year are executed through the system.  C.S.H.B. 2575 seeks to reduce costs and improve the titling process by authorizing TxDMV to require participation by a lienholder in the electronic lien system.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Department of Motor Vehicles in SECTION 1 of this bill.

ANALYSIS

C.S.H.B. 2575 amends the Transportation Code to replace a provision establishing that participation by a lienholder in an electronic lien system developed by rule by the Texas Department of Motor Vehicles (TxDMV) under which a security interest in a motor vehicle may be perfected, assigned, discharged, and canceled electronically instead of by record maintained on a certificate of title is voluntary with a provision authorizing TxDMV to establish categories of lienholders that may participate in the system and authorizing TxDMV to require lienholder participation.

C.S.H.B. 2575 prohibits TxDMV from requiring a credit union, as defined by the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009, to participate in the system if TxDMV has issued fewer than 100 notifications of security interests in motor vehicles to the credit union during a calendar year.  The bill adds a temporary provision, set to expire January 1, 2013, to prohibit TxDMV from requiring a credit union to participate in the system during 2011 if TxDMV issues fewer than 200 notifications of security interests in motor vehicles to the credit union between September 1, 2011, and December 31, 2011 and during 2012 if the credit union was exempt during 2011 and TxDMV issues fewer than 200 notifications to the credit union in 2012.

C.S.H.B. 2575 requires TxDMV by rule to establish a reasonable schedule for compliance for each category of lienholder that is required to participate in the electronic lien system.  The bill prohibits TxDMV from prohibiting a lienholder from using an intermediary to access the system or requiring a lienholder to use an intermediary to access the system.

EFFECTIVE DATE

September 1, 2011.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.H.B. 2575 contains provisions not included in the original prohibiting the Texas Department of Motor Vehicles from requiring a credit union to participate in the electronic lien system under certain conditions.  The substitute differs from the original by specifying that the reasonable schedule for compliance for each category of participating lienholder required to be established by TxDMV is to be established by rule. 

C.S.H.B. 2575 differs from the original by making the bill effective September 1, 2011, whereas the original makes the bill effective on passage, or, if the bill does not receive the necessary vote, September 1, 2011. The substitute differs from the original in nonsubstantive ways.