TITLE 7. BANKING AND SECURITIES

PART 1. FINANCE COMMISSION OF TEXAS

CHAPTER 2. RESIDENTIAL MORTGAGE LOAN ORIGINATORS APPLYING FOR LICENSURE WITH THE OFFICE OF CONSUMER CREDIT COMMISSIONER UNDER THE SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT

SUBCHAPTER B. OPERATIONAL REQUIREMENTS FOR OFFICE OF CONSUMER CREDIT COMMISSIONER LICENSEES

7 TAC §2.201

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 2, concerning Residential Mortgage Loan Originators Applying for Licensure with the Office of Consumer Credit Commissioner Under the Secure and Fair Enforcement for Mortgage Licensing Act.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 2 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the license term, renewal process, and expiration date for residential mortgage loan originators. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments are provided in the following paragraph.

In §2.201, proposed amendments specify the term, renewal process, and expiration date for a residential mortgage loan originator license. The proposed amendments maintain the current one-year term, the current December 31 expiration date, and the current reinstatement period from January 1 through the last day of February, all of which are currently described in §2.104. The title of §2.201 is also amended to state "License Term, Renewal, and Expiration," to ensure that the rule's title clearly conveys its contents, and to ensure consistency with other rules being amended in this proposal. In addition, proposed amendments shorten the titles of Chapter 2 and its two subchapters, in order to make these titles more simple and concise, and to clarify that Chapter 2 applies to residential mortgage loan originators regulated by the OCCC, not just those applying for licensure.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or repeal an existing regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments to 7 TAC, Chapter 2 are proposed under Texas Finance Code, §180.004, which authorizes the commission to adopt rules necessary to implement Texas Finance Code, Chapter 180. In addition, the proposed amendments in §2.201 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 180.

§2.201.License Term, Renewal, and Expiration.

(a) License term. A new residential mortgage loan originator license is effective from the date of its issuance until December 31. A license must be renewed annually in order to remain effective. After renewal, a license is effective for a term of one year, from January 1 to December 31.

(b) [(a)] Requirements. A license may be renewed if:

(1) the RMLO submits a completed application for renewal through the NMLS together with the payment of the applicable renewal application fee;

(2) the OCCC determines that the RMLO continues to meet the minimum requirements for license issuance, including financial responsibility, character, and general fitness, as provided in Texas Finance Code, §180.055, and subsection (g) [(d)] of this section; and

(3) the RMLO provides satisfactory evidence that the RMLO has completed the continuing education requirements of Texas Finance Code, §180.060.

(c) Due date for annual fees. Annual renewal fees are due by December 31 of each year.

(d) Expiration. A residential mortgage loan originator license expires on December 31 if the annual renewal fee has not been paid by December 31. After expiration, a license may be reinstated during the period from January 1 through the last day of February.

(e) [(b)] Rejection of renewal. Renewal of a license may be rejected for reasons provided in Texas Finance Code, §180.201.

(f) [(c)] Additional information. The OCCC may require additional, clarifying, or supplemental information from any applicant for the renewal of a license pursuant to Texas Finance Code, Chapter 180 in order to determine compliance with the law.

(g) [(d)] Additional background checks. After initial issuance of a license, the OCCC may require additional criminal and credit background checks in order to determine an RMLO's continuing compliance with the law.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901929

Laurie B. Hobbs

Assistant General Counsel

Finance Commission of Texas

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 3. STATE BANK REGULATION

SUBCHAPTER B. GENERAL

7 TAC §3.24

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §3.24 concerning required notice of cybersecurity incidents. The new rule is proposed to require a state bank to notify the banking commissioner promptly if it experiences a material cybersecurity incident in its information system.

Proposed subsection (a) provides definitions. "Cybersecurity incident" is defined in a manner consistent with current federal guidance as essentially an observed irregularity that must be investigated to determine if information has been damaged or stolen. Most cybersecurity incidents will not result in a notice to the commissioner. "Information system" is defined more broadly than current federal guidance, which is limited to systems that handle sensitive customer information. However, there are other types of sensitive data that can have a detrimental impact on a bank if breached, including confidential business information, trade secrets, organizational strategies and financial information. Further, a breach of specialized systems such as electronic banking systems, industrial/process control systems, telephone switching, private branch exchange systems, and environmental control systems can have a material adverse effect on a bank's operations and financial performance.

Subsection (b) as proposed requires a state bank to notify the banking commissioner as soon as practicable but no later than 15 days following a determination that a cybersecurity incident has occurred regarding the bank's information system, whether maintained by the bank or by an affiliate or third party service provider at the direction of the bank, if the incident has a reasonable likelihood of (1) requiring notice to a regulatory agency other than the department, (2) a data breach notification to customers of the bank under applicable law, or (3) otherwise causing a material adverse effect on the financial performance of the bank or on customers of the bank.

Proposed subsection (c) specifies the information required to be submitted in the notice, to the extent known at the time of submission. The purpose of the notice is not to provide comprehensive information regarding the incident, but rather to provide a confidential early warning to (1) ensure the commissioner is informed of the basic circumstances before receiving related consumer complaints and calls from elected officials, and (2) enable the department to monitor the bank's incident response and provide guidance if appropriate. While examiners with the department have sophisticated expertise and can assist if warranted, the proposed section is not intended to authorize the department to directly conduct or interfere with the bank's incident response.

Subsection (d) as proposed acknowledges that the filing of a suspicious activity report (SAR) under federal law will trigger the notice requirement under the proposed section but cautions that the bank should not mention or discuss any related SAR filing in the submitted notice.

Catherine Reyer, General Counsel, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Ms. Reyer also has determined that, for each year of the first five years the rule as proposed is in effect, the public benefit anticipated as a result of enforcing the rule is enhanced regulatory oversight and resulting public confidence in the safety and soundness of state banks, particularly regarding the ability to protect sensitive customer information. Regulatory oversight of a state bank's remediation and compliance efforts in response to a material cybersecurity incident can better inform the examination process applicable to all state banks, resulting in stronger and more secure protection of sensitive customer information and other confidential information.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed. There will be no adverse economic effect on persons required to comply with the rule as proposed. A state bank will merely add the notice requirement to the written incident response plan the bank is already required to maintain under applicable federal law.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

Pursuant to Government Code, §2001.0221, the department provides the following Government Growth Impact Statement for the proposed rule. During the first five years that the rule will be in effect, the rule will create a new regulation but will not create or eliminate a government program, require the creation of new employee positions or the elimination of existing employee positions, require an increase or decrease in future legislative appropriations to the department, require an increase or decrease in fees paid to the department, expand, limit or repeal an existing regulation; increase or decrease the number of individuals subject to the rule's applicability, or positively or adversely affect this state's economy.

To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

The new rule is proposed under Finance Code, §31.003(a)(2), which authorizes the commission to adopt rules necessary or reasonable to preserve or protect the safety and soundness of state banks. As required by Finance Code, §31.003(b), in proposing the new rule, the commission considered the need to promote a stable banking environment, provide the public with convenient, safe, and competitive banking services, preserve and promote the competitive position of state banks with regard to national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system, and allow for economic development in this state.

No state statutes are affected by the proposed new section.

§3.24.Notice of Cybersecurity Incident.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) "Cybersecurity incident" means any observed occurrence in an information system that:

(A) jeopardizes the cybersecurity of the information system or the information the system processes, stores or transmits; or

(B) violates the security policies, security procedures or acceptable use policies of the information system owner to the extent such occurrence results from unauthorized or malicious activity.

(2) "Information system" means a set of applications, services, information technology assets or other information-handling components organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, including the operating environment as well as any specialized system such as electronic banking systems, industrial/process control systems, telephone switching, private branch exchange systems, and environmental control systems.

(b) Notice required. A state bank shall notify the banking commissioner and submit the information required by subsection (c) of this section as soon as practicable but not later than 15 days following a determination that a cybersecurity incident has occurred regarding the bank's information system, whether maintained by the bank or by an affiliate or third party service provider at the direction of the bank, that will likely:

(1) require submission of a notice to a state or federal regulatory or law enforcement agency or to a self-regulatory body other than the notice required by this section;

(2) require sending a data breach notification to customers of the bank under applicable state or federal law, including Business and Commerce Code, §521.053, or a similar law of another state; or

(3) cause a material adverse effect on the financial performance of the bank or on customers of the bank.

(c) Content of notice. The notice required by subsection (b) of this section must include, to the extent known at the time of submission:

(1) a brief description of the cybersecurity incident, including the approximate date of the incident, the date the incident was discovered, and the nature of any data that may have been illegally obtained or accessed;

(2) subject to subsection (d) of this section, a list of the state and federal regulatory agencies, self-regulatory bodies, and foreign regulatory agencies to whom notice has been or will be provided; and

(3) the name, address, telephone number, and email address of the employee or agent of the bank from whom additional information may be obtained regarding the incident.

(d) Omission of certain information. The filing of a suspicious activity report (SAR) related to the cybersecurity incident under applicable federal law constitutes a notice described by subsection (b)(1) of this section. However, the bank should not reference or mention the filing of a SAR in the notice filed with the commissioner.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901955

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 11. MISCELLANEOUS

SUBCHAPTER A. GENERAL

7 TAC §§11.10 - 11.12

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §§11.10 - 11.12, concerning complaints. The new rules are proposed to provide consistent procedures for persons to complain about conduct of persons regulated by the department. The new rules are proposed in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The proposed new rules implement the applicable recommendations contained in the Sunset Model.

Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rules.

Ms. Newberg also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that complainants will have a clear, consistent process to follow and an understanding of timeframes for complaint processing and resolution.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rules as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--increase or decrease the number of individuals subject to the rules' applicability; or

--positively or adversely affect this state's economy.

The rules create new regulations concerning complaint handling to conform to recommendations from the Sunset Advisory Commission.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposed new sections must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

The new rules are proposed under Government Code, §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures.

Other statutes affected by the proposed new rules include Finance Code, §12.108 and §396.304, and Health and Safety Code, §711.048.

§11.10.Definitions.

(a) "Complainant" means a person who files a complaint or inquiry.

(b) "Complaint" means a signed, written communication submitted to the department by a person that alleges misconduct by a person believed to be engaging in an activity that is regulated by the department. For purposes of this subchapter, a complaint shall contain at least the following information:

(1) the complainant's name and contact information;

(2) the name of the entity against whom the complaint is submitted;

(3) the date and place of the alleged violation;

(4) a description of the facts or conduct alleged to violate applicable statutes or rules; and

(5) written documentation supporting the complaint.

(c) "Inquiry" means a communication made to the department about an entity believed to be engaging in an activity that is regulated by the department, but such communication does not include all of the required elements of a complaint.

§11.11.Complaint Processing.

(a) Complaints and inquiries filed with the department are generally considered public information, unless a specific statutory exception applies.

(b) Upon receipt of a complaint or inquiry, the department will make a good faith effort to protect complainant's identity to the extent possible. The department will determine if the complaint or inquiry relates to an activity that the department regulates.

(c) If the department does not regulate the activity that is the subject of the complaint or inquiry, the department shall close the complaint or inquiry, notify the complainant and refer the complaint or inquiry to the appropriate regulatory entity within five business days of receiving the complaint or inquiry, if known.

(d) If the department regulates the activity that is the subject of a complaint, the department shall initiate an investigation into the merits of the complaint by sending, within 10 business days of receiving the complaint, a copy of the complaint and any supporting documentation to the entity that is the subject of the complaint.

(e) The department shall prioritize complaints for purposes of determining the order in which complaints are investigated, taking into account the seriousness of the allegations made in a complaint and the length of time a complaint has been pending.

(f) A regulated entity that receives a complaint forwarded by the department shall respond within 30 days from the date the request is mailed by the department.

(g) The banking commissioner may appoint a hearings officer or other subject matter expert to investigate a complaint received by the department.

(h) The department may, at the discretion of the commissioner, arrange for the services of a qualified mediator or subject matter expert to assist in resolving the complaint.

(i) The department shall monitor how long each complaint is open and shall make all reasonable efforts to resolve complaints within 90 days of receipt. The department shall notify the complainant of their complaint status at least quarterly if more than 45 days have elapsed since the complaint was received.

(j) If the department determines that the complaint is not supported by the evidence, or if the complaint is resolved to the satisfaction of the parties, the complaint will be dismissed.

(k) The department shall notify all parties to the complaint within 10 business days of closing the complaint.

(l) A complainant who disagrees with the disposition of a complaint may appeal by filing a petition against the department in a district court in Travis County.

§11.12.Complaint Review and Reporting.

(a) The department shall maintain in accordance with its retention policy records of all complaints received. Such records shall include the information required in Finance Code, §12.108.

(b) A representative sample of complaints closed due to lack of jurisdiction or evidence shall be reviewed quarterly by the head of the division that received the complaint.

(c) At least quarterly, the department shall submit to the Finance Commission a report of the sources, subjects, types, and dispositions of complaint activity during the preceding period.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901958

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


CHAPTER 17. TRUST COMPANY REGULATION

SUBCHAPTER A. GENERAL

7 TAC §17.5

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §17.5, concerning required notice of cybersecurity incidents. The new rule is proposed to require a state trust company to notify the banking commissioner promptly if it experiences a material cybersecurity incident in its information system.

Proposed subsection (a) provides definitions. "Cybersecurity incident" is defined in a manner consistent with current federal guidance as essentially an observed irregularity that must be investigated to determine if information has been damaged or stolen. Most cybersecurity incidents will not result in a notice to the commissioner. "Information system" is defined more broadly than current federal guidance, which is limited to systems that handle sensitive customer information. However, there are other types of sensitive data that can have a detrimental impact on a trust company if breached, including confidential business information, trade secrets, organizational strategies and financial information. Further, a breach of specialized systems such as telephone switching or exchange systems and environmental control systems can have a material adverse effect on a trust company's operations and financial performance.

Subsection (b) as proposed requires a state trust company to notify the banking commissioner as soon as practicable but no later than 15 days following a determination that a cybersecurity incident has occurred regarding the trust company's information system, whether maintained by the trust company or by an affiliate or third party service provider at the direction of the trust company, if the incident has a reasonable likelihood of (1) requiring notice to a regulatory agency other than the department, (2) a data breach notification to clients of the trust company under applicable law, or (3) otherwise causing a material adverse effect on the financial performance of the trust company or on clients or beneficiaries of trusts and custodial arrangements handled by the trust company.

Proposed subsection (c) specifies the information required to be submitted in the notice, to the extent known at the time of submission. The purpose of the notice is not to provide comprehensive information regarding the incident, but rather to provide a confidential early warning to (1) ensure the commissioner is informed of the basic circumstances before receiving related consumer complaints and calls from elected officials, and (2) enable the department to monitor the trust company's incident response and provide guidance if appropriate. While examiners with the department have sophisticated expertise and can assist if warranted, the proposed section is not intended to authorize the department to directly conduct or interfere with the trust company's incident response.

Subsection (d) as proposed acknowledges that the filing of a suspicious activity report (SAR) under federal law will trigger the notice requirement under the proposed section but cautions that the trust company should not mention or discuss any related SAR filing in the submitted notice.

Proposed subsection (e) provides an exemption from the proposed rule for a family trust company that is exempt under Finance Code, §182.011.

Catherine Reyer, General Counsel, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Ms. Reyer also has determined that, for each year of the first five years the rule as proposed is in effect, the public benefit anticipated as a result of enforcing the rule is enhanced regulatory oversight and resulting public confidence in the safety and soundness of state trust companies, particularly regarding the ability to protect sensitive information of trust company clients and beneficiaries. Regulatory oversight of a state trust company's remediation and compliance efforts in response to a material cybersecurity incident can better inform the examination process applicable to all state trust companies, resulting in stronger and more secure protection of sensitive customer information and other confidential information.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed. There will be no adverse economic effect on persons required to comply with the rule as proposed. A state trust company will merely add the notice requirement to the written information security program and incident response plan maintained by the trust company.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

Pursuant to Government Code, §2001.0221, the department provides the following Government Growth Impact Statement for the proposed rule. During the first five years that the rule will be in effect, the rule will create a new regulation but will not create or eliminate a government program; will not require the creation of new employee positions or the elimination of existing employee positions; will not require an increase or decrease in future legislative appropriations to the department; will not require an increase or decrease in fees paid to the department; will not expand, limit or repeal an existing regulation; will not increase or decrease the number of individuals subject to the rule's applicability; and will not positively or adversely affect this state's economy.

To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

The new rule is proposed under Finance Code, §181.003(a)(2), which authorizes the commission to adopt rules necessary or reasonable to preserve or protect the safety and soundness of state trust companies.

No state statutes are affected by the proposed new section.

§17.5.Notice of Cybersecurity Incident.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) "Cybersecurity incident" means any observed occurrence in an information system that:

(A) jeopardizes the cybersecurity of the information system or the information the system processes, stores or transmits; or

(B) violates the security policies, security procedures or acceptable use policies of the information system owner to the extent such occurrence results from unauthorized or malicious activity.

(2) "Information system" means a set of applications, services, information technology assets or other information-handling components organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, including the operating environment as well as any specialized system such as telephone switching or exchange systems and environmental control systems.

(b) Notice required. A state trust company shall notify the banking commissioner and submit the information required by subsection (c) of this section as soon as practicable but not later than 15 days following a determination that a cybersecurity incident has occurred regarding the trust company's information system, whether maintained by the trust company or by an affiliate or third party service provider at the direction of the trust company, that will likely:

(1) require submission of a notice to another state or federal regulatory agency or to a self-regulatory body other than the notice required by this section;

(2) require sending a data breach notification to clients of or beneficiaries of trusts and custodial arrangements handled by the trust company under applicable state or federal law, including Business and Commerce Code, §521.053, or a similar law of another state; or

(3) cause a material adverse effect on:

(A) the financial performance of the trust company;or

(B) clients or beneficiaries of trusts and custodial arrangements handled by the trust company.

(c) Content of notice. The notice required by subsection (b) of this section must include, to the extent known at the time of submission:

(1) a brief description of the cybersecurity incident, including the approximate date of the incident, the date the incident was discovered, and the nature of any data that may have been illegally obtained or accessed;

(2) subject to subsection (d) of this section, a list of the state and federal regulatory agencies, self-regulatory bodies, and foreign regulatory agencies to whom notice has been or will be provided; and

(3) the name, address, telephone number, and email address of the employee or agent of the trust company from whom additional information may be obtained regarding the incident.

(d) Omission of certain information. The filing of a suspicious activity report (SAR) related to the cybersecurity incident under applicable federal law constitutes a notice described by subsection (b)(1) of this section. However, the trust company should not reference or mention the filing of a SAR in the notice filed with the commissioner.

(e) Exemptions. This section does not apply to a state trust company that is exempt under Finance Code, §182.011.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901959

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


CHAPTER 24. CEMETERY BROKERS

7 TAC §§24.1 - 24.4

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to repeal Chapter 24 concerning cemetery brokers, in its entirety. Chapter 24 consists of §§24.1 - 24.4.

The commission proposes the repeal of Chapter 24 in response to the legislative directives that persons are no longer required to be licensed or registered to sell a plot in a dedicated cemetery for another person, and Subchapter C-1, Chapter 711, Texas Health and Safety Code concerning cemetery broker registration is repealed in its entirety.

Impact Summary

For each year of the first five years after Chapter 24 is repealed, the elimination of the chapter will:

--decrease fees paid to the agency;

--repeal an existing regulation; and

--decrease the number of individuals subject to the chapter's applicability.

The repeal of Chapter 24 will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--create a new regulation; or

--positively or adversely affect this state's economy.

Analysis of Fiscal Impact and Public Benefits

Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has determined that for each of the first five years after Chapter 24 is repealed, there will be minimal fiscal implications for state government and no fiscal implications for local government. Prior to the implementation of the legislative directive, there were 17 cemetery brokers registered with the department. The annual registration fee was $100 per year. Assuming a stable number of registered brokers, the department's revenue will drop by $1,700 per year in each of the first five years after Chapter 24 is repealed.

Ms. Newberg has also determined that, for each year of the first five years after Chapter 24 is repealed, the public benefit anticipated as a result of the repeal is a reduction in unnecessary regulation and an increase in operational efficiency.

Analysis of Economic Impact

For each year of the first five years after Chapter 24 has been repealed, there will be a reduction in economic costs to persons previously required to comply with the chapter.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. Rather, there will be a $100 per year reduction in the cost of compliance for entities that were formerly required to register as cemetery brokers.

Comment Requested

To be considered, comments on the proposed repeal of Chapter 24 must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

Statutory Authority

The repeal of Chapter 24 is proposed under Texas Health and Safety Code, §711.012(a), which authorizes the commission to adopt rules for the regulation of perpetual care cemeteries.

Texas Health and Safety Code, Subchapter C-1 and §§711.001(6)(A), 711.038(e), 711.0381(a), 711.052(a), 711.056(a), 711.059(a), and 711.02(a) and (b) are affected by the proposed repeal of Chapter 24.

§24.1.Registration.

§24.2.Responsibilities After Registration.

§24.3.Consumer Complaints.

§24.4.Appeal of Delay in Registration Processing Times.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901963

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


CHAPTER 25. PREPAID FUNERAL CONTRACTS

SUBCHAPTER B. REGULATION OF LICENSES

7 TAC §§25.13, 25.23, 25.24

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to amend §25.13 concerning the annual report filing, §25.23 concerning the annual renewal fee and §25.24 concerning the annual examination fee (annual assessment) for existing permits to sell prepaid funeral benefits. The commission proposes these amendments in response to a legislative directive that the commission by rule prescribe the term of a permit issued, which may be for more than one year. The proposed amendments provide that a permit to sell prepaid funeral benefits is effective until it is revoked by the department or surrendered by the permit holder, combine the annual renewal fee and annual assessment into one new annual assessment schedule, and allow the values in the new assessment schedule to be adjusted for inflation, not more than annually, beginning September 1, 2020.

Summary of Current Rules

The requirement that an annual report be filed, and the required content of that report, are set forth in §25.13. This section does not currently specify how long a permit issued by the department to sell prepaid funeral benefits remains in effect.

The fees for a permit to sell prepaid funeral benefits set forth in §25.23 include an annual renewal fee. The annual renewal fee is based on the number of outstanding prepaid funeral benefit contracts and must be paid on or before March 1 of each year. Section 25.23(b)(2) includes a Renewal Fee Schedule that specifies the rates for the annual renewal.

Under §25.24, the annual assessment for an existing permit to sell prepaid funeral benefits is also based on the number of outstanding prepaid funeral benefit contracts. The annual assessment may be billed in quarterly or fewer installments each fiscal year. Section 25.24(b)(1) includes an Annual Assessment Schedule that specifies rates for the annual assessment. The annual assessment has advantages over the annual renewal fee for both permit holders and the department because it allows permit holders to calculate and accrue for amounts due to the department in support of the department's supervisory functions; provides for an equitable structure by which permit holders pay for the cost of supervision; allows the department to more accurately predict and manage its cash flows; and prevents the accumulation of excess funds.

Proposed Amendments

The proposed amendment to §25.13 adds the definition of a valid permit to clarify that a permit issued by the department to sell prepaid funeral benefits remains in effect until it is revoked by the department or surrendered by the permit holder.

The proposed amendment to §25.23 eliminates the annual renewal fee, including the Renewal Fee Schedule. The new definition of a valid permit makes existing permits perpetual rather than requiring that they be renewed each year. This supports the legislative directive that the commission by rule prescribe the term of a permit issued, which may be for more than one year. Existing permits will still be subject to revocation due to violations of state law.

The proposed amendment to §25.24 combines the current Renewal Fee Schedule in §25.23(b)(2) and the current Annual Assessment Schedule in §25.24(b)(1) into one new annual assessment schedule based on the number of outstanding prepaid funeral benefit contracts. The new annual assessment rates will still be billed in quarterly or fewer installments to preserve the advantages of the assessment system over the annual fee system as described above. Combining the two current schedules into one new assessment schedule also preserves the revenue to the department with little or no impact to existing permit holders.

To eliminate the need for large, one-time increases in annual assessments, the proposed amendment to §25.24 would also allow the department to escalate the new assessment rates based on the percentage change in an inflation index beginning September 1, 2020. The proposed inflation index is the Gross Domestic Product Implicit Price Deflator (GDPIPD), published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. While the Consumer Price Index (CPI) published by the Bureau of Labor Statistics, United States Department of Labor, is the most well-known measure, it measures only the prices of goods and services typically purchased by urban consumers. These goods and services constitute only about 60% of the economy's total production. In contrast, the GDPIPD captures the overall level of inflation in everything that an economy produces and is typically used to calculate inflation at the corporate or governmental level.

Each September 1, the assessment rates set forth in the proposed amendment to §25.24 will be reviewed by the department to determine if they should be revised upward (or downward) by an amount equal to the percentage change in the GDPIPD index values from the first quarter value of the previous calendar year (the previous March-to-March period). An increase in the GDPIPD can result in an increase in assessment rates if adopted by the department.

As provided by §25.24(c)(1), the department may periodically forgive a portion of assessments otherwise due in a year when the additional funds are not needed to fund the department's operations. Over the past five fiscal years, the department has discounted or forgiven a portion of the permit holders' annual assessments because the forgiven revenue was not needed to cover the department's regular operations. In fiscal years 2014, 2015, 2016, 2017 and 2018, the department reduced total billable annual assessments by 19%, 30%, 30%, 13% and 18%, respectively. Therefore, an increase in assessment rates will not necessarily result in a proportionate increase in assessments collected.

Impact Summary

For each year of the first five years the proposed amendments are in effect, the amendments will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--create a new regulation;

--expand, limit or repeal an existing regulation;

--increase or decrease the number of individuals subject to the rules' applicability; or

--positively or adversely affect this state's economy.

Analysis of Fiscal Impact and Public Benefits

Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has determined that, for the first five-year period the proposed amendments are in effect, there could be some fiscal implications for state government (but not for local government) as a result of enforcing or administering the amended rules. However, as discussed above, the department anticipates it will forgive a portion of the assessments otherwise due. Thus, it is anticipated that the proposed amendments will be revenue neutral for the first five-year period the amendments are in effect.

Assuming there are a stable number of permit holders and an annual inflation of 1.58% (based on the average percentage change in the GDPIPD index for the past five years) applied annually after the first year, and in the event no assessments are forgiven, Ms. Newberg estimates that, for each year of the first five years the proposed amendments are in effect, the increased assessments could generate additional revenue of $17,346 in year one, $17,620 in year two, $17,898 in year three, $18,181 in year four and $18,468 in year five. Although the five-year revenue estimate is required by Texas Government Code, §2001.024(a)(4), it is more understandable in the present context if presented by fiscal year (September through August). Assuming an effective date of September 1, 2019, Ms. Newberg estimates that the new assessment fees could generate additional revenue in fiscal years 2019 through 2023 as follows:

Figure: 7 TAC Chapter 25--Preamble (.pdf)

Ms. Newberg has also determined that, for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of the amendments is better matching of the actual cost of regulation with the service provided while achieving economic self-sufficiency for the supervision of prepaid funeral benefit sellers.

Analysis of Economic Impact

For each year of the first five fiscal years the proposed amendments are in effect, there could be some minimal economic impact. However, as discussed above, the department anticipates that it will forgive a portion of assessments otherwise due. Thus, it is anticipated that the amendments will have no actual economic impact. In the event no assessments are forgiven, the anticipated costs to all persons required to comply with the rules as proposed would be an average of $47.98 per fiscal year, or 1.78%. This is well below the historical reductions in billable assessments as outlined above.

There will be no adverse economic effect on rural communities. There could be some minimal adverse economic effect on small businesses and micro-businesses. However, as discussed above, the department anticipates that it will forgive a portion of assessments otherwise due. Thus, it is anticipated that the proposed amendments will have no actual economic effect on either small businesses or micro-businesses. In the event no assessments are forgiven, the adverse economic effect on small businesses would be an average of $47.18 per fiscal year, or 2.0%. The adverse economic effect on micro-businesses would be an average of $17.20 per fiscal year, or 2.1%, The adverse economic effect on large businesses would be an average of $79.13 per fiscal year, or 1.7%.

Comment Requested

To be considered, comments on the proposed amendments must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

Statutory Authority

The amendments are proposed under Texas Finance Code (Finance Code), §154.051(b) and §154.054, which authorize the commission to adopt rules necessary or reasonable to recover the cost of supervision and regulation by imposing and collecting reasonable fees.

Finance Code, §§154.108, 154.109(b) and 154.110 are affected by the proposed amendments.

§25.13.Annual Report Filing.

(a) Valid permit. A permit issued by the department to sell prepaid funeral benefits remains in effect until it is revoked by the department or surrendered by the permit holder.

(b) [(a)] Date of filing. Each permit holder with outstanding prepaid funeral benefit contracts must file an annual report with the department [Department] by March 1 of each year for the preceding calendar year.

(c) [(b)] Contents of filing. The Annual Report filing must be sworn to by an authorized agent or corporate officer of the permit holder before a notary and must provide:

(1) - (7) (No change.)

§25.23.Application [and Renewal] Fees.

(a) Definitions.

(1) - (2) (No change.)

(b) Application fees. The application fees set forth in this subsection have been set in accordance with the Finance Code, Chapter 154, for the purpose of defraying the cost of administering the Finance Code, Chapter 154. Except as otherwise provided in this subsection, all fees are due at the time the application is filed and are nonrefundable. An application submitted without the appropriate filing fee will be deemed incomplete and will not be considered.

(1) (No change.)

[(2) Renewal fee. The renewal fee for an existing permit is based on the number of outstanding contracts as reflected on the most recent annual report you have filed with the department, as specified in the Renewal Fee Schedule following this paragraph. You must pay the renewal fee by ACH debit on or before March 1 of each year, or by another method if directed to do so by the department. At least 15 days prior to the scheduled ACH transfer, the department will send you a notice specifying the amount of the renewal fee and the date the department will initiate payment of the fee by ACH debit, which will be March 1 of each year or, if March 1 is a holiday, the last business day immediately preceding March 1.]

[Figure: 7 TAC §23(b)(2)]

(2) [(3)] Conversion application fee. If you apply to convert a trust-funded prepaid funeral benefits operation to an insurance-funded prepaid funeral benefits operation, you must pay a $1,000 fee per application. In the event additional processing time is required because the application is incomplete, you must pay the additional processing costs incurred in excess of the filing fee originally submitted, at the rate of $600 per eight-hour employee day, provided that the total fee cannot exceed $2,000. Until you have paid any such additional fee, the application will be deemed incomplete and will not be considered.

§25.24.What Fees Must I Pay for an Examination?

(a) Definitions.

(1) - (3) (No change.)

(b) As a prepaid funeral benefits seller, what fees must I pay for department examinations?

(1) An annual assessment must be paid as an examination fee and as a renewal fee to the department to defray the cost of administering Chapter 154 [§154.054] of the Finance Code. The amount of your annual assessment is based on the number of outstanding contracts as reflected on your most recent annual report filed with the department. You must pay the annual assessment specified in the following table:

Figure: 7 TAC §25.24(b)(1) (.pdf)

[Figure: 7 TAC §25.24(b)(1)]

(2) - (3) (No change.)

(c) How will the department bill me for the examination fees and when must I pay them?

(1) - (2) (No change.)

(d) Adjustments for inflation. In this section, "GDPIPD" means the Gross Domestic Product Implicit Price Deflator, published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. The "annual GDPIPD factor" is equal to the percentage change in the GDPIPD index values published for the first quarter of the current year compared to the first quarter of the previous year (the March-to-March period immediately preceding the calculation date), rounded to a hundredth of a percent (two decimal places).

(1) Beginning September 1, 2020, and each September 1 thereafter, the table in subsection (b)(1) of this section, as most recently revised before such date pursuant to this subsection, may be revised as follows:

(A) the base assessment amount listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to whole dollars; and

(B) each factor listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to two decimal places.

(2) If the table in subsection (b)(1) of this section is revised for inflation (or deflation), then not later than August 1 of each year, the department shall calculate and prepare a revised table reflecting the inflation-adjusted values to be applied effective the following September 1 and will provide each permit holder with notice of and access to the revised table.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901961

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


CHAPTER 26. PERPETUAL CARE CEMETERIES

7 TAC §26.1

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to amend §26.1 concerning the fees for a certificate of authority (certificate) to operate a perpetual care cemetery. The commission proposes this amendment in response to a legislative directive that the commission by rule prescribe the term of a certificate issued, which may be for more than one year. The proposed amendment provides that a certificate to operate a perpetual care cemetery is effective until it is revoked by the department or surrendered by the certificate holder, combines the annual renewal fee and annual assessment into one new annual assessment schedule, and allows the values in the new assessment schedule to be adjusted for inflation, not more than annually, beginning September 1, 2020.

Summary of Current Rule

The fees for a certificate to operate a perpetual care cemetery set forth in §26.1 include an annual renewal fee. The annual renewal fee is based on the fund balance shown on the statement of funds in the most recent annual renewal report filed with the department and must be paid on or before March 1 of each year. Section §26.1(b)(2) includes an Annual Fee Schedule that specifies the rates for the annual renewal.

The fees set forth in §26.1 also include an annual assessment for existing certificate holders. As with the annual renewal fee, the annual assessment is also based on the fund balance shown on the statement of funds in the most recent annual renewal report. The annual assessment may be billed in quarterly or fewer installments each fiscal year. Section 26.1(b)(4) includes an Annual Assessment Schedule that specifies rates for the annual assessment. The annual assessment has advantages over the annual renewal fee for both certificate holders and the department because it allows certificate holders to calculate and accrue for amounts due to the department in support of the department's supervisory functions; provides for an equitable structure by which certificate holders pay for the costs of supervision; allows the department to more accurately predict and manage its cash flows; and prevents the accumulation of excess funds.

Proposed Amendment

First, the proposed amendment to §26.1 adds the definition of a "certificate of authority" to clarify that a certificate issued by the department to operate a perpetual care cemetery remains in effect until it is revoked by a district court or the department, or surrendered by the certificate holder. It also eliminates the word "renewal" from all references to the report that must be filed with the department each year.

Second, the proposed amendment to §26.1 eliminates the annual renewal fee, including the Annual Fee Schedule. The new definition of a "certificate of authority" makes existing certificates perpetual rather than requiring that they be renewed each year. This supports the legislative directive that the commission by rule prescribe the term of a certificate issued, which may be for more than one year. Existing certificates will still be subject to revocation due to violations of state law.

Third, the proposed amendment to §26.1 combines the current Annual Fee Schedule in §26.1(b)(2) and the current Annual Assessment Schedule in §26.1(b)(4) into one new annual assessment schedule based on the fund balance shown on the statement of funds in the most recent annual report. The new annual assessment rates will still be billed in quarterly or fewer installments to preserve the advantages of the assessment system over the annual fee system as described above. Combining the two current schedules into one new assessment schedule also preserves the revenue to the department with little or no impact to existing certificate holders.

Finally, to eliminate the need for large, one-time increases in annual assessments, the proposed amendment to §26.1 would also allow the department to escalate the new assessment rates based on the percentage change in an inflation index beginning September 1, 2020. The proposed inflation index is the Gross Domestic Product Implicit Price Deflator (GDPIPD), published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. While the Consumer Price Index (CPI) published by the Bureau of Labor Statistics, United States Department of Labor, is the most well-known measure, it measures only the prices of goods and services typically purchased by urban consumers. These goods and services constitute only about 60% of the economy's total production. In contrast, the GDPIPD captures the overall level of inflation in everything that an economy produces and is typically used to calculate inflation at the corporate or governmental level.

Each September 1, the assessment rates set forth in the proposed amendment to §26.1 will be reviewed by the department to determine if they should be revised upward (or downward) by an amount equal to the percentage change in the GDPIPD index values from the first quarter value of the previous calendar year (the previous March-to-March period). An increase in the GDPIPD can result in an increase in assessment rates if adopted by the department.

As provided by §26.1(c)(1), the department may periodically forgive a portion of assessments otherwise due in a year when the additional funds are not needed to fund the department's operations. Over the past five fiscal years, the department has discounted or forgiven a portion of the certificate holders' annual assessments because the forgiven revenue was not needed to cover the department's regular operations. In fiscal years 2014, 2015, 2016, 2017 and 2018, the department reduced total billable annual assessments by 22%, 30%, 30%, 13% and 18%, respectively. Therefore, an increase in assessment rates will not necessarily result in a proportionate increase in assessments collected.

Impact Summary

For each year of the first five years the proposed amendments are in effect, the amendments will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--create a new regulation;

--expand, limit or repeal an existing regulation;

--increase or decrease the number of individuals subject to the rules' applicability; or

--positively or adversely affect this state's economy.

Analysis of Fiscal Impact and Public Benefits

Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has determined that, for the first five-year period the proposed amendment is in effect, there could be some fiscal implications for state government (but not for local government) as a result of enforcing or administering the amended rule. However, as discussed above, the department anticipates it will forgive a portion of the assessments otherwise due. Thus, it is anticipated that the proposed amendment will be revenue neutral for the first five-year period the amendment is in effect.

Assuming there are a stable number of certificate holders and an annual inflation of 1.58% (based on the average percentage change in the GDPIPD index for the past five years) applied annually after the first year, and in the event no assessments are forgiven, Ms. Newberg estimates that, for each year of the first five years the proposed amendment is in effect, the increased assessments could generate additional revenue of $14,533 in year one, $14,763 in year two, $14,996 in year three, $15,233 in year four and $15,473 in year five. Although the five-year revenue estimate is required by Texas Government Code, §2001.024(a)(4), it is more understandable in the present context if presented by fiscal year (September through August). Assuming an effective date of September 1, 2019, Ms. Newberg estimates that the new assessment fees could generate additional revenue in fiscal years 2019 through 2023 as follows:

Figure: 7 TAC Chapter 26--Preamble (.pdf)

Ms. Newberg has also determined that, for each year of the first five years the proposed amendment is in effect, the public benefit anticipated as a result of the amendment is better matching of the actual cost of regulation with the service provided while achieving economic self-sufficiency for the supervision of perpetual care cemeteries.

Analysis of Economic Impact

For each year of the first five fiscal years the proposed amendment is in effect, there could be some minimal economic impact. However, as discussed above, the department anticipates that it will forgive a portion of assessments otherwise due. Thus, it is anticipated that the amendment will have no actual economic impact. In the event no assessments are forgiven, the anticipated costs to all persons required to comply with the rule as proposed would be an average of $60.66 per fiscal year, or 1.71%. This is well below the historical reductions in billable assessments as outlined above.

There will be no adverse economic effect on rural communities. There could be some minimal adverse economic effect on small businesses and micro-businesses. However, as discussed above, the department anticipates that it will forgive a portion of assessments otherwise due. Thus, it is anticipated that the proposed amendment will have no actual economic effect on either small businesses or micro-businesses. In the event no assessments are forgiven, the adverse economic effect on small businesses would be an average of $79.99 per fiscal year, or 1.7%. The adverse economic effect on micro-businesses would be an average of $18.77 per fiscal year, or 1.0%, The adverse economic effect on large businesses would be an average of $101.04 per fiscal year, or 2.0%.

Comment Requested

To be considered, comments on the proposed amendments must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

Authority

The amendments are proposed under Texas Finance Code (Finance Code), §712.008(a) which authorizes the commission to adopt rules necessary or reasonable to defray the cost of supervision and regulation by imposing and collecting reasonable fees.

Finance Code, §712.0036 and §712.0037 are affected by the proposed amendments.

§26.1.What Fees Must I Pay to Operate a Perpetual Care Cemetery? [What fees must I pay to operate a perpetual care cemetery?]

(a) Definitions. The following words and terms, when used in this section, will have the following meanings, unless the text clearly indicates otherwise.

(1) - (5) (No change.)

(6) Certificate of authority--a certificate issued by the department to operate a perpetual care cemetery, which remains in effect until it is revoked by a district court or the department, or surrendered by the certificate holder.

(b) If I want to operate a perpetual care cemetery, what fees must I pay to the department?

(1) (No change.)

[(2) An annual renewal fee must be paid as required by Section 712.0037 of the Act. This annual renewal fee is based on your fund balance as reflected on the statement of funds in the most recent annual renewal report you have filed with the department. Your annual renewal fee will be calculated according to the following table:]

[Figure: 7 TAC §26.1(b)(2)]

(2) [(3)] If the department does not receive your completed annual report [both your completed renewal report and renewal fee] by the due date, a late fee of $100 per day for each business day after the due date that the department does not receive your completed annual report [renewal report and renewal fee] may be imposed. You must pay this fee immediately upon receipt of the department's written invoice.

(3) [(4)] An annual assessment will be imposed as an examination fee and as a renewal fee on a perpetual care cemetery corporation to defray the cost of administering the Act, as required by Sections 712.0037, 712.042 and 712.044(b) of the Act. The annual assessment will be collected pursuant to 7 TAC §26.1(c)(1). The amount of your annual assessment is based on your fund balance as reflected on the statement of funds in the most recent annual [renewal] report you have filed with the department. You must pay the annual assessment specified in the following table:

Figure: 7 TAC §26.1(b)(3) (.pdf)

[Figure: 7 TAC §26.1(b)(4)]

(4) [(5)] If you are a new certificate holder and have not yet filed your first annual [renewal] report, which includes the statement of funds required by Section 712.041 of the Act, you must pay an examination fee of $75.00 per hour for each examiner and all associated travel expenses. Your subsequent annual assessments will be calculated in accordance with paragraph (3) [(4)] of this subsection.

(c) How will the department bill me for the annual assessment [and the annual fees] and when must I pay it? [them?]

(1) (No change.)

[(2) Your annual fee must be paid with the filing of your annual statement of funds by ACH debit on or before March 1st of each year.]

(2) [(3)] The annual assessment [A fee] is considered paid as of the date the department receives payment.

(d) Adjustments for inflation. In this section, "GDPIPD" means the Gross Domestic Product Implicit Price Deflator, published quarterly by the Bureau of Economic Analysis, United States Department of Commerce. The "annual GDPIPD factor" is equal to the percentage change in the GDPIPD index values published for the first quarter of the current year compared to the first quarter of the previous year (the March-to-March period immediately preceding the calculation date), rounded to a hundredth of a percent (two decimal places).

(1) Beginning September 1, 2020, and each September 1 thereafter, the table in subsection (b) of this section, as most recently revised before such date pursuant to this subsection, may be revised as follows:

(A) The base assessment amount listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to whole dollars; and

(B) Each factor listed in column three of the table may be increased (or decreased) by an amount proportionate to the measure of inflation (or deflation) reflected in the annual GDPIPD factor, rounded to four decimal places for fund balances not over $499,999.99 and five decimal places for fund balances of $500,000.00 or more.

(2) If the table in subsection (b) of this section is revised for inflation (or deflation), then not later than August 1 of each year, the department shall calculate and prepare a revised table reflecting the inflation-adjusted values to be applied effective the following September 1 and will provide each certificate holder with notice of and access to the revised table.

(e) [(d)] Must I pay for additional examinations and if so how much and when?

(1) - (2) (No change.)

(f) [(e)] Are any fees refundable? Fees paid under this section are nonrefundable.

(g) [(f)] What will happen if a fee is deemed unlawful or in excess of the department's authority? If a fee or reimbursement imposed or required by this section or the manner of its calculation is determined to be unlawful or to exceed the department's authority to adopt and impose, the remainder of the section is unaffected.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901962

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


CHAPTER 33. MONEY SERVICES BUSINESSES

7 TAC §33.30

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §33.30 concerning required notice of cybersecurity incidents. The new rule is proposed to require a money transmission licensee to notify the banking commissioner promptly if it experiences a material cybersecurity incident in its information system.

Proposed subsection (a) provides definitions of "cybersecurity incident" and "information system." The term "you" is also defined to mean a holder of a license issued under Texas Finance Code, Chapter 151.

"Cybersecurity incident" is defined in a manner consistent with currently applicable federal guidance as essentially an observed irregularity that must be investigated to determine if information has been damaged or stolen. Most cybersecurity incidents will not result in a notice to the commissioner.

"Information system" is defined more broadly than current federal guidance, which is limited to systems that handle sensitive customer information. However, there are other types of sensitive data that can have a detrimental impact on a licensee if stolen or compromised, including confidential business information, trade secrets, organizational strategies and financial information. Further, a breach of specialized systems such as electronic payment systems, industrial/process control systems, telephone switching, private branch exchange systems and environmental control systems can have a material adverse effect on a licensee's operations and financial performance.

Subsection (b) as proposed requires a licensee to notify the banking commissioner as soon as practicable following a determination that a cybersecurity incident has occurred regarding the licensee's information system, whether maintained by the licensee or by an affiliate or third party service provider at the direction of the licensee, if the incident has a reasonable likelihood of (1) requiring notice to a regulatory or law enforcement agency other than the department, (2) a data breach notification to customers of the licensee under applicable law, or (3) otherwise causing a material adverse effect on the financial performance of the licensee or on its customers.

Proposed subsection (c) specifies the information required to be submitted in the notice, to the extent known at the time of submission. The purpose of the notice is not to provide comprehensive information regarding the incident, but rather to provide a confidential early warning to (1) ensure the commissioner is informed of the basic circumstances before receiving related consumer complaints and calls from elected officials, and (2) enable the department to monitor the licensee's incident response and provide guidance if appropriate. While examiners with the department have sophisticated expertise and can assist if warranted, the proposed section is not intended to authorize the department to directly conduct or interfere with the licensee's incident response.

Subsection (d) as proposed acknowledges that the filing of a suspicious activity report (SAR) under federal law will trigger the notice requirement under the proposed section but cautions that the licensee should not mention or discuss any related SAR filing in the submitted notice.

Some have questioned whether licensees in other states or foreign countries should have to comply with the notice requirement if a cybersecurity incident does not affect Texas customers. The commissioner believes that a serious data breach usually implicates systemic problems that can easily spread to other information systems of the licensee and has the potential to cause significant financial harm which, in some cases, may endanger a licensee as a going concern. Further, this simple notice requirement is not onerous in terms of the information required to be in the notice. A licensee will merely add the notice requirement to its written incident response plan maintained as part of the licensee's information security program.

Catherine Reyer, General Counsel, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Ms. Reyer also has determined that, for each year of the first five years the rule as proposed is in effect, the public benefit anticipated as a result of enforcing the rule is enhanced regulatory oversight and resulting public confidence in the safety and soundness of Texas-licensed money services businesses, particularly regarding the ability to protect sensitive customer information. Regulatory oversight of a licensee's remediation and compliance efforts in response to a material cybersecurity incident can better inform the examination process applicable to all such licensees, resulting in stronger and more secure protection of sensitive customer information and other confidential information.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed. There will be no adverse economic effect on persons required to comply with the rule as proposed.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

Pursuant to Government Code, §2001.0221, the department provides the following Government Growth Impact Statement for the proposed rule. During the first five years that the rule will be in effect, the rule will create a new regulation but will not create or eliminate a government program, require the creation of new employee positions or the elimination of existing employee positions, require an increase or decrease in future legislative appropriations to the department, require an increase or decrease in fees paid to the department, expand, limit or repeal an existing regulation; increase or decrease the number of individuals subject to the rule's applicability, or positively or adversely affect this state's economy.

To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on August 5, 2019. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

The new rule is proposed under Finance Code, §151.102(a), which authorizes the commission to adopt rules necessary or appropriate to preserve and protect the safety and soundness of money services businesses and protect the interests of purchasers of money services and the public.

No state statutes are affected by the proposed new section.

§33.30.Notice of Cybersecurity Incident.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) "Cybersecurity incident" means any observed occurrence in an information system that:

(A) jeopardizes the cybersecurity of the information system or the information the system processes, stores or transmits; or

(B) violates the security policies, security procedures or acceptable use policies of the information system owner to the extent such occurrence results from unauthorized or malicious activity.

(2) "Information system" means a set of applications, services, information technology assets or other information-handling components organized for the collection, processing, maintenance, use, sharing, dissemination or disposition of electronic information, including the operating environment as well as any specialized system such as electronic payment systems, industrial/process control systems, telephone switching, private branch exchange systems and environmental control systems.

(3) "You" means a holder of a money transmission or currency exchange license issued under Finance Code, Chapter 151.

(b) Notice required. You must notify the banking commissioner and submit the information required by subsection (c) of this section within 15 days following a determination that a cybersecurity incident has occurred regarding your information system, whether maintained by you or by your affiliate or a third party service provider at your direction, that will likely:

(1) require you to submit a notice of the incident to another state or federal regulatory or law enforcement agency or to a self-regulatory body, other than the notice required by this section;

(2) require you to provide a data breach notification to any of your customers under applicable state or federal law, including Business and Commerce Code, §521.053, or a similar law of another state; or

(3) cause a material adverse effect on your financial performance or on any of your customers.

(c) The notice required by subsection (b) of this section must include, to the extent known at the time of submission:

(1) a brief description of the cybersecurity incident, including the approximate date of the incident, the date the incident was discovered, and the nature of any data that may have been illegally obtained or accessed;

(2) a list of the state and federal regulatory agencies, self-regulatory bodies, and foreign regulatory agencies to whom you have provided or will provide notice of the incident; and

(3) the name, address, telephone number, and email address of your employee or agent from whom additional information may be obtained regarding the incident.

(d) Omission of certain information. The filing of a suspicious activity report (SAR) related to the cybersecurity incident under applicable federal law constitutes a notice described by subsection (b)(1) of this section. However, the licensee should not reference or mention the filing of a SAR in the notice filed with the commissioner.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901960

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-1301


PART 4. DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 52. DEPARTMENT ADMINISTRATION

SUBCHAPTER A. COMPLAINTS AND APPEALS

7 TAC §§52.10 - 52.13

The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), proposes a new Chapter 52, new Subchapter A, Complaints and Appeals, new §§52.10 - 52.13, concerning complaints. The new rules are proposed to provide consistent procedures for persons to complain about conduct of entities and individuals regulated by the department. The new rules are proposed in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The proposed new rules implement the applicable recommendations contained in the Sunset Model.

Caroline C. Jones, the Department of Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Commissioner Jones also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that complainants will have a clear, consistent process to follow and an understanding of timeframes for complaint processing and resolution.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

1. create or eliminate a government program;

2. require the creation of new employee positions or the elimination of existing employee positions;

3. require an increase or decrease in future legislative appropriations to the agency;

4. require an increase or decrease in fees paid to the agency;

5. increase or decrease the number of individuals subject to the rule's applicability;

6. expand, limit, or repeal existing regulation; or

7. positively or adversely affect this state's economy.

The rules create new regulations concerning complaint handling to conform to recommendations from the Sunset Advisory Commission.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposed new sections must be submitted in writing to Devyn F. Wills, Associate General Counsel, Department of Savings and Mortgage Lending, 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705-4294 or by email to smlinfo@sml.texas.gov within 30 days of publication in the Texas Register.

The new rules are proposed under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the department relating to consumer complaints, Finance Code §13.011, which provides that the savings and mortgage lending commissioner shall prepare information concerning the department's regulatory functions and consumer complaint procedures, Finance Code §96.002, which provides that the finance commission may adopt rules necessary to supervise and regulate savings banks and to protect public investment in savings banks, Finance Code §156.102, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 156, Finance Code §157.0023, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 157, Finance Code §158.003, which provides that the finance commission may adopt rules necessary to ensure that residential mortgage loan servicers comply with federal and state laws, rules, and regulations, and Finance Code §180.004, which provides that the finance commission may implement rules necessary to comply with Chapter 180.

Other statutes affected by the proposed new rules are found in Finance Code Title 3, Subtitles B and C, and also Finance Code Chapters 13, 156, 157, 158, and 180.

§52.10.Definitions.

(a) "Complainant" means a person who files a complaint.

(b) "Complaint" means a signed, written communication submitted to the department by a person expressing a grievance against an entity or individual believed to be engaging in an activity that is regulated by the department. For purposes of this subchapter, complaints shall contain at least the following information:

(1) The complainant's name and contact information;

(2) The name of the entity or individual against whom the complaint is submitted;

(3) The date and place of the alleged violation;

(4) A description of the facts or conduct alleged to violate applicable statutes or rules; and

(5) Written documentation supporting the complaint.

(c) "Inquirer" means a person who files an inquiry.

(d) "Inquiry" means a communication made to the department about an individual or entity believed to be engaging in an activity that is regulated by the department, but such communication does not include all of the required elements of a complaint.

§52.11.Complaint Processing.

(a) Complaints and inquiries filed with the department are generally considered public information, unless a specific statutory exception applies.

(b) Upon receipt of an inquiry, the department will refer the inquirer to the department's website, or otherwise facilitate the filing of a complaint.

(c) Upon the receipt of a complaint, the department will determine if the complaint relates to an activity that the department regulates.

(1) If the department does not regulate the activity that is the subject of the complaint, the department shall close the complaint, notify the complainant and refer the complainant to the appropriate regulatory authority, if known, within ten (10) business days of determining that the department does not have jurisdiction.

(2) If the department regulates the activity that is the subject of a complaint, the department shall initiate an investigation into the merits of the complaint by sending, within ten (10) business days of receiving the complaint, a copy of the complaint and any supporting documentation to the entity or individual that is the subject of the complaint.

(d) The department will make a good faith effort to protect complainants' identity to the extent possible.

(e) The department shall prioritize complaints for purposes of determining the order in which complaints are investigated, taking into account the seriousness of the allegations made in a complaint and the length of time a complaint has been pending.

(f) A regulated entity or individual that receives a complaint forwarded by the department shall respond within fourteen (14) days from the date the request is mailed by the department.

(g) The commissioner may appoint an investigator, enforcement staff, or other subject matter expert to investigate a complaint received by the department.

(h) The department shall monitor how long each complaint is open, and shall make all reasonable efforts to resolve complaints within ninety (90) days of receipt. The department shall notify the complainant of their complaint status if more than forty-five (45) days has elapsed since the complaint was received, and shall continue to notify the complainant of the status at least quarterly until final disposition, unless such notice would jeopardize an investigation.

§52.12.Complaint Resolution and Disposition.

(a) If the department determines that the complaint is not supported by the evidence, or if the complaint is resolved to the satisfaction of the parties, the complaint will be closed.

(b) The department shall notify all parties to the complaint within ten (10) business days of closing the complaint.

(c) If the department determines that the complaint is sufficiently supported by the evidence, the complaint shall be referred to enforcement for adjudication.

(d) A complainant who disagrees with the disposition of a complaint by the department may appeal by requesting to have their file reviewed by another qualified employee of the department. Unless such review results in a new determination by the department, this review shall be considered final and, with the exception of 7 Texas Administrative Code §52.12(f), may not be further appealed.

(e) An entity or individual who is the subject of a complaint that has been referred to enforcement, and receives an order, may appeal by requesting a hearing. Such request shall be done in writing, which includes email. Such hearing shall be held in accordance with Chapter 9 of this title and with Government Code, Chapter 2001.

(f) A complainant, entity, or individual who disagrees with the disposition of a complaint by the department may appeal by filing a petition against the department in a district court in Travis County.

§52.13.Complaint Review and Reporting.

(a) The department shall maintain in accordance with its retention policy records of all complaints received. Such records shall include the information required in Finance Code §13.011.

(b) A representative sample of all complaints closed due to lack of jurisdiction or evidence shall be reviewed quarterly by the head of the division that received the complaint.

(c) The department shall submit to the Finance Commission a report of the sources, subjects, types, and dispositions of complaint activity for each fiscal year quarter.

(d) The department shall make available on its website information describing procedures for complaint investigation and disposition.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901964

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-2534


CHAPTER 61. HEARINGS

7 TAC §61.1

The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), proposes an amendment to 7 TAC §61.1, concerning hearings. The amendment is proposed to provide consistent procedures for persons to complain about conduct of entities regulated by the department. The amendment is proposed in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The proposed amendments implement the applicable recommendations contained in the Sunset Model.

Caroline C. Jones, the Department of Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Commissioner Jones also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that complainants will have a clear, consistent process to follow and an understanding of timeframes for complaint processing and resolution.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--increase or decrease the number of individuals subject to the rule's applicability; or

--positively or adversely affect this state's economy.

The rules create new regulations concerning complaint handling to conform to recommendations from the Sunset Advisory Commission.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposed amendments must be submitted in writing to Devyn F. Wills, Associate General Counsel, Department of Savings and Mortgage Lending, 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705 or by email to smlinfo@sml.texas.gov within 30 days of publication in the Texas Register.

The amendments are proposed under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the department relating to consumer complaints, and Finance Code §§13.007 and 13.011, which provide that the savings and mortgage lending commissioner shall supervise and regulate the organization, operation, and liquidations of state savings associations and prepare information concerning the department's regulatory functions and consumer complaint procedures.

Other statutes affected by the proposed amendments are found in Finance Code Title 3, Subtitle B, and also Finance Code Chapter 13.

§61.1.Hearings Officer.

Chapter 11 of the Texas Finance Code, provides that the Finance Commission may employ a hearings officer, who for purposes of Texas Government Code, §2003.021, is an employee of the Department of Savings and Mortgage Lending, Texas Department of Banking and the Office of the Consumer Credit Commissioner. As determined by the Commissioner, the [The] Finance Commission hearing officer or an Administrative Law Judge at the State Office of Administrative Hearings (SOAH) may [shall] conduct hearings under the provisions of the Act.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901965

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-2534


CHAPTER 76. MISCELLANEOUS

SUBCHAPTER E. HEARINGS

7 TAC §76.71

The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), proposes an amendment to §76.71 concerning hearings, an amendment to the name of Subchapter H of Chapter 76, and an amendment to the name of §76.122, concerning complaints. The amendments are proposed to provide consistent procedures for persons to complain about conduct of entities regulated by the department. The amendments are proposed in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The proposed amendments implement the applicable recommendations contained in the Sunset Model.

Caroline C. Jones, the Department of Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Commissioner Jones also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that complainants will have a clear, consistent process to follow and an understanding of timeframes for complaint processing and resolution.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--increase or decrease the number of individuals subject to the rule's applicability; or

--positively or adversely affect this state's economy.

The rules create new regulations concerning complaint handling to conform to recommendations from the Sunset Advisory Commission.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposed amendments must be submitted to Devyn F. Wills, Associate General Counsel, Department of Savings and Mortgage Lending, 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705-4294 or by email to smlinfo@sml.texas.gov within 30 days of publication in the Texas Register.

The amendments are proposed under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures, Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the department relating to consumer complaints, Finance Code §§13.007 and 13.011, which provide that the savings and mortgage lending commissioner shall supervise and regulate the organization, operation, and liquidations of state savings banks and prepare information concerning the department's regulatory functions and consumer complaint procedures, and Finance Code §96.002, which provides that the finance commission may adopt rules necessary to supervise and regulate savings banks and to protect public investment in savings banks.

Other statutes affected by the proposed amendments are found in Finance Code Title 3, Subtitle C, and also Finance Code Chapter 13.

§76.71.Hearings Officer.

Chapter 11 of the Texas Finance Code [The Texas Banking Act, §1.011(b), House Bill 1543, Acts, 74th Legislature], provides that the Finance Commission may employ a hearings officer, who for purposes of Government Code, §2003.21, is an employee of the Department of Savings and Mortgage Lending, Texas Department of Banking and the Office of the Consumer Credit Commissioner. As determined by the Commissioner, the [The] Finance Commission hearings officer or an Administrative Law Judge at the State Office of Administrative Hearings (SOAH) may shall conduct hearings under provisions of the Act.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901967

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-2534


CHAPTER 81. MORTGAGE BANKERS AND RESIDENTIAL MORTGAGE LOAN ORIGINATORS

SUBCHAPTER D. COMPLIANCE AND ENFORCEMENT

7 TAC §81.301, §81.302

The Finance Commission of Texas (the commission), on behalf of the Department of Savings and Mortgage Lending (the department), proposes an amendment to §81.301, concerning complaints and investigations, and to 7 TAC §81.302, concerning hearings and appeals. The amendments are proposed to provide consistent procedures for persons to complain about conduct of entities and individuals regulated by the department. The amendments are proposed in response to a recommendation of the Sunset Advisory Commission that the department update its complaint processing provisions in line with the Sunset Advisory Commission's Licensing and Regulation Model guidelines (Sunset Model).

The Sunset Model is intended as a guide to assist in evaluating occupational licensing and regulatory agencies to see if they are efficient, effective, fair, and accountable in their mission to protect the public. Complaint filing, processing, and recordkeeping are topics covered in the Sunset Model. The proposed amendments implement the applicable recommendations contained in the Sunset Model.

Caroline C. Jones, the Department of Savings and Mortgage Lending Commissioner, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Commissioner Jones also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is that complainants will have a clear, consistent process to follow and an understanding of timeframes for complaint processing and resolution.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rule as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

--create or eliminate a government program;

--require the creation of new employee positions or the elimination of existing employee positions;

--require an increase or decrease in future legislative appropriations to the agency;

--require an increase or decrease in fees paid to the agency;

--increase or decrease the number of individuals subject to the rule's applicability; or

--positively or adversely affect this state's economy.

The rules create new regulations concerning complaint handling to conform to recommendations from the Sunset Advisory Commission.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposed amendments must be submitted in writing to Devyn F. Wills, Associate General Counsel, Department of Savings and Mortgage Lending, 2601 North Lamar Boulevard, Suite 201, Austin, Texas 78705-4294, or by email to smlinfo@sml.texas.gov within 30 days of publication in the Texas Register.

The amendments are proposed under Government Code §2001.004, which provides the authority to adopt rules of practice stating the nature and requirements of all available formal and informal procedures; Finance Code §11.307, which provides that the finance commission shall adopt rules applicable to each entity regulated by the department relating to consumer complaints; Texas Finance Code §13.011, which provides that the savings and mortgage lending commissioner shall prepare information concerning the department's regulatory functions and consumer complaint procedures; Texas Finance Code §157.0023, which provides that the finance commission may adopt and enforce rules necessary for the intent of or to ensure compliance with Chapter 157; and Texas Finance Code §180.004, which provides that the finance commission may implement rules necessary to comply with Chapter 180.

Other statutes affected by the proposed amendments are found in Finance Code Chapter 156, 157, and 180.

§81.301.[Complaints and] Investigations.

(a) Investigations [Upon receipt of a written complaint alleging acts or omissions of a person as defined under Finance Code, §180.002(14) required to be licensed or a mortgage banker required to be registered under Finance Code, Chapter 157, the Commissioner or the Commissioner's designee will make an initial determination whether the complaint sets forth reasonable cause to warrant an investigation:]

[(1)] [If it has been determined that the complaint warrants an investigation, advise all parties who are subject of the complaint by written notice that a complaint has been filed and an investigation will be conducted. The investigation] will be conducted as [is] deemed appropriate in light of all the relevant facts and circumstances then known. Such investigation may include any or all of the following:

(1) review of documentary evidence;

(2) interviews with complainants, licensees, and third parties;

(3) obtaining reports, advice, and other comments and assistance of other state and/or federal regulatory, enforcement, or oversight bodies;

(4) other lawful investigative techniques as the Commissioner reasonably deems necessary and/or appropriate, including, but not limited to, requesting that complainants and/or other parties made the subject of complaints provide explanatory, clarifying, or supplemental information.

[(2) if determined that a complaint does not warrant investigation, advise the complainant of the right to bring forth additional facts or information to have the initiation of an investigation reconsidered, and close the file.]

(b) The Commissioner may, upon a finding of reasonable cause, investigate a licensee or registrant to determine whether they are complying with Finance Code, Chapter 157 and this chapter.

(c) The Commissioner may conduct an undercover or covert investigation only if the Commissioner, after due consideration of the circumstances, determines that the investigation is necessary to prevent immediate harm and to carry out the purposes of Finance Code, Chapter 157.

(d) Reasonable cause will be deemed to exist if the Commissioner has received information from a source he or she has no reason to believe to be other than reliable, including documentary or other evidence or information, indicating facts which a prudent person would deem worthy of investigation as a violation of Finance Code, Chapter 157.

§81.302.Hearings and Appeals.

(a) As determined by the Commissioner, hearings may [Hearings are to] be conducted in accordance with Chapter 9 of this title including, but not limited to motions for rehearing, notices of appeal, and applications for review. All [such] hearings shall, unless specifically authorized by the Commissioner, be conducted in Austin, Travis County, Texas. All appeals of decisions of the Commissioner shall be made to the State District Court in Travis County, Texas. Such rules, as set forth in Chapter 9 of this title are incorporated herein by reference for all purposes.

(b) If a person against whom an order is made requires 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 Government Code, Chapter 2001. Based on the findings of fact, conclusions of law, and any recommendations of the hearings officer, the Commissioner shall, by order, find that a violation has or has not occurred.

(c) Appeals of an order denying an application or the renewal of a license must be properly requested within ten calendar days of the date on which the initial order is received. All other appeals must be properly requested within thirty days of the date on which the initial order is issued. Any order not properly appealed by the applicable deadline becomes final without further action and cannot be appealed [with no further action by the Commissioner].

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 24, 2019.

TRD-201901968

Ernest C. Garcia

General Counsel

Department of Savings and Mortgage Lending

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 475-2534


PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER

CHAPTER 82. ADMINISTRATION

The Finance Commission of Texas (commission) proposes new §82.4, and proposes the repeal of §82.4, in 7 TAC, Chapter 82, concerning Administration.

In general, the purpose of the proposed rule changes in 7 TAC, Chapter 82 is to implement provisions related to administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill simplifies statutory provisions regarding complaint processing, in order to meet the Sunset Advisory Commission's across-the-board requirements.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

Section 82.4 is proposed for repeal and replacement with a new rule, to specify procedures for complaint processing. The proposed new rule is based on Texas Finance Code, §14.062 (as amended by HB 1442), which provides that the OCCC will maintain a system to act efficiently on complaints, will make information available describing complaint procedures, and will periodically notify complaint parties of the status of the complaint. The new rule is also proposed in response to a recommendation of the Sunset Advisory Commission, which directed the OCCC and the commission to develop an updated complaint process in rule. The Sunset Advisory Commission identified the following best practices that should be included in the complaint procedure rule: details on the phrases of the complaint process; overall timeline goals; intervals for notifying parties of the status of the complaint; a process for providing a summary of complaint resolution to the parties; information about appealing the OCCC's resolution of a complaint; procedures governing administrative dismissal of complaints; procedures for defining, counting, and reporting types of complaints; and definitions of how the OCCC distinguishes between complaints and inquiries. Sunset Advisory Commission, Finance Agencies Report with Staff Decisions, p. 57 (Sept. 2018).

In proposed new §82.4, subsection (a) defines the terms "complainant," "complaint," "inquiry," and "OCCC." The rule distinguishes between a complaint and an inquiry by defining a complaint to refer to a communication that expresses dissatisfaction with a transaction or alleges wrongful conduct, and by defining an inquiry to refer to a communication other than a complaint. In the precomment draft, the OCCC had included communications requesting assistance with a transaction in the definition of "complaint." The OCCC received an informal precomment that recommended against including requests for assistance in the definition, and pointed to a definition used by the Consumer Financial Protection Bureau. Based on this input, the OCCC believes that the proposed definition appropriately captures the sense of the term "complaint," and will help ensure that the OCCC accurately counts complaints.

Proposed §82.4(b) describes the procedures by which the OCCC processes complaints. The subsection explains that it will send a summary of the complaint and supporting documentation to the person who is the subject of the complaint, and that the person must respond by the deadline identified by the OCCC. The subsection explains that the OCCC will make reasonable efforts to resolve the complaint within 90 days. The subsection also describes circumstances where the OCCC may close complaints, including situations where the complaint is not supported by the evidence, is not within the OCCC's jurisdiction, contains no violation, or is resolved to the satisfaction of the parties. The subsection describes the process for appealing a complaint determination to senior staff of the OCCC consumer protection department. In response to a precomment, the subsection explains that the OCCC will notify the complaint parties of a request to appeal a complaint determination. One precommenter expressed concern about whether the complaint appeal process conflicted with Chapter 2001 of the Texas Government Code (the Administrative Procedure Act). If a complaint results in an enforcement action against a person, the rule's complaint appeal process would not affect that person's due process rights to appeal the enforcement action under the Administrative Procedure Act. For this reason, the OCCC does not believe that the complaint appeal process creates any inconsistency with the due process rights provided under the Administrative Procedure Act.

Proposed new §82.4(c) explains that the OCCC will quarterly review certain closed complaints, that the OCCC will quarterly report complaint activity to the commission, and that the OCCC will make complaint procedure information available on its website.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed rule changes are increased efficiencies and modernized rule language.

There is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal repeals §82.4 and replaces it with a new rule regarding complaint processing, in order to implement recommendations of the Texas Sunset Advisory Commission. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

7 TAC §82.4

The repeal in 7 TAC, Chapter 82 is proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code.

The statutory provisions affected by the proposed repeal are contained in Texas Finance Code, Chapters 14, 180, 342, 345, 347, 348, 351, 352, 353, 354, 393, and 394; and Texas Occupations Code, Chapter 1956.

§82.4.Consumer Complaint Process.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901932

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


7 TAC §82.4

The rule changes in 7 TAC, Chapter 82 are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 180, 342, 345, 347, 348, 351, 352, 353, 354, 393, and 394; and Texas Occupations Code, Chapter 1956.

§82.4.Consumer Complaint Process.

(a) Definitions.

(1) "Complainant" means a person who files a complaint with the OCCC.

(2) "Complaint" means a communication received by the OCCC consumer assistance department that expresses dissatisfaction with a transaction or alleges wrongful conduct. For purposes of this section, the OCCC will collect the following items and information regarding a complaint, if available:

(A) the complainant's name and contact information;

(B) the name of the person against whom the complaint is submitted;

(C) the date and place of the alleged misconduct, violation, or transaction;

(D) a description of the facts or conduct alleged to violate applicable statutes or rules, and the transaction; and

(E) any written documentation supporting the complaint.

(3) "Inquiry" means a communication received by the OCCC consumer assistance department that is not a complaint.

(4) "OCCC" means the Office of Consumer Credit Commissioner of the State of Texas.

(b) Complaint processing.

(1) Complaints and inquiries filed with the OCCC are generally considered public information, unless a specific statutory exception applies.

(2) Upon receipt of a complaint and at the request of the complainant, the OCCC will make a good faith effort to protect the complainant's identity to the extent possible.

(3) The OCCC will determine whether the complaint or inquiry relates to an activity that the OCCC regulates.

(4) If the OCCC does not regulate the activity that is the subject of the complaint or inquiry, the OCCC will close the complaint or inquiry and refer the person making the complaint or inquiry to the appropriate regulatory entity, if known.

(5) If the OCCC regulates the activity that is the subject of a complaint, the OCCC will send a summary of the complaint and appropriate supporting documentation to the person that is the subject of the complaint.

(6) The OCCC will prioritize complaints for purposes of determining the order in which complaints are investigated, taking into account the seriousness of the allegations made in a complaint and the length of time a complaint has been pending.

(7) A person that receives a complaint forwarded by the OCCC must respond by the deadline identified by the OCCC when it forwards the complaint.

(8) The OCCC will monitor how long each complaint is open, and will make all reasonable efforts to resolve complaints within 90 days of receipt. The OCCC will notify the complainant of their complaint status at least quarterly until final disposition, unless such notice would jeopardize an ongoing complaint analysis, a field investigation, or a pending enforcement action.

(9) If the OCCC determines that the complaint is not supported by the evidence, is not within the OCCC's jurisdiction, contains no violation, or is resolved to the satisfaction of the parties, the complaint will be closed. Upon closure, the OCCC will promptly send a closure summary outlining the results of the complaint analysis to all parties to the complaint.

(10) The OCCC will notify all parties to the complaint within 10 business days of closing the complaint.

(11) A complainant who disagrees with the disposition of a complaint may appeal by sending a written appeal request to the OCCC consumer assistance department within 30 calendar days after the date of the closure summary. Upon receipt of an appeal request, the OCCC will notify the complaint parties of the request, and a senior member of the OCCC consumer protection department will review all information and make a determination regarding the complaint. The OCCC will send a letter of its final findings to the complaint parties.

(c) Complaint review and reporting.

(1) The OCCC will maintain records of all complaints received in accordance with its retention policy. These records will include the information required in Texas Finance Code, §14.062.

(2) Complaints closed administratively, due to lack of jurisdiction, or due to lack of evidence will be reviewed quarterly by the consumer assistance manager.

(3) At least quarterly, the OCCC will submit to the Finance Commission a report of the sources, subjects, types, and dispositions of complaint activity during the preceding period.

(4) The OCCC will make available on its website information describing procedures for complaint receipt, investigation, and closure.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901931

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 83. REGULATED LENDERS AND CREDIT ACCESS BUSINESSES

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 83, concerning Regulated Lenders and Credit Access Businesses.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 83 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the license term, renewal process, and expiration date for regulated lenders and credit access businesses. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments are provided in the following paragraphs.

In §83.309, concerning License Status, a proposed amendment removes a subsection dealing with the date of license expiration for regulated lenders, because expiration is addressed in separate proposed amendments at §83.403. In addition, a proposed amendment changes the title of §83.309 from "License Status" to "License Inactivation or Voluntary Surrender," to provide more clarity about the subject matter of the section. Throughout §83.309 and other sections in this proposal, proposed amendments replace the use of the word "commissioner" with the agency's acronym, "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically. Proposed amendments to the section also update a citation and simplify references to filing a license amendment.

In §83.403, concerning Notice of Delinquency in Payment of Annual Assessment Fee, proposed amendments specify the term, renewal process, and expiration date for a regulated lender license. The proposed amendments maintain the current one-year term and the current December 31 expiration date. New subsection (e) also explains that an expired license may be reinstated during the 180-day period described in Texas Finance Code, Chapter 349. The OCCC received an informal precomment explaining that regulated lenders under Chapter 342, Subchapter F of the Texas Finance Code favor a one-year license period, and that this period may help avoid confusion that could occur if the OCCC used a two-year licensing period.

In §83.3009, concerning License Status, a proposed amendment removes a subsection dealing with the date of license expiration for credit access businesses, because expiration is addressed in separate proposed amendments at §83.4002. In addition, a proposed amendment changes the title of §83.3009 from "License Status" to "License Inactivation or Voluntary Surrender," to provide more clarity about the subject matter of the section.

In §83.4002, concerning Notice of Delinquency in Payment of Annual Assessment Fee, proposed amendments specify the term, renewal process, and expiration date for a credit access business license. The proposed amendments maintain the current one-year term and the current December 31 expiration date.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

SUBCHAPTER A. RULES FOR REGULATED LENDERS

DIVISION 3. APPLICATION PROCEDURES

7 TAC §83.309

The amendments in 7 TAC, Chapter 83, Subchapter A are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. The amendments to 7 TAC, Chapter 83, Subchapter B are proposed under Texas Finance Code, §393.622, which authorizes the commission to adopt rules necessary to enforce and administer Texas Finance Code, Chapter 393, Subchapter G. In addition, the proposed amendments in §83.403 and §83.4002 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 342, and 393.

§83.309.License Inactivation or Voluntary Surrender [Status].

(a) Inactivation of active license. A licensee may cease operating under a regulated loan license and choose to inactivate the license. A license may be inactivated by giving notice of the cessation of operations not less than 30 calendar days prior to the anticipated inactivation date. Notification must be provided by filing a license amendment [filed on the Amendment to a License] or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the new mailing address for the license, the effective date of the inactivation, and the fee for amending the license. A licensee must continue to pay the yearly renewal fees for an inactive license as outlined in §83.310 of this title (relating to Fees), or the license will expire as described by §83.403 of this title (relating to License Term and Annual Renewal).

(b) Activation of inactive license. A licensee may activate an inactive license by giving notice of the intended activation not less than 30 calendar days prior to the anticipated activation date. Notification must be provided by filing a license amendment [filed on the Amendment to a License] or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the contemplated new address of the licensed office, the approximate date of activation, and the fee for amending the license as outlined in §83.310 of this title.

(c) (No change.)

[(d) Expiration. A license will expire on the later of December 31 of each year or the 16th day after the written notice of delinquency is given unless the annual assessment fees have been paid by the due date for license renewal. A licensee that pays the annual assessment fees will automatically be renewed even though a new license may not be issued.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901933

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 4. LICENSE

7 TAC §83.403

The amendments to 7 TAC, Chapter 83, Subchapter A, are proposed under Texas Finance Code §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, the proposed amendments in §83.403 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 342.

§83.403.License Term, Renewal, and Expiration [Notice of Delinquency in Payment of Annual Assessment Fee].

(a) License term and renewal. A new license is effective from the date of its issuance until December 31. A license must be renewed annually to remain effective. After renewal, a license is effective for a term of one year, from January 1 to December 31.

(b) Due date for annual assessment fee. The annual assessment fee is due by December 1 of each year.

(c) Notice of delinquency. If a licensee does not pay the annual assessment fee, the OCCC will send a notice of delinquency. Notice [For purposes of Texas Finance Code, §342.155, and §83.309(d) of this title (relating to License Status), notice] of delinquency [in the payment of an annual assessment fee] is given when the OCCC sends the [delinquency] notice:

(1) by mail to the address on file with the OCCC as a master file address; or

(2) by e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided a master file e-mail address.

(d) Expiration. If a licensee does not pay the annual assessment fee, the license will expire on the later of:

(1) December 31 of each year; or

(2) the 16th day after notice of delinquency is given under subsection (c) of this section.

(e) Reinstatement. As provided by Texas Finance Code, §349.301 and §349.303(a), if a license was in good standing when it expired, a person may reinstate the expired license not later than the 180th day after its expiration date by paying the annual assessment fee and a $1,000 late filing fee.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901934

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


SUBCHAPTER B. RULES FOR CREDIT ACCESS BUSINESSES

DIVISION 3. APPLICATION PROCEDURES

7 TAC §83.3009

The amendments to 7 TAC, Chapter 83, Subchapter B are proposed under Texas Finance Code, §393.622, which authorizes the commission to adopt rules necessary to enforce and administer Texas Finance Code, Chapter 393, Subchapter G.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 393.

§83.3009.License Inactivation or Voluntary Surrender [Status].

(a) Inactivation of active license. A licensee may cease operating under a credit access business license and choose to inactivate the license. A license may be inactivated by giving notice of the cessation of operations not less than 30 calendar days prior to the anticipated inactivation date. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the new mailing address for the license, the effective date of the inactivation, and the fee for amending the license. A licensee must continue to pay the yearly renewal fees for an inactive license as outlined in §83.3010 of this title (relating to Fees), or the license will expire as described by §83.4002 of this title (relating to License Term and Annual Renewal).

(b) Activation of inactive license. A licensee may activate an inactive license by giving notice of the intended activation not less than 30 calendar days prior to the anticipated activation date. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the contemplated new address of the licensed office, the approximate date of activation, and the fee for amending the license as outlined in §83.3010 of this title.

(c) (No change.)

[(d) Expiration. A license will expire on the later of December 31 of each year or the 16th day after the written notice of delinquency is given unless the annual assessment fees have been paid by the due date for license renewal. A licensee that pays the annual assessment fees will automatically be renewed even though a new license may not be issued.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901936

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 4. LICENSE

7 TAC §83.4002

The amendments to 7 TAC, Chapter 83, Subchapter B are proposed under Texas Finance Code, §393.622, which authorizes the commission to adopt rules necessary to enforce and administer Texas Finance Code, Chapter 393, Subchapter G. In addition, the proposed amendments in §83.4002 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 393.

§83.4002.License Term, Renewal, and Expiration [Notice of Delinquency in Payment of Annual Assessment Fee].

(a) License term and renewal. A new license is effective from the date of its issuance until December 31. A license must be renewed annually to remain effective. After renewal, a license is effective for a term of one year, from January 1 to December 31.

(b) Due date for annual assessment fee. The annual assessment fee is due by December 1 of each year.

(c) Notice of delinquency. If a licensee does not pay the annual assessment fee, the OCCC will send a notice of delinquency. Notice [For purposes of Texas Finance Code, §393.613, notice] of delinquency [in the payment of an annual assessment fee] is given when the OCCC sends the [delinquency] notice:

(1) by mail to the address on file with the OCCC as a master file address; or

(2) by e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided a master file e-mail address.

(d) Expiration. If a licensee does not pay the annual assessment fee, the license will expire on the later of:

(1) December 31 of each year; or

(2) the 16th day after notice of delinquency is given under subsection (c) of this section.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901937

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 84. MOTOR VEHICLE INSTALLMENT SALES

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 84, §84.309 and §84.610, concerning Motor Vehicle Installment Sales. Additionally, the commission proposes new §84.617, in 7 TAC, Chapter 84, concerning Motor Vehicle Installment Sales.

In general, the purpose of the proposed amendments and new rule in 7 TAC, Chapter 84 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill addresses two issues that are relevant to this proposal. First, the bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years. Second, the bill removes current provisions from the Texas Finance Code stating that certain matters may be appealed to the commission, while maintaining a respondent's opportunity for judicial review in district court under the Administrative Procedure Act.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

In general, this proposal is intended to fulfill two purposes. First, proposed amendments specify the license term, renewal process, and expiration date for motor vehicle sales finance licensees. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. Second, a proposed amendment specifies procedures for appealing the denial of a debt cancellation agreement. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments and new rule are provided in the following paragraphs.

In §84.309, proposed amendments specify the procedure for appealing the denial of a debt cancellation agreement in a contested case. The amendments remove references to appealing a denial to the commission. This is based on Texas Finance Code, §354.005(d) (as amended by HB 1442), which specifies that the denial of a debt cancellation agreement may be appealed to district court after an opportunity for a hearing, and removes references to appealing the denial to the commission.

In §84.610, a proposed amendment removes a subsection dealing with the date of license expiration for motor vehicle sales finance licensees, because expiration is addressed separately in proposed new §84.617. Proposed amendments replace the use of the word "commissioner" with the agency's acronym, "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically. In addition, a proposed amendment changes the title of §84.610 from "License Status" to "License Inactivation or Voluntary Surrender," to provide more clarity about the subject matter of the section.

Proposed new §84.617 specifies the term, renewal process, and expiration date for a motor vehicle sales finance license. The new rule maintains the current one-year term, and changes the expiration date from July 31 to October 31. Subsection (e) also explains that an expired license may be reinstated during the 180-day period described in Texas Finance Code, Chapter 349. A temporary provision explains that licenses obtained or renewed in 2019 will be effective until October 31, 2020.

Based on an initial analysis, the OCCC believes that the October 31 date will better align with the OCCC's fiscal year, and will better enable the OCCC to enjoy the operational efficiencies associated with staggering different types of license and registration renewals throughout the year. As an alternative to the rule changes as proposed, the OCCC is also considering moving to the October 31 renewal date in phrases, where the motor vehicle sales finance licensees would be divided into two groups, one of which would be required to renew by July 31, 2020, and the other of which would be required to renew by October 31, 2020. The OCCC invites comments on this issue.

The OCCC received two precomments recommending a staggered two-year renewal cycle for motor vehicle sales finance licensees. While the OCCC is open to considering two-year renewal in the future, the OCCC has several concerns. Currently, the motor vehicle sales finance licensee population sees a large amount of yearly turnover, with many new licensees coming into business each year and many other licenses expiring. Based on this turnover, the OCCC is concerned that a two-year renewal period would create additional complex and difficult situations pertaining to communications between licensees who have experienced changes in status or location and the OCCC. The OCCC is also concerned that the process of sending notifications to different portions of the licensed population on different dates would create confusion for licensees, who are most familiar with yearly renewal occurring on a common date for each license type. In addition, the OCCC is concerned about the additional costs that would result for the agency, including costly system modifications and fundamental changes to budget structure.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be fiscal implications for state government as a result of administering the rules. During the first fiscal year, FY 2020, the OCCC will experience decreased revenue as a result of shifting the license fee renewal period for motor vehicle sales finance licensees from a July 31 deadline to an October 31 deadline. As a result of moving this deadline, licensees that renew in June or July of 2019 will not be required to renew until October 2020. Consequently, during FY 2020, the OCCC will not receive any renewal fees from the vast majority of motor vehicle sales finance licensees, for an estimated revenue reduction of $3.4 million. During the following four fiscal years (FY 2021-2024), there will be no fiscal implications for state government as a result of administering the rules. Because motor vehicle sales finance license renewal will resume in September and October of 2020, the OCCC's revenue from license renewals in FY 2021 through 2024 is anticipated to be unaffected. However, revenue from renewing motor vehicle sales finance licensees will be received earlier during each of these years. The OCCC does not anticipate an impact on the costs to the state as a result of administering the rules. Additionally, Ms. Cuellar Hoke has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed rule changes are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. As discussed earlier, the proposed rule changes would result in a decrease in fees paid to the agency for the first year, but not for subsequent years. The proposal creates new rule §84.617 as part of the implementation of HB 1442. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

SUBCHAPTER C. INSURANCE AND DEBT CANCELLATION AGREEMENTS

7 TAC §84.309

The amendments in 7 TAC, Chapter 84 are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, proposed new §84.617 is authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 348, 353, and 354.

§84.309.Debt Cancellation Agreements Requiring Insurance.

(a) Purpose and scope. This section applies to a debt cancellation agreement described by Texas Finance Code, Chapter 354, that includes insurance coverage as part of the retail buyer's responsibility to the holder. Debt cancellation agreements must be submitted to the OCCC for approval, as provided by Texas Finance Code, §354.005(a). The denial of a debt cancellation agreement may be appealed in a contested case [to the Finance Commission of Texas], as provided by Texas Finance Code, §354.005(d). This section describes the requirements for submitting a debt cancellation agreement to the OCCC and the requirements for appealing the denial of a debt cancellation agreement [to the commission].

(b) - (f) (No change.)

(g) Proposal for decision. In connection with a contested case under this section, the administrative law judge will issue a proposal for decision to the commissioner [commission]. The proposal for decision will include a recommendation regarding whether the OCCC's denial of the agreement should be affirmed or reversed. The proposal for decision may include a recommendation that costs be assigned to a party, to the extent authorized by law.

(h) Final [Commission's final] order. The commissioner [commission] will issue a final order after review of the administrative law judge's proposal for decision. The final order will include a statement of whether the OCCC's denial of the agreement is affirmed or reversed. The final order may include an assignment of costs to a party, to the extent authorized by law.

(i) Judicial review of [commission's] final order. A final order [of the commission] under subsection (h) of this section may be appealed to a Travis County district court, as provided by Texas Government Code, §2001.176.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901938

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


SUBCHAPTER F. LICENSING

7 TAC §84.610, §84.617

The amendments and new rule in 7 TAC, Chapter 84 are proposed under Texas Finance Code §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, proposed new §84.617 is authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 348, 353, and 354.

§84.610.License Inactivation or Voluntary Surrender [Status].

(a) Inactivation of active license. A licensee may cease operating under a motor vehicle sales finance license and choose to inactivate the license. A license may be inactivated by giving notice of the cessation of operations not less than 10 calendar days prior to the anticipated inactivation date. Registered offices will be designated as closed when a license is inactivated. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the new mailing address for the license, the effective date of the inactivation, and the fee for amending the license. A licensee must continue to pay the yearly renewal fees for an inactive license as outlined in §84.611 of this title (relating to Fees), or the license will expire.

(b) Activation of inactive license. A licensee may activate an inactive license by giving notice of the intended activation not less than 10 calendar days prior to the anticipated activation date. Registered offices must be listed and appropriate fees paid upon activation of a license. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the contemplated new address of the licensed office, the approximate date of activation, and the fee for amending the license as outlined in §84.611 of this title.

(c) (No change.)

[(d) Expiration. A license will expire the later of July 31 of each year or the 16th day after the written notice of delinquency is given unless the annual assessment fees have been paid by the due date for license renewal. A licensee that pays the annual assessment fees will automatically be renewed even though a new license may not be issued. For purposes of this subsection, notice of delinquency in the payment of an annual assessment fee is given when the OCCC sends the delinquency notice:]

[(1) by mail to the address on file with the OCCC as a master file address; or]

[(2) by e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided a master file e-mail address.]

(d) [(e)] Surrendering to avoid administrative action. A licensee may not surrender a license after an administrative action has been initiated without the written agreement of the OCCC.

§84.617.License Term, Renewal, and Expiration.

(a) License term and renewal. A new license is effective from the date of its issuance until October 31. A license must be renewed annually to remain effective. After renewal, a license is effective for a term of one year, from November 1 of a calendar year to October 31 of the next calendar year.

(b) Due date for annual assessment fee. The annual assessment fee is due by October 1 of each year.

(c) Notice of delinquency. If a licensee does not pay the annual assessment fee, the OCCC will send a notice of delinquency. Notice of delinquency is given when the OCCC sends the notice:

(1) by mail to the address on file with the OCCC as a master file address; or

(2) by e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided a master file e-mail address.

(d) Expiration. If a licensee does not pay the annual assessment fee, the license will expire on the later of:

(1) October 31 of each year; or

(2) the 16th day after notice of delinquency is given under subsection (c) of this section.

(e) Reinstatement. As provided by Texas Finance Code, §349.301 and §349.303(a), if a license was in good standing when it expired, a person may reinstate the expired license not later than the 180th day after its expiration date by paying the annual assessment fee and a $1,000 late filing fee.

(f) Temporary provision. Notwithstanding subsections (a) and (d) of this section, if a licensee renews a license during 2019, or obtains a new license on or after August 1, 2019, then the license will be effective until October 31, 2020. The license must be renewed in order to remain in effect after October 31, 2020. This subsection expires on January 1, 2021.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901939

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 85.PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS

SUBCHAPTER A. RULES OF OPERATION FOR PAWNSHOPS

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 85, Subchapter A, §§85.102, 85.104, 85.202, 85.206, 85.210, 85.302 - 85.304, 85.306, 85.308, 85.601, 85.603, 85.604, 85.701, and 85.702, concerning Rules of Operation for Pawnshops.

The proposed amendments affect rules contained in Division 1, concerning General Provisions; Division 2, concerning Pawnshop License; Division 3, concerning Pawnshop Employee License; Division 6, concerning License Revocation, Suspension, and Surrender; and Division 7, concerning Enforcement; Penalties.

In general, the purpose of the proposed amendments to 7 TAC, Chapter 85, Subchapter A is to implement the pawnshop-related provisions of HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill's amendments to Chapter 371 relate mainly to four issues. First, the bill provides that pawnshops may, but are not required to, participate in the pawnshop employee license program. Second, the bill removes provisions stating that pawnshop and pawnshop employee license applicants must be of "good moral character." Third, the bill authorizes the commission to set the term of pawnshop and pawnshop employee licenses for a period up to two years. Fourth, the bill authorizes the commission to set pawnshop employee license fee amounts in accordance with Texas Finance Code, §14.107, replacing current statutory provisions containing a $25 initial fee and a $15 annual renewal fee.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. The OCCC did not receive any informal written precomments on the rule text draft, although several stakeholders provided verbal feedback during the stakeholder meeting. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments are intended to fulfill the following purposes: (1) to implement the optional pawnshop employee license program; (2) to amend pawnshop employee license fees to $50 for a new license and $25 for a renewal; (3) to clarify provisions on license term, renewal, and expiration, while maintaining the current June 30 expiration date for pawnshops and pawnshop employees; and (4) to remove references to "good moral character" as a licensing standard, while maintaining the OCCC's review of an applicant's character and fitness. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments to each section are provided in the following paragraphs.

In §85.102, a proposed amendment to the definition of "pawnbroker" removes a statement that a pawnbroker may include a pawnshop employee, and adds a reference to the statutory reference of "pawnbroker" in Texas Finance Code, §371.003(6). Another proposed amendment in §85.102 adds a definition of the term "pawnshop employee license program," explaining that this term refers to the optional licensing program under Texas Finance Code, Chapter 371, Subchapter C.

Proposed amendments to §85.104 specify license terms and expiration dates for pawnshops and pawnshop employees. These amendments implement Texas Finance Code, §14.112, as added by HB 1442. Section 14.112 provides that the commission shall prescribe the licensing period for licenses issued under Chapter 371, not to exceed two years. The proposed amendments to §85.104 maintain the current one-year license period, as well as the current June 30 expiration date, for pawnshops and pawnshop employees. A proposed amendment at §85.104(c), sets the due date for the annual license fee at May 31. This is based on Texas Finance Code, §371.064 and §371.106, as amended by HB 1442, which require licensees to pay a license fee not later than the 30th day before expiration of the license. Proposed §85.104(e) explains that at the time of renewal, a pawnshop may provide written notification to participate in the pawnshop employee license program. This is based on Texas Finance Code, §371.101(a-1), as amended by HB 1442, which explains that a pawnbroker may provide written notification to participate at the time of renewal. In §85.104, other proposed amendments provide additional clarity to the rule text.

In §85.202, a proposed amendment explains that a pawnshop may provide a notification to participate in the pawnshop employee license program at the time of the license application.

Proposed amendments to §85.206 remove references to "good moral character" as a licensing standard for pawnshops, while maintaining references to the OCCC's review of an applicant's character and fitness. These proposed amendments implement HB 1442's amendments to Texas Finance Code, §371.052, which remove provisions stating that pawnshop license applicants must be of "good moral character," while maintaining references to review of character and fitness. The statutory amendment is based on a recommendation of Sunset Advisory Commission staff, which stated that "good moral character" is a subjective standard that should be removed from the statute. A proposed amendment at §85.206(f)(1)(A)(iv) explains that the OCCC will review an applicant's criminal history as part of its review of character and fitness. Throughout §85.206, proposed amendments replace the use of the word "commissioner" with the agency's acronym, "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically.

In §85.210, a proposed amendment removes a subsection dealing with the date of license expiration, because expiration is addressed in the separate rule at §85.104. In addition, a proposed amendment changes the title of §85.210 from "License Status" to "License Inactivation or Voluntary Surrender," to provide more clarity about the subject matter of the section.

In §85.302, a proposed amendment specifies that the requirement for a pawnshop to notify the OCCC of a pawnshop employee's termination applies if the pawnshop participates in the pawnshop employee license program.

In §85.303, a proposed amendment specifies that the requirement for a pawnshop to notify the OCCC of a pawnshop employee's hiring applies if the pawnshop participates in the pawnshop employee license program.

Proposed amendments to §85.304 remove references to "good moral character" as a licensing standard for pawnshop employees, while maintaining references to the OCCC's review of an applicant's character and fitness. These proposed amendments implement HB 1442's amendments to Texas Finance Code, §371.102, which remove provisions stating that pawnshop employee license applicants must be of "good moral character," while maintaining references to review of character and fitness. The proposed amendments to §85.304 are similar to the amendments to §85.206 described earlier in this proposal.

Proposed amendments to §85.306 update fee amounts for pawnshop employee licenses. For the initial investigation and annual fee, a proposed amendment contains a $50 fee. For the annual renewal fee, a proposed amendment contains a $25 fee. These proposed amendments implement HB 1442's amendments to Texas Finance Code, §371.103 and §371.106, which authorize the commission to set pawnshop employee license fee amounts in accordance with Texas Finance Code, §14.107 in an amount necessary to recover the costs of administration.

The OCCC has determined that the proposed fee changes in §85.306 are necessary in order to ensure that pawnshop employee license fees appropriately fund the pawnshop employee license program. The commission is authorized to establish reasonable and necessary fees for the OCCC to carry out its functions under Chapter 371, and to set licensing fees under Chapter 371 at amounts necessary to recover the costs of administering the chapter. Tex. Fin. Code §14.107(a)-(b). As a self-directed, semi-independent agency, the OCCC is responsible for all direct and indirect costs of its operation, and is authorized to set fee amounts as necessary to carry out its functions. Tex. Fin. Code §16.003(b)-(c).

The OCCC performed an analysis of its current costs, determining how much cost should be allocated to each regulated license and registration type. This analysis showed that $285,000 of yearly costs are currently associated with licensing and regulation of pawnshop employees. The OCCC also estimates that 30% of pawnshops will opt to participate in the optional pawnshop employee license program, and therefore, as a result of HB 1442, the total number of pawnshop employees is estimated to decrease by approximately 70%. Some costs of the pawnshop employee license program will stay the same, while others will decrease. The OCCC's initial analysis suggests that annual costs for pawnshop employees will decrease to approximately $120,000. Based on this estimate, the OCCC has determined that a $50 investigation and annual fee, with a $25 annual renewal fee, would help ensure that revenues cover the cost of the pawnshop employee license program over time.

A proposed amendment at §85.306(d) specifies that a pawnshop employee must provide relocation notice to the OCCC in accordance with the OCCC's instructions.

In §85.308, proposed amendments specify that the requirement to maintain pawnshop employee records applies if the pawnshop participates in the pawnshop employee license program.

In §85.601, which describes denial, suspension, or revocation based on criminal history, proposed amendments remove references to "good moral character." As with the proposed amendments to §85.206 and §85.304, the proposed amendments to §85.601 maintain references to the OCCC's review of character and fitness.

In §85.603, a proposed amendment updates a reference to §85.104 as amended by this proposal.

In §85.604, which describes enforcement actions that the OCCC may take against a pawnbroker or pawnshop employee, proposed amendments explain that the requirements imposed on pawnbrokers apply to all pawnbrokers, and the requirements imposed on pawnshop employees apply to employees of pawnbrokers that participate in the pawnshop employee license program.

In §85.701, which describes enforcement actions that the OCCC may take for failure to file a timely pawnshop employee license application, proposed amendments explain that the requirements imposed on pawnbrokers apply to all pawnbrokers, and the requirements imposed on pawnshop employees apply to employees of pawnbrokers that participate in the pawnshop employee license program.

In §85.702, which describes enforcement actions that the OCCC may take for accepting prohibited merchandise, proposed amendments explain that the requirements imposed on pawnbrokers apply to all pawnbrokers, and the requirements imposed on pawnshop employees apply to employees of pawnbrokers that participate in the pawnshop employee license program.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed amendments are in effect there will be fiscal implications for state government as a result of administering the rules, and as a result of pawnshop employee licensing becoming optional under HB 1442. The OCCC estimates that 30% of pawnshops will opt to participate in the optional pawnshop employee license program, and therefore, the total number of pawnshop employees is estimated to decrease by approximately 70%. The OCCC estimates that for each of the first five fiscal years the rule is in effect, as a result of pawnshop employee licensing becoming optional, yearly costs for the pawnshop employee license program will decrease by approximately $165,000. The OCCC estimates that for each of the first five fiscal years the rule is in effect, as a result of the proposed amendments and pawnshop employee licensing becoming optional, yearly revenues for the pawnshop employee license program will decrease by approximately $92,000. Additionally, Ms. Cuellar Hoke has determined that for the first five-year period the proposed amendments are in effect there will be no fiscal implications for local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the amendments are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. The proposed amendments will also implement pawnshop employee licensing as an optional program in accordance with HB 1442, enabling pawnshops to determine whether to participate in pawnshop employee licensing based on their own needs. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The OCCC does not anticipate any cost to persons who are required to comply with the rule changes as proposed. Although the proposed amendments would adjust pawnshop employee license fee amounts, the licensing program is optional. Generally, pawnshop employee license fees have been paid by pawnshops. Under the proposed amendments, a pawnshop that chooses to participate in the program would experience a $50 cost for each new pawnshop employee, and a $25 per year cost to renew the license for each previously licensed employee. However, because this participation is not required, the OCCC does not anticipate costs to persons who are required to comply with the rule changes as proposed.

The OCCC does not anticipate any adverse economic effect on small businesses, micro-businesses, or rural communities as a result of the proposed amendments. The OCCC anticipates that approximately 350 pawnshops will participate in the pawnshop employee license program, and the OCCC believes that these pawnshops are small businesses or micro-businesses. Based on testimony provided to the Texas Legislature regarding HB 1442, the OCCC understands that many of these small businesses and micro-businesses wish to participate in pawnshop employee licensing because of the OCCC's review of the criminal history of pawnshop employee applicants. Because the program is optional, a pawnshop may choose not to participate in the program. The OCCC considered alternative methods of amending the rules to implement the pawnshop employee license program, including different pawnshop employee license fee amounts. However, the OCCC determined that these alternative methods would not meet the statutory objective of ensuring that licensing fees are set at amounts necessary to recover the costs of administering Chapter 371, as described by Texas Finance Code, §14.107. In order to obtain more complete information concerning the economic effect of these rule changes, the agency invites comments from interested stakeholders and the public on any economic impacts on small businesses, micro-businesses, or rural communities, as well as any alternative methods of achieving the purpose of the proposal while minimizing adverse impacts on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. As discussed earlier, the proposed rule changes, combined with the pawnshop employee license program becoming optional, will result in a decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or repeal an existing regulation. As discussed earlier, the proposal limits certain regulations regarding pawnshop employees to specify that they apply only to employees of pawnshops participating in the pawnshop employee license program, and to remove references to "good moral character" as a licensing standard, in accordance with HB 1442. The proposed rule changes decrease the number of individuals subject to rules governing pawnshop employees. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

DIVISION 1. GENERAL PROVISIONS

7 TAC §85.102, §85.104

These amendments are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 of the Texas Finance Code. Texas Finance Code, §371.006 also authorizes the commission to adopt rules for enforcement of Chapter 371 (the Texas Pawnshop Act). The proposed changes in §85.104 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license terms. The proposed fee changes in §85.306 are authorized under Texas Finance Code, §§14.107, 371.103, and 371.106 (as amended by HB 1442), which authorize the commission to set license fees for pawnshop employee licenses.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 371.

§85.102.Definitions.

Words and terms used in this subchapter that are defined in Texas Finance Code, Chapter 371, have the same meanings as defined in that chapter unless the context clearly indicates otherwise. The following words and terms, when used in this subchapter, will have the following meanings unless the context clearly indicates otherwise.

(1) - (9) (No change.)

(10) Pawnbroker--Has the meaning provided by Texas Finance Code, §371.003(6), and includes a [A] person who has an ownership interest in a pawnshop as shown in an application for a pawnshop license filed with the OCCC. [When general duties and prohibitions are described, pawnbroker also includes a pawnshop employee unless the context indicates otherwise.]

(11) Pawnshop employee license program--The optional program for licensing pawnshop employees described by Texas Finance Code, Chapter 371, Subchapter C.

(12) [(11)] Pledged goods--Tangible personal property held by a pawnbroker as collateral for a pawn loan and that has not become the property of the pawnbroker by a taking into inventory due to non-payment of the loan.

(13) [(12)] Principal party--An adult individual with a substantial relationship to the proposed business of the applicant. The following individuals are principal parties:

(A) a proprietor;

(B) general partners;

(C) officers of privately held corporations, including the chief executive officer or president, the chief operating officer or vice president of operations, the chief financial officer or treasurer, and those with substantial responsibility for lending operations or compliance with the Texas Pawnshop Act;

(D) directors of privately held corporations;

(E) individuals associated with publicly held corporations designated by the applicant as follows:

(i) officers as provided by subparagraph (C) of this paragraph (as if the corporation was privately held); or

(ii) three officers or similar employees with significant involvement in the corporation's activities governed by the Texas Pawnshop Act. One of the persons designated must be responsible for assembling and providing the information required on behalf of the applicant and must sign the application for the applicant;

(F) voting members of a limited liability corporation;

(G) shareholders owning 5% or more of the outstanding voting stock;

(H) trustees and executors; and

(I) individuals designated as a principal party where necessary to fairly assess the applicant's financial responsibility, experience, character, general fitness, and sufficiency to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly as required by the commissioner.

§85.104.License Term, Renewal, and Expiration [Renewal Dates of Licenses].

(a) License term and renewal [Licensing period and renewal due date]. A new pawnshop license or pawnshop employee license is effective from the date of its issuance until June 30. A pawnshop license and a pawnshop employee license must be renewed annually in order to remain effective. After renewal, a pawnshop license or pawnshop employee license is effective for a term of one year, from July 1 of one calendar year to June 30 of the next calendar year [are effective from July 1 through June 30 of each year].

(b) Due date for annual fees. The annual fees for pawnshop licenses and pawnshop employee licenses are due by May 31 [on June 1] of each year for the following July 1 through June 30 term.

(c) [(b)] Notice of delinquency. If a licensed pawnshop or pawnshop employee does not pay the annual fees [by June 1], the OCCC will send a written notice of delinquency [will be sent] by June 15.

(1) If a pawnshop has provided a master file e-mail address to the OCCC, then the OCCC will:

(A) send any notice of delinquency for the pawnshop to the master file e-mail address on file for the pawnshop; and

(B) send any notice of delinquency for an employee of the pawnshop to the employee through the master file e-mail address on file for the pawnshop.

(2) If a pawnshop has not provided a master file e-mail address to the OCCC, then the OCCC will:

(A) send any notice of delinquency for the pawnshop by mail to the master file address on file for the pawnshop; and

(B) send any notice of delinquency for an employee of the pawnshop to the employee by mail through the master file address on file for the pawnshop.

(d) [(c)] Expiration of license. A pawnshop license and a pawnshop employee license will expire on the later of June 30 of each year or the 16th day after the written notice of delinquency is given unless the annual fees for the following term have been paid. To be accepted [considered timely paid], the fees must be postmarked or submitted by June 30. June 30 is the end of the license term for each year. For purposes of this subsection [and §85.210(d) of this title (relating to License Status)], notice of delinquency is given when the OCCC sends the [delinquency] notice by the method described in subsection (c) [(b)] of this section.

(e) Pawnshop employee license program. At the time of the annual renewal, a pawnshop may provide a written notification to participate in the pawnshop employee license program.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901946

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 2. PAWNSHOP LICENSE

7 TAC §§85.202, 85.206, 85.210

These amendments are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 of the Texas Finance Code. Texas Finance Code, §371.006 also authorizes the commission to adopt rules for enforcement of Chapter 371 (the Texas Pawnshop Act).

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 371.

§85.202.Filing of New Application.

(a) An application for issuance of a new pawnshop license must be submitted in a format prescribed by the OCCC at the date of filing and in accordance with the OCCC's instructions. The OCCC may accept the use of prescribed alternative formats in order to accept approved electronic submissions. Appropriate fees must be filed with the application, and the application must include the following:

(1) Required application information. All questions must be answered.

(A) - (J) (No change.)

(2) Other required filings.

(A) - (H) (No change.)

(I) Pawnshop employee license program. At the time of the application, the applicant may provide a written notification to participate in the pawnshop employee license program.

(b) - (c) (No change.)

§85.206.Processing of Application.

(a) - (e) (No change.)

(f) Decision on application. The OCCC may approve or deny an application.

(1) Approval. The OCCC will approve the application upon payment of the appropriate fees and a finding of the eligibility and statutory location requirements.

(A) Eligibility requirements.

[(i) Good moral character. In evaluating an applicant's moral character the commissioner will consider criminal history information and the applicant's conduct and activities as described in §85.601 of this title (relating to Denial, Suspension, or Revocation Based on Criminal History.]

(i) [(ii)] A belief that the pawnshop will be operated lawfully and fairly. In evaluating this standard, the OCCC [commissioner] will consider an applicant's background and history. If the OCCC [commissioner ] questions the applicant's ability to meet this standard, the OCCC [commissioner] may require further conditions, such as probation, to favorably consider an applicant for a license.

(ii) [(iii)] Financial responsibility. In evaluating the financial responsibility of an applicant, the OCCC [commissioner] may investigate the history of an applicant and the principal parties of the applicant as to the payment of debts, taxes, and judgments, if any, and handling of financial affairs generally.

(iii) [(iv)] Experience. In evaluating experience, the OCCC [commissioner] will consider the applicant's background and history as well as the personnel that the applicant plans to use in the operation and management of the pawnshop.

(iv) [(v)] Character and [General] fitness [to command the confidence of the public]. In evaluating an applicant's character and fitness to command the confidence of the public, the OCCC will consider the [The] applicant's overall background and history, including the applicant's criminal history as described in §85.601 of this title (relating to Denial, Suspension, or Revocation Based on Criminal History) [will be considered]. Providing misleading information on the application or failing to disclose information to the OCCC may be grounds for denial.

(v) [(vi)] Net assets. Net assets are calculated by taking the sum of current assets and subtracting all liabilities either secured by those current assets or unsecured. Liabilities not included in the calculation are those liabilities that are secured by assets other than current assets including subordinated debt. Debt that is either unsecured or secured by current assets may be subordinated to the net asset requirement pursuant to an agreement of the parties providing that assets other than current assets are sufficient to secure the debt.

(B) (No change.)

(2) (No change.)

(g) - (h) (No change.)

§85.210.License Inactivation or Voluntary Surrender [Status].

(a) Inactivation of active license. A licensee may cease operating a pawnshop and choose to inactivate the license. A license may be inactivated by giving notice of the cessation of operations not less than 30 calendar days prior to the anticipated inactivation date. Written notification must be submitted by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the new mailing address for the license, the effective date of the inactivation, the fee for amending the license, a certification that no loans will be made or collected under the license until it is activated, a notice to pledgors that pawn loans are being relocated, and a plan ensuring pledged goods are made available for redemption. If an active license is not being used for the active operation of a pawnshop, the OCCC [commissioner ] may unilaterally place the license in inactive status. A licensee must continue to pay the annual assessment fees for an inactive license as outlined in §85.211 of this title (relating to Fees), or the license will expire as described by §85.104 of this title (relating to License Term, Renewal, and Expiration).

(b) Activation of inactive license. To activate an inactive license the holder of the inactive license must comply with the relocation requirements set forth in §85.203 of this title (relating to Relocation).

(c) (No change.)

[(d) Expiration. A license will expire on the later of June 30 of each year or the 16th day after the written notice of delinquency is given unless the annual assessment fees are paid as per §85.104 of this title (relating to Renewal Dates of Licenses). A licensee that pays the annual assessment fees will automatically be renewed even though a new license may not be issued.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901947

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 3. PAWNSHOP EMPLOYEE LICENSE

7 TAC §§85.302 - 85.304, 85.306, 85.308

These amendments are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 of the Texas Finance Code. Texas Finance Code, §371.006 also authorizes the commission to adopt rules for enforcement of Chapter 371 (the Texas Pawnshop Act). The proposed fee changes in §85.306 are authorized under Texas Finance Code, §§14.107, 371.103, and 371.106 (as amended by HB 1442), which authorize the commission to set license fees for pawnshop employee licenses.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 371.

§85.302.Notification of Termination.

If a pawnshop employee ceases working at a pawnshop that participates in the pawnshop employee license program, then the pawnbroker must [It is the responsibility of a pawnshop to] notify the OCCC of the termination [within a reasonable period of time when an employee ceases working at a pawnshop. A reasonable period of time is] within one week from the issuance of the final wage payment or in accordance with a standard preapproved reporting schedule.

§85.303.Notification of Hiring.

If a licensed pawnshop employee begins working at a pawnshop participating in the pawnshop employee license program, and the pawnshop is different from the pawnshop on file for the employee's license, then the hiring pawnbroker must [It is the responsibility of a pawnshop to] notify the OCCC of the hiring [within a reasonable period of time when a licensed employee begins working at a different pawnshop entity from that printed on the employee's license. A reasonable period of time is] within one week from the issuance of the initial wage payment or in accordance with a standard preapproved reporting schedule.

§85.304.Processing of Application.

(a) - (b) (No change.)

(c) Decision on application. The OCCC may approve or deny an application.

(1) Approval. The OCCC will approve the application upon payment of the appropriate fees and finding of the eligibility requirements. A license is the personal property of the employee and may not be retained by a pawnshop when an employee terminates employment with the pawnshop.

[(A) Good moral character. In evaluating an applicant's moral character the commissioner will consider criminal history information and the applicant's conduct and activities as described in §85.601 of this title (relating to Denial, Suspension, or Revocation Based on Criminal History.]

(A) [(B)] Good business repute. In evaluating an applicant's business repute, the OCCC [commissioner ] will consider the applicant's background and history.

(B) [(C)] Character and fitness [to warrant belief that pawnshop will be operated lawfully and fairly]. In evaluating the applicant's character and fitness to warrant the belief that the pawnshop will be operated lawfully and fairly, the OCCC will consider the [The] applicant's overall background and history, including the applicant's criminal history as described in §85.601 of this title (relating to Denial, Suspension, or Revocation Based on Criminal History) [will be considered]. Providing misleading information on the application or failing to disclose information to the OCCC may be grounds for denial.

(2) (No change.)

(d) - (f) (No change.)

§85.306.Fees.

(a) New licenses. A $50 [$25] nonrefundable investigation and annual fee is assessed each time an application for a new license is filed.

(b) (No change.)

(c) Annual renewal fees. The annual renewal fee for a pawnshop employee license is $25 [$15]. The fee must be paid by May 31 [June 30] each year. A pawnshop employee license will expire on the later of June 30 or the 16th day after the written notice of delinquency is given unless the annual renewal fee has been paid.

(d) License amendments. An employee seeking to amend a license by changing the name of the licensee or relocating to another pawnshop is not required to pay an additional fee. Any relocation requires notice to the OCCC in accordance with the OCCC's instructions [the format prescribed by the commissioner].

(e) - (f) (No change.)

§85.308.Availability of Pawnshop Employee License Information.

(a) Maintaining records. If a pawnbroker participates in the pawnshop employee license program, then the pawnbroker [A pawnbroker] must maintain adequate written documents demonstrating that all pawnshop employees are either properly licensed pursuant to Texas Finance Code, §371.101 or have applied for a pawnshop employee license.

(b) Availability of records. If a pawnbroker participates in the pawnshop employee license program, then during [During] an examination by the OCCC [commissioner or the commissioner's representative,] or an inspection by a peace officer, copies of the pawnshop employee licenses or copies of records relating to any pending applications for pawnshop employee licenses must be readily available.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901948

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 6. LICENSE REVOCATION, SUSPENSION, AND SURRENDER

7 TAC §§85.601, 85.603, 85.604

These amendments are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 of the Texas Finance Code. Texas Finance Code, §371.006 also authorizes the commission to adopt rules for enforcement of Chapter 371 (the Texas Pawnshop Act).

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 371.

§85.601.Denial, Suspension, or Revocation Based on Criminal History.

(a) - (c) (No change.)

(d) Crimes related to [moral] character and fitness.

(1) The OCCC may deny a pawnshop license application [if the applicant is not of good moral character,] if the applicant does not show that the business will be operated lawfully and fairly, or if the applicant does not show that the applicant or the applicant's owners have the financial responsibility, experience, character, and general fitness to command the confidence of the public, as provided by Texas Finance Code, §371.052(a).

(2) The OCCC may deny a pawnshop employee license if the applicant is not of [good moral character and] good business repute, or if the applicant does not possess the character and general fitness necessary to warrant the belief that the individual will operate the business lawfully and fairly, as provided by Texas Finance Code, §371.102(a).

(3) In conducting its review of [moral] character and fitness, the OCCC will consider the criminal history of the applicant and any principal parties. [The OCCC considers the offenses described by subsections (c)(1) and (f)(2) of this section to be crimes involving moral character.] If the applicant or a principal party has been convicted of an offense described by subsections (c)(1) or (f)(2) of this section, this reflects negatively on an applicant's [moral] character and fitness. The OCCC may deny a license application based on other criminal history of the applicant or its principal parties if, when the application is considered as a whole, the agency does not find that the financial responsibility, experience, character, and general fitness of the applicant are sufficient to command the confidence of the public and warrant the belief that the business will be operated lawfully and fairly. The OCCC will, however, consider the factors identified in subsection (c)(2) - (3) of this section in its review of [moral] character and fitness.

(e) (No change.)

(f) Other grounds for denial, suspension, or revocation. The OCCC may deny a license application, or suspend or revoke a license, based on any other ground authorized by statute, including the following:

(1) a conviction for an offense that does not directly relate to the duties and responsibilities of the occupation and that was committed less than five years before the date of application, as provided by Texas Occupations Code, §53.021(a)(2);

(2) a conviction for an offense listed in Texas Code of Criminal Procedure, art. 42A.054 or art. 62.001(6), as provided by Texas Occupations Code, §53.021(a)(3) - (4);

(3) a conviction of a pawnshop licensee or a principal party for an offense directly related to the licensed occupation, as provided by Texas Finance Code, §371.251(a)(6);

(4) errors or incomplete information in the license application;

(5) a fact or condition that would have been grounds for denying the license application, and that either did not exist at the time of the application or the OCCC was unaware of at the time of application, as provided by Texas Finance Code, §371.251(a)(3) and §371.255(2);

(6) a finding by the OCCC that the financial responsibility, experience, character, or general fitness of a pawnshop licensee or a principal party do not command the confidence of the public or warrant the belief that the business will be operated lawfully, fairly, and within the purposes of this chapter, as provided by Texas Finance Code, §371.251(a)(7); and

(7) a finding by the OCCC that the [moral] character, business repute, and general fitness of a pawnshop employee license holder do not warrant belief that the license holder will operate the business lawfully and fairly, as provided by Texas Finance Code, §371.255(3).

§85.603.Reinstatement of an Expired Pawnshop License.

If a pawnshop license expires as prescribed by §85.104 of this title (relating to License Term, Renewal, and Expiration [Renewal Dates of Licenses]) for failure to pay annual assessment fees, the OCCC will notify the pawnshop license holder by mailing notice to the current registered agent on file via certified mail that the license has expired and that the licensee may not make or renew a pawn loan. The holder of the expired license may elect to reinstate the license by submitting the fees required by §85.211(d) of this title (relating to Fees) and a $1,000 reinstatement fee postmarked on or before December 27 of that same year. An expired pawnshop license holder may not conduct any licensed business at the formerly licensed location during the time the license is expired. Any unlicensed acts are subject to enforcement action by the OCCC should the holder of the expired license not cease operations upon expiration of the license on July 1. An expired license is considered an operating pawnshop location for the duration of the period of reinstatement right for the purpose of statutory distance requirements.

§85.604.Enforcement Action Against Pawnshop License or Pawnshop Employee License.

(a) Applicability. In this section:

(1) the requirements imposed on a pawnbroker apply to all pawnbrokers; and

(2) the requirements imposed on a pawnshop employee apply only to employees of pawnbrokers that participate in the pawnshop employee license program.

(b) [(a)] Generally. For the reasons in subsection (c) [(b)] of this section, the OCCC may take one or more of the following enforcement actions under Texas Finance Code, Chapters 14 and 371:

(1) an injunction;

(2) an administrative penalty;

(3) a suspension; or

(4) a revocation.

(c) [(b)] Basis for enforcement actions.

(1) - (9) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901949

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


DIVISION 7. ENFORCEMENT; PENALTIES

7 TAC §85.701, §85.702

These amendments are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 of the Texas Finance Code. Texas Finance Code, §371.006 also authorizes the commission to adopt rules for enforcement of Chapter 371 (the Texas Pawnshop Act).

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 371.

§85.701.Failure to Timely File a Pawnshop Employee Application.

(a) Applicability. This section applies only to pawnbrokers that participate in the pawnshop employee license program and employees of these pawnbrokers.

(b) [(a)] Reasonable ground for denial. Failure to file a pawnshop employee application with the OCCC within 75 calendar days of the first day the employee participated or trained in a transaction subject to Texas Finance Code, §371.101(c), will be a reasonable ground for denial of the license. Should the OCCC find that no other ground is present on which to base a denial of the license, the OCCC may grant the license and take an enforcement action as provided in subsection (c) [(b)] of this section.

(c) [(b)] Enforcement actions. Failure to file a pawnshop employee application with the OCCC within 75 calendar days of the first day the employee participated or trained in a transaction subject to Texas Finance Code, §371.101(c), may subject both the pawnbroker [pawnshop] and the pawnshop employee to one or more of the following enforcement actions under Texas Finance Code, Chapters 14 and 371:

(1) an injunction;

(2) an administrative penalty;

(3) a suspension; or

(4) a revocation.

(d) [(c)] Pattern of violations. A pattern of violations may result in an additional enforcement action or denial.

§85.702.Accepting Prohibited Merchandise.

(a) Applicability. In this section:

(1) the requirements imposed on a pawnbroker apply to all pawnbrokers; and

(2) the requirements imposed on a pawnshop employee apply only to employees of pawnbrokers that participate in the pawnshop employee license program.

(b) [(a)] Reasonable ground for revocation. Reasonable ground for revocation of the license exists when a pawnbroker or pawnshop employee, knowingly or without exercising due care, fails to prevent a transaction of stolen property, in violation of Texas Finance Code, Chapter 371.

(c) [(b)] Enforcement actions. The acceptance of prohibited merchandise in violation of §85.418(a)(1) or (3) of this title (relating to Acceptance of Goods), may subject the pawnbroker [pawnshop] and pawnshop employee to one or more of the following enforcement actions under Texas Finance Code, Chapters 14 and 371:

(1) an injunction;

(2) an administrative penalty;

(3) a suspension; or

(4) a revocation.

(d) [(c)] Multiple violations. Multiple violations may result in an additional enforcement action.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901951

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


SUBCHAPTER B. RULES FOR CRAFTED PRECIOUS METAL DEALERS

DIVISION 1. REGISTRATION PROCEDURES

7 TAC §85.1007

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 85, concerning Pawnshops and Crafted Precious Metal Dealers.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 85, Subchapter B is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the registration term, renewal process, and expiration date for crafted precious metal dealers. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments are provided in the following paragraphs.

In §85.1007, proposed amendments specify the term, renewal process, and expiration date for a crafted precious metal dealer registration. The proposed amendments maintain the current one-year term and the current December 31 expiration date. Additional proposed amendments specify that December 31 is the due date for renewal fees, and that a registration for a temporary location is effective from the date of its issuance until it expires on December 31.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments to 7 TAC, Chapter 85 are proposed under Texas Occupations Code, §1956.0611, which authorizes the commission to adopt rules necessary to implement Texas Occupations Code, Chapter 1956, Subchapter B. In addition, the proposed amendments in §85.1007 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapter 14; and Texas Occupations Code, Chapter 1956.

§85.1007.Registration Term, [Annual] Renewal, and Expiration.

(a) Generally. An initial registration for a permanent location is effective from the date of its issuance until December 31. For each calendar year following the initial registration for a permanent registered location, a crafted precious metal dealer must renew the registration annually. A registration for a permanent registered location expires on December 31 of each year. After renewal, a registration is effective for a term of one year, from January 1 to December 31.

(b) Renewal procedure. A crafted precious metal dealer may renew its registration for a permanent registered location by providing the following:

(1) the fees required by §85.1011 of this title (relating to Fees); and

(2) any information required by the OCCC.

(c) Due date for renewal fees and information. The fees and information described by subsection (b) of this section are due by December 31 of each year.

(d) [(c)] Late renewal.

(1) If a crafted precious metal dealer renews its registration on or before the 30th day following expiration (i.e., on or before January 30), then there is no late renewal fee.

(2) If a crafted precious metal dealer renews its registration after the 30th day following expiration, but on or before the 180th day following expiration, then the dealer must pay a late renewal fee of $50 for each permanent registered location, in addition to the fees described by §85.1011 of this title.

(3) A registration for a permanent registered location may not be renewed after the 180th day following expiration. In order to obtain a registration, the crafted precious metal dealer must reapply under §85.1002 of this title (relating to Filing of New Application).

(e) [(d)] Administrative penalty. If a person has engaged in the purchase of crafted precious metal while its registration was not effective, the person may be subject to an administrative penalty under Texas Occupations Code, §1956.0615.

(f) [(e)] Temporary locations. A registration for a temporary location is effective from the date of its issuance until it expires on December 31. A registration for a temporary location is not renewable.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901940

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 86. RETAIL CREDITORS

SUBCHAPTER A. REGISTRATION OF RETAIL CREDITORS

7 TAC §86.102, §86.103

The Finance Commission of Texas (commission) proposes amendments to §86.102 in 7 TAC, Chapter 86, concerning Retail Creditors. Additionally, the commission proposes new §86.103 in 7 TAC, Chapter 86, concerning Retail Creditors.

In general, the purpose of the proposed amendments and new rule in 7 TAC, Chapter 86 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the registration term, renewal process, and expiration date for registered creditors. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC.

The individual purposes of the proposed amendments and new rule are provided in the following paragraphs.

In §86.102, a proposed amendment removes a paragraph stating that the registration fee must be paid within 60 days of commencing operations, while another proposed amendment adds a statement that a person must pay a $250 late filing fee under Chapter 349 of the Texas Finance Code. These proposed amendments would ensure that the rule provides a clear reference to the statutory process for late registration under Chapter 349. Another proposed reference removes a reference to the October 31 due date for the annual registration fee, because the due date is addressed separately in proposed new §86.103.

Proposed new §86.103 specifies the term, renewal process, and expiration date for registered creditors. The new rule maintains the current one-year term, and specifies that registrations expire on November 30. Proposed §86.103 also specifies the process for late renewal of an expired registration.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed rule changes are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal creates new rule §86.103 as part of the implementation of HB 1442. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments and new rule in 7 TAC, Chapter 86 are proposed under Texas Finance Code §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, proposed new §86.103 is authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14, 345, and 347.

§86.102.[Annual Registration] Fees.

(a) (No change.)

(b) Annual fee. An annual fee is required under the provisions of Texas Finance Code, §345.351 or §347.451 and will be payable as follows:

(1) A retail seller, creditor, holder, or assignee must pay a registration fee for every chapter under which business is conducted.

[(2) A retail seller, holder, creditor, or assignee who begins business under Texas Finance Code, Chapter 345 or 347 must pay the annual fee within 60 days after the first day of commencing regulated operations.]

[(3) The annual fee for each subsequent calendar year will be due and payable by October 31 of each year.]

(2) [(4)] The registration is not transferable between locations. A retail seller, creditor, holder, or assignee must obtain a registration for each new location. [Each new location must comply with the provisions in paragraph (2) of this subsection.]

(3) [(5)] No annual fee is required for a location operated by a retail seller, creditor, holder, or assignee operating under the provisions of Texas Finance Code, Chapter 345 or 347, provided the personnel at the location are not conducting regulated business with the consumer (e.g., storage, web-hosting, or data processing facility).

(c) Late filing fee. As provided by Texas Finance Code, §349.302(b), a person must pay a $250 late filing fee for each registered location if the person:

(1) obtains a new registration after the person has begun engaging in business under Texas Finance Code, Chapter 345 or 347; or

(2) obtains a renewal more than 30 days after expiration.

(d) [(c)] Evidence of registration. The Office of Consumer Credit Commissioner (OCCC) will issue a certificate evidencing registration under the provisions of Texas Finance Code, Chapter 345 or 347, and this section. A registrant may print a copy of its registration certificate through the OCCC's online licensing portal.

(e) [(d)] Registration duplicates sent by mail. If a registrant does not print its registration certificate online, the registrant may request that the OCCC mail a registration duplicate for a fee of $10 per certificate mailed.

§86.103.Registration Term, Renewal, and Expiration.

(a) Registration term and renewal. An initial registration is effective from the date of its issuance until November 30. A registration must be renewed annually to remain effective. After renewal, a registration is effective for a term of one year, from December 1 of a calendar year to November 30 of the next calendar year.

(b) Due date for annual fee. The annual fee is due by November 30 of each year.

(c) Expiration. If a registrant does not pay the annual fee, the registration will expire on November 30.

(d) Late renewal. A person may renew an expired registration by December 30 by paying the annual fee. In order to renew an expired registration after December 30, a person must pay any registration fee for a prior year and the late filing fee described by §86.102 of this title (relating to Fees).

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901941

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 87. TAX REFUND ANTICIPATION LOANS

SUBCHAPTER A. REGISTRATION PROCEDURES

7 TAC §87.107

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 87, concerning Tax Refund Anticipation Loans.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 87 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the registration term, renewal process, and expiration date for tax refund anticipation loan facilitators. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments are provided in the following paragraphs.

In §87.107, proposed amendments specify the term, renewal process, and expiration date for a refund anticipation loan facilitator registration. The proposed amendments maintain the current one-year term and the current December 31 expiration date. In addition, proposed amendments replace the use of the word "commissioner" with the agency's acronym, "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments in 7 TAC, Chapter 87 are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, the proposed amendments in §87.107 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 352.

§87.107.Registration Term, [Annual] Renewal, and Expiration.

(a) Registration term and renewal. An initial registration is effective from the date of its issuance until December 31. A registration must be renewed annually to remain effective. After renewal, a registration is effective for a term of one year, from January 1 to December 31.

(b) [(a)] Renewal requirements. A registered tax refund anticipation loan facilitator may renew its registration by providing the following:

(1) the renewal fees required by §87.105(c) of this title (relating to Fees);

(2) any late filing fees required by §87.105(d) of this title; and

(3) any other information required by the OCCC [commissioner].

(c) Due date for renewal fee. The annual renewal fee and information described by subsection (b) of this section are due by December 31 of each year.

(d) [(b)] Expiration. If a facilitator does not pay the annual renewal fee, the registration will expire on December 31. A facilitator may not renew a registration that has been expired for more than one year. If a facilitator's registration has been expired for more than one year, then the facilitator must apply for a new registration under §87.102 of this title (relating to Filing of New Application) in order to obtain a registration.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901942

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 88. CONSUMER DEBT MANAGEMENT SERVICES

SUBCHAPTER B. ANNUAL REQUIREMENTS

7 TAC §88.201

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 88, concerning Consumer Debt Management Services.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 88 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the registration term, renewal process, and expiration date for debt management services providers. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC.

The individual purposes of the proposed amendments are provided in the following paragraphs.

In §88.201, proposed amendments specify the term, renewal process, and expiration date for a debt management services provider registration. The proposed amendments maintain the current one-year term, and specify that a registration expires on January 31.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

The amendments to 7 TAC, Chapter 88 are proposed under Texas Finance Code, §394.214, which authorizes the commission to adopt rules to carry out Texas Finance Code, Chapter 394, Subchapter C. In addition, the proposed amendments in §88.201 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 394.

§88.201.Registration Term, [Annual ] Renewal, and Expiration.

(a) Registration term and renewal. An initial registration is effective from the date of its issuance until January 31. A registration must be renewed annually to remain effective. After renewal, a registration is effective for a term of one year, from February 1 of a calendar year to January 31 of the next calendar year.

(b) Renewal requirements. A [Not later than February 1, a] registered debt management services provider may renew its registration by providing the following:

(1) an annual report, according to §88.202 of this title (relating to Annual Report);

(2) the annual fee [fees] required by §88.107(f) [§88.107(e)] of this title (relating to Fees); and

(3) any other information required by the OCCC.

(c) Due date for renewal fee. The annual fee and information described by subsection (b) of this section are due by January 31 of each year.

(d) Expiration. If a provider does not renew its registration, the registration will expire on January 31.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901943

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


CHAPTER 89. PROPERTY TAX LENDERS

The Finance Commission of Texas (commission) proposes amendments to 7 TAC, Chapter 89, concerning Property Tax Lenders, §89.309 and §89.403.

In general, the purpose of the proposed amendments in 7 TAC, Chapter 89 is to implement provisions related to licensing and administration in HB 1442, the Sunset legislation for the Office of Consumer Credit Commissioner (OCCC). The Texas Legislature passed HB 1442 in the 2019 legislative session.

HB 1442 continues the OCCC's existence as a state agency, and was passed in response to recommendations of the Texas Sunset Advisory Commission. The bill authorizes the commission to set the term of each license or registration issued by the OCCC, for a period up to two years.

The OCCC distributed an early precomment draft of proposed changes to interested stakeholders for review and then held a stakeholder meeting and webinar regarding the rule changes. Several stakeholders provided verbal feedback during the stakeholder meeting, and the OCCC received four written precomments from stakeholders. The agency believes that the participation of stakeholders in the rulemaking process is invaluable in presenting balanced proposals.

The proposed amendments specify the license term, renewal process, and expiration date for property tax lenders. These amendments implement Texas Finance Code, §14.112 (as added by HB 1442), which provides that the commission shall prescribe the licensing or registration period for licenses and registrations issued by the OCCC. In addition, the proposed amendments modernize or remove obsolete language.

The individual purposes of the proposed amendments are provided in the following paragraphs.

In §89.309, a proposed amendment removes a subsection dealing with the date of license expiration for property tax lenders, because expiration is addressed in separate proposed amendments at §89.403. Proposed amendments replace the use of the word "commissioner" with the agency's acronym, "OCCC." The agency believes that the use of "OCCC" will provide better clarity to the rules when the context calls for action by the agency, as opposed to the commissioner specifically. In addition, a proposed amendment changes the title of §89.309 from "License Status" to "License Inactivation or Voluntary Surrender," to provide more clarity about the subject matter of the section.

In §89.403, proposed amendments specify the term, renewal process, and expiration date for a property tax lender license. The proposed amendments maintain the current one-year term and the current December 31 expiration date. New subsection (e) also explains that an expired license may be reinstated during the 180-day period described in Texas Finance Code, Chapter 349.

Christina Cuellar Hoke, Manager of Accounting, has determined that for the first five-year period the proposed rule changes are in effect there will be no fiscal implications for state or local government as a result of administering the rules.

Huffman Lewis, Director of Consumer Protection, has determined that for each year of the first five years the rule changes are in effect, the public benefits anticipated as a result of the proposal will be that the commission's rules will be more easily understood by applicants and licensees, will reflect current agency procedures, and will be more easily enforced. Additional benefits of the proposed amendments are increased efficiencies and modernized rule language.

The proposed rule changes would maintain the one-year term and annual renewal requirement for each license or registration, and would not increase any fee amounts currently described in the rules. For this reason, there is no anticipated cost to persons who are required to comply with the rule changes as proposed. There will be no adverse economic effect on small businesses, micro-businesses, or rural communities.

During the first five years the proposed rule changes will be in effect, the rules will not create or eliminate a government program. Implementation of the rule changes will not require the creation of new employee positions or the elimination of existing employee positions. Implementation of the rule changes will not require an increase or decrease in future legislative appropriations to the OCCC, because the OCCC is a self-directed, semi-independent agency that does not receive legislative appropriations. The proposed rule changes do not require an increase or decrease in fees paid to the agency. The proposal does not create a new regulation. The proposal does not expand or limit an existing regulation. The proposed rule changes do not increase or decrease the number of individuals subject to the rules' applicability. The agency does not anticipate that the proposed rule changes will have an effect on the state's economy.

Comments on the proposal may be submitted in writing to Laurie Hobbs, Assistant General Counsel, Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207 or by email to rule.comments@occc.texas.gov. To be considered, a written comment must be received on or before 5:00 p.m. central time on the 31st day after the date the proposal is published in the Texas Register. At the conclusion of business on the 31st day after the proposal is published in the Texas Register, no further written comments will be considered or accepted by the commission.

SUBCHAPTER C. APPLICATION PROCEDURES

7 TAC §89.309

The amendments in 7 TAC, Chapter 89 are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, the proposed amendments in §89.403 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 351.

§89.309.License Inactivation or Voluntary Surrender [Status].

(a) Inactivation of active license. A licensee may cease operating under a license and choose to inactivate the license. A license may be inactivated by giving notice of the cessation of operations not less than 30 calendar days prior to the anticipated inactivation date. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the new mailing address for the license, the effective date of the inactivation, and the fee for amending the license. A licensee must continue to pay the yearly renewal fees for an inactive license as outlined in §89.310 of this title (relating to Fees), or the license will expire as described by §89.403 of this title (relating to License Term, Renewal, and Expiration).

(b) Activation of inactive license. A licensee may activate an inactive license by giving notice of the intended activation not less than 30 calendar days prior to the anticipated activation date. Notification must be provided by filing a license amendment or an approved electronic submission as prescribed by the OCCC [commissioner]. The notice must include the contemplated new address of the licensed office, the approximate date of activation, and the fee for amending the license as outlined in §89.310 of this title.

(c) (No change.)

[(d) Expiration. A license will expire on the later of December 31 of each year or the 16th day after the written notice of delinquency is given unless the annual assessment fees have been paid by the due date for license renewal. A licensee that pays the annual assessment fees will automatically be renewed even though a new license may not be issued.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901944

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621


SUBCHAPTER D. LICENSE

7 TAC §89.403

The amendments in 7 TAC, Chapter 89 are proposed under Texas Finance Code, §11.304, which authorizes the Finance Commission to adopt rules to administer Title 4 and Chapter 14 of the Texas Finance Code. In addition, the proposed amendments in §89.403 are authorized under Texas Finance Code, §14.112 (as added by HB 1442), which authorizes the commission to set license and registration terms.

The statutory provisions affected by the proposal are contained in Texas Finance Code, Chapters 14 and 351.

§89.403.License Term, Renewal, and Expiration [Notice of Delinquency in Payment of Annual Assessment Fee].

(a) License term and renewal. A new license is effective from the date of its issuance until December 31. A license must be renewed annually to remain effective. After renewal, a license is effective for a term of one year, from January 1 to December 31.

(b) Due date for annual assessment fee. The annual assessment fee is due by December 1 of each year.

(c) Notice of delinquency. If a licensee does not pay the annual assessment fee, the OCCC will send a notice of delinquency. Notice [For purposes of Texas Finance Code, §351.155, and §89.309(d) of this title (relating to License Status), notice] of delinquency [in the payment of an annual assessment fee] is given when the OCCC sends the [delinquency] notice:

(1) by mail to the address on file with the OCCC as a master file address; or

(2) by e-mail to the address on file with the OCCC as a master file e-mail address, if the licensee has provided a master file e-mail address.

(d) Expiration. If a licensee does not pay the annual assessment fee, the license will expire on the later of:

(1) December 31 of each year; or

(2) the 16th day after notice of delinquency is given under subsection (c) of this section.

(e) Reinstatement. As provided by Texas Finance Code, §349.301 and §349.303(a), if a license was in good standing when it expired, a person may reinstate the expired license not later than the 180th day after its expiration date by paying the annual assessment fee and a $1,000 late filing fee.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 21, 2019.

TRD-201901945

Laurie B. Hobbs

Assistant General Counsel

Office of Consumer Credit Commissioner

Earliest possible date of adoption: August 4, 2019

For further information, please call: (512) 936-7621