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                                                                  H.B. No. 955




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 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 this title or Title 3; 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 not secured by real property, whether or not 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 of the creditor 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 certification 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) The provisions of this chapter do not affect transactions that are not subject to this chapter nor 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 339.001, Finance Code, is amended by adding Subsection (c) to read as follows: (c) The Finance Commission of Texas shall have exclusive jurisdiction to enforce and adopt rules relating to this section. Rules adopted pursuant to this section shall be consistent with federal laws and regulations governing credit card transactions described by this section. This section does not create a cause of action against an individual for violation of this section. SECTION 2.16. 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 2.17. 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 the 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 2.18. 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 2.19. Section 348.001, Finance Code, is amended by adding Subdivisions (3-a) and (10-a) and amending Subdivision (4) 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 2.20. 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. SECTION 2.21. Section 342.308(a), Finance Code, is amended to read as follows: (a) A lender or a person who is assigned a secondary mortgage loan may collect on or before the closing of the loan, or include in the principal of the loan: (1) reasonable fees for: (A) title examination and preparation of an abstract of title by: (i) an attorney who is not an employee of the lender; or (ii) a title company or property search company authorized to do business in this state; or (B) premiums or fees for title insurance or title search for the benefit of the mortgagee and, at the mortgagor's option, for title insurance or title search for the benefit of the mortgagor; (2) reasonable fees charged to the lender by an attorney who is not a salaried employee of the lender for preparation of the loan documents in connection with the mortgage loan if the fees are evidenced by a statement for services rendered; (3) charges prescribed by law that are paid to public officials for determining the existence of a security interest or for perfecting, releasing, or satisfying a security interest; (4) reasonable fees for an appraisal of real property offered as security for the loan prepared by an [a licensed or certified] appraiser who is not a salaried employee of the lender; (5) the reasonable cost of a credit report; (6) reasonable fees for a survey of real property offered as security for the loan prepared by a registered surveyor who is not a salaried employee of the lender; (7) the premiums received in connection with the sale of credit life insurance, credit accident and health insurance, or other insurance that protects the mortgagee against default by the mortgagor, the benefits of which are applied in whole or in part to reduce or extinguish the loan balance; or (8) reasonable fees relating to real property offered as security for the loan that are incurred to comply with a federally mandated program if the collection of the fees or the participation in the program is required by a federal agency; and (9) an administrative fee, subject to Subsection (c), in an amount not to exceed $25 for a loan of more than $1,000 or $20 for a loan of $1,000 or less. SECTION 2.22. Section 342.251, Finance Code, is amended to read as follows: Sec. 342.251. MAXIMUM CASH ADVANCE. The maximum cash advance of a loan made under this subchapter is an amount computed under Subchapter C, Chapter 341, using the reference base amount of $100, except that for loans that are subject to Section 342.259 the reference base amount is $200. SECTION 2.23. Section 342.257, Finance Code, is amended to read as follows: Sec. 342.257. DEFAULT CHARGE; DEFERMENT OF PAYMENT. The provisions of Subchapter E relating to additional interest for default and additional interest for the deferment of installments apply to a loan made under this subchapter. Provided, that on a loan contract in which the cash advance is $100 or more, instead of additional interest for default under Subchapter E, the contract may provide for a delinquency charge if any part of an installment remains unpaid after the 10th day after the date on which the installment is due, including Sundays and holidays. The delinquency charge on a loan with a cash advance of $100 or more may not exceed the greater of $10 or five cents for each $1 of the delinquent installment. SECTION 2.24. Subchapter F, Chapter 342, Finance Code, is amended by adding Section 342.259 to read as follows: Sec. 342.259. LOANS WITH LARGER ADVANCES. (a) Instead of the charges authorized by Sections 342.201 and 342.252, a loan made under this subchapter with a maximum cash advance computed under Subchapter C, Chapter 341, using a reference base amount that is more than $100 but not more than $200, may provide for: (1) an acquisition charge that is not more than $10; and (2) an installment account handling charge that is not more than the ratio of $4 a month for each $100 of cash advance. (b) An acquisition charge under this section is considered to be earned at the time a loan is made and is not subject to refund. On the prepayment of a loan that is subject to this section, the installment account handling charge is subject to refund in accordance with Subchapter H. (c) Except as provided by this section, provisions of this chapter applicable to a loan that is subject to Section 342.252 also apply to a loan that is subject to this section.
ARTICLE 3. DEPARTMENT OF SAVINGS AND MORTGAGE LENDING
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 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 Subchapter C, Chapter 349. 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. Subchapter A, Chapter 59, Finance Code, is amended by adding Section 59.011 to read as follows: Sec. 59.011. LENDER LIABILITY FOR CONSTRUCTION. (a) For purposes of Chapter 27, Property Code, and Title 16, Property Code, a federally insured financial institution regulated under this code is not a builder. (b) A lender regulated by this code that forecloses on or otherwise acquires a home through the foreclosure process or other legal means when the loan is in default is not liable to a subsequent purchaser for any construction defects of which the lender had no knowledge that were created prior to the acquisition of the home by the lender. (c) A builder hired by a lender to complete the construction of a foreclosed home is not liable for any construction defects of which the builder had no knowledge that existed prior to the acquisition of the home by the lender, but the builder is subject to Chapter 27, Property Code, and Title 16, Property Code, for work performed for the lender subsequent to the acquisition of the home by the lender. SECTION 5.02. 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 5.03. 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 5.04. 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 5.05. 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 5.06. 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 5.07. 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 5.08. 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 5.09. 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 5.10. 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 5.11. 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 5.12. 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 5.13. 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 5.14. 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 5.15. 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 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 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 subchapter 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 5.16. 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 5.17. 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 5.18. 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 5.19. 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 5.20. 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 5.21. 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. [(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. The change in law made by Section 339.001(c), Finance Code, as added by this Act, applies only to a credit card transaction entered into on or after the effective date of this Act. A credit card transaction entered into before that date is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose. SECTION 7.03. 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 7.04. (a) The Office of Consumer Credit Commissioner, with the assistance of the attorney general, shall conduct a study to develop and evaluate proposals to limit the use of social security numbers by businesses in this state. (b) In conducting the study, the consumer credit commissioner shall receive input from credit reporting agencies, businesses, and consumer groups. (c) The consumer credit commissioner shall evaluate whether, when a business contacts a credit reporting agency for a credit check of a customer, the business and credit reporting agency should create a unique code that: (1) would allow the business to retrieve the social security number of the customer for collection purposes; and (2) would permit the business to delete the social security number of the customer from the records of the business. (d) The consumer credit commissioner shall determine the date on which the system described by Subsection (c) of this section could be implemented and the feasibility of monitoring compliance with the system. (e) Not later than July 1, 2006, the consumer credit commissioner shall submit a report to the legislature regarding the results of the study conducted under this section. (f) This section expires September 1, 2006. SECTION 7.05. 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. ______________________________ ______________________________ President of the Senate Speaker of the House I certify that H.B. No. 955 was passed by the House on May 10, 2005, by a non-record vote; that the House refused to concur in Senate amendments to H.B. No. 955 on May 27, 2005, and requested the appointment of a conference committee to consider the differences between the two houses; and that the House adopted the conference committee report on H.B. No. 955 on May 29, 2005, by a non-record vote. ______________________________ Chief Clerk of the House I certify that H.B. No. 955 was passed by the Senate, with amendments, on May 25, 2005, by the following vote: Yeas 31, Nays 0; at the request of the House, the Senate appointed a conference committee to consider the differences between the two houses; and that the Senate adopted the conference committee report on H.B. No. 955 on May 29, 2005, by a viva-voce vote. ______________________________ Secretary of the Senate APPROVED: __________________ Date __________________ Governor