TITLE 43. TRANSPORTATION

PART 10. TEXAS DEPARTMENT OF MOTOR VEHICLES

CHAPTER 217. VEHICLE TITLES AND REGISTRATION

SUBCHAPTER C. REGISTRATION AND TITLE SYSTEMS

43 TAC §§217.76 - 217.78

INTRODUCTION. The Texas Department of Motor Vehicles (department) proposes new sections to 43 TAC Subchapter C, Registration and Title Systems, §§217.76 - 217.78, concerning access to the department's automated registration and titling system (RTS), including suspension and denial. The new sections are necessary to implement Transportation Code, §520.021 and §520.022, as added by Senate Bill (SB) 604, 86th Legislature, Regular Session (2019). Transportation Code, §520.021, authorizes the department to adopt rules and policies for the maintenance and use of the RTS and Transportation Code, §520.022, provides that the department has sole authority to determine access to RTS.

Section 217.76 is also necessary to implement SB 604, Section 4.07, which requires the department, not later than March 1, 2020, in coordination with county tax assessor-collectors, and in accordance with Subchapter C, Chapter 520, Transportation Code, as added, to develop, adopt, and implement rules that create clear criteria for the suspension or denial of access to RTS if a county tax assessor-collector suspects fraud, waste, or abuse relating to RTS by a county tax assessor-collector employee or a person deputized under Transportation Code, §520.0071. As part of the coordination process with county tax assessor-collectors, on August 20, 2019, the department provided draft language for proposed §217.76 to the Tax Assessor-Collectors Association of Texas (TACA) and the TxDMV county tax assessor-collector Liaison. The proposed rule incorporates comments received.

The department has also proposed new 43 TAC §§223.1 - 223.3 concerning the department's "red flag" fraud reporting system in this issue of the Texas Register.

EXPLANATION.

Transportation Code, §520.022, provides that the department has sole authority to determine access to RTS. The department interprets SB 604, Section 4.07, as requiring the department to identify the types of suspected activity that will result in suspension or denial. These are stated in proposed §217.76. Suspension and denial are addressed in proposed §217.77. Reinstatement is addressed in §217.78.

Proposed §217.76(a) establishes that §§217.76 - 217.78 apply to individuals, other than department employees, and entities, with RTS access. The sections do not apply to department employees because their access, and denial of access, is at the will of the department. Stating that the sections do not apply to them clarifies that the sections do not create procedures or requirements related to RTS access, suspension, or denial, for a department employee. The reference to entities includes only entities with RTS access.

Proposed §217.76(b) establishes the criteria for the department to suspend or deny access to RTS. After reviewing comments received from county tax assessor-collectors in the SB 604, Section 4.07, coordination process, the department modified the draft text to require a reasonable suspicion and added the sources of information that could validate that suspicion. A reasonable suspicion standard is consistent with the "suspects" language in SB 604, Section 4.07. Requiring a final determination or knowing conduct would not be consistent with the legislative instruction.

As with the draft language provided for review, the criteria of suspected fraud, waste, or abuse is further defined to include reasonable suspicion of misappropriation of money, falsification of government records, or a crime involving fraud, theft, deceit, dishonesty, misrepresentation, or that otherwise reflects poorly on the person's honesty or trustworthiness. The listed types of criminal activity were in the coordination process criteria document as defining "a crime of moral turpitude." Based on feedback received from the commenters, the department removed the reference to "a crime of moral turpitude" and kept the listed types of criminal activity.

Proposed §217.76(b)(2) also provides that the department may suspend or deny access to RTS based on a demonstration of non-compliance with applicable statutes and rules, including Texas Administrative Code, Chapter 217 and Transportation Code, Chapters 501, 502, 504, or 520. Section 217.76(c) lists the types of acceptable forms of information that can be used to support a reasonable suspicion.

Proposed §217.77(a) clarifies that the executive director or the executive director's designee has sole authority to determine access to RTS, determine if information exists to support a reasonable suspicion, and may suspend or deny RTS access, based on the criteria in §217.76. This is based on Transportation Code, §520.022. Proposed §217.77(b) provides that a county tax assessor-collector may request the executive director or the executive director's designee immediately suspend a county employee or full service deputy's access to RTS based on the same criteria. Although not a criterion, commenters in the SB 604, Section 4.07, coordination process suggested including a notice, such as the notice set forth in the current §217.163 addendum. Proposed §217.77(c) incorporates the existing notice provision from the addendum into the rule, with modifications to refer to an exception for federal law enforcement, a request for immediate termination by the county tax assessor-collector, and for differences in style between the proposal and the addendum.

Commenters in the coordination process also suggested the need for a reinstatement process. Proposed §217.78(a) incorporates the addendum reinstatement process which was agreed upon after negotiation between the county tax assessor-collectors and the department. The process has been modified to reflect that it applies to individuals in addition to entities, and to correct differences in style between the proposal and the addendum. Proposed §217.78(b) provides that access to RTS may be reinstated if the person whose access has been suspended is not the subject of a pending criminal investigation by a law enforcement entity. Access may be reinstated if the department determines no fraud, waste, or abuse was committed; the matter has been remedied to the satisfaction of the department; or the person is in compliance with applicable statutes or rules.

FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Linda M. Flores, Chief Financial Officer, has determined that for each year of the first five years the new sections will be in effect, there will be no fiscal impact to state or local governments as a result of the enforcement or administration of the proposal.

Jeremiah Kuntz, Director of the Vehicle Titles and Registration Division, has determined that there will be no measurable effect on local employment or the local economy as a result of the proposal.

PUBLIC BENEFIT AND COST NOTE. Mr. Kuntz has also determined that, for each year of the first five years the new sections are in effect, the public benefits include increased clarity and consistency for reporting by county tax assessor-collectors of suspected fraud, waste, or abuse, leading to an improved ability for the department and law enforcement authorities to coordinate, investigate, and ultimately prevent and deter fraud, waste, and abuse of RTS.

Mr. Kuntz anticipates that there will be no additional costs on regulated persons to comply with these rules. Currently, the department is authorized to suspend and deny access to the RTS system, including full service deputies, based on the required addendum in §217.163. Transportation Code, §520.022, clarifies the department's sole authority to control access to the system. Access, suspension, and denial will now be addressed in §§217.76 - 217.78.

Access to the system is allowed unless reasonable suspicion exists that the RTS user has committed fraud, waste, or abuse, or has failed to comply with applicable statutes as required by SB 604, Section 4.07. The criteria for suspension or denial is stated in §217.76. No additional costs arise from the criteria, because not committing fraud, waste, abuse, or noncompliance are functions of the individual's employment or entity's contract. The processes of notice and reinstatement in §217.77 and §217.78 are taken from the current addendum and impose no new requirements.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. As required by Government Code, §2006.002, the department has determined that the new sections will not have an adverse economic effect on small businesses, micro-businesses, or rural communities because the proposal creates no new costs. Therefore, the department is not required to prepare a regulatory flexibility analysis under Government Code, §2006.002.

TAKINGS IMPACT ASSESSMENT. The department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under Government Code, §2007.043.

GOVERNMENT GROWTH IMPACT STATEMENT. The department has determined that each year of the first five years the new sections are in effect, the proposed rule:

- 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 create new regulations in §§217.76 - 217.78 to implement Transportation Code, §520.021 and §520.022, enacted in SB 604;

- will not expand existing regulations;

- will not repeal existing regulations;

- will not increase or decrease the number of individuals subject to the rule's applicability; and

- will not positively or adversely affect the Texas economy.

REQUEST FOR PUBLIC COMMENT.

If you want to comment on the proposal, submit your written comments by 5:00 p.m. CST on November 18, 2019. A request for a public hearing must be sent separately from your written comments. Send written comments or hearing requests by email to rules@txdmv.gov or by mail to Office of General Counsel, Texas Department of Motor Vehicles, 4000 Jackson Avenue, Austin, Texas 78731. If a hearing is held, the department will consider written comments and public testimony presented at the hearing.

STATUTORY AUTHORITY. The department proposes new §§217.76 - 217.78 under SB 604, Section 4.06, and Transportation Code, §520.021 and §1002.001.

Senate Bill 604, Section 4.06, 86th Legislature, Regular Session (2019), provides that not later than March 1, 2020, the department shall, in coordination with county tax assessors-collectors and in accordance with Subchapter C, Chapter 520, Transportation Code, as added by this Act, develop, adopt, and implement rules that create clear criteria for the suspension or denial of access to the department's automated registration and titling system if a county tax assessor-collector suspects fraud, waste, or abuse relating to the system by an employee of the tax assessor-collector's or a person deputized under Transportation Code, §520.0071.

Transportation Code, §520.021, authorizes the department to adopt rules and policies for the maintenance and use of the department's automated registration and titling system.

Transportation Code, §1002.001, authorizes the board to adopt rules that are necessary and appropriate to implement the powers and the duties of the department.

CROSS REFERENCE TO STATUTE. Transportation Code, §520.021.

§217.76.Criteria for Suspension or Denial of Access to RTS.

(a) Sections 217.77, 217.78, and this section apply to individuals, other than department employees, and entities, with RTS access.

(b) The department may suspend or deny any individual user's or entity's access to RTS if:

(1) information exists to support a reasonable suspicion that the individual or entity is committing fraud, waste, or abuse related to RTS, including:

(A) misappropriation of money;

(B) falsification of government records; or

(C) a crime involving fraud, theft, deceit, dishonesty, misrepresentation, or that otherwise reflects poorly on the individual's honesty or trustworthiness; or

(2) the individual or entity demonstrates non-compliance with applicable statutes and rules, including Texas Administrative Code, Chapter 217 and Transportation Code, Chapters 501, 502, 504, or 520.

(c) Acceptable forms of information that can support a reasonable suspicion include:

(1) information gathered in an audit under Transportation Code, §520.010 or §520.011;

(2) a request to suspend or deny the individual or entity access from a county tax assessor-collector;

(3) review of transactions processed by the individual or entity; and

(4) oral or written information or complaints from:

(A) a law enforcement agency;

(B) another government agency:

(C) an association or trade group;

(D) an entity; or

(E) an identifiable individual.

§217.77.Process for Suspension or Denial of Access to RTS.

(a) The executive director or the executive director's designee has sole authority to:

(1) determine access to RTS;

(2) determine that information exists to support a reasonable suspicion that the individual or entity is committing fraud, waste, or abuse related to RTS; and

(3) suspend or deny the individual's or entity's access to RTS, based on the criteria in §217.76 of this title (relating to Criteria for Suspension or Denial of Access to RTS).

(b) A county tax assessor-collector may request the executive director or the executive director's designee immediately suspend a county employee or full service deputy's access to RTS based on the criteria in §217.76 of this title.

(c) The department shall inform the county tax assessor-collector before taking action to suspend or deny the individual's or entity's access to RTS under subsection (a) of this section, unless:

(1) the action is as a result of a court order;

(2) time is of the essence;

(3) revealing this action would detrimentally interfere with or compromise an active investigation by the department or an enforcement agency of this state or the federal government; or

(4) the action is based on the county tax collector-assessor's request in subsection (b) of this section.

§217.78.Reinstatement of Access to RTS.

(a) A county tax assessor-collector may request a review of a decision to suspend or terminate RTS access by submitting a request for reinstatement in writing to the department.

(1) The request for reinstatement should include all supporting information that is relevant to support reinstatement.

(2) A county tax assessor-collector may submit information in support of or relevant to a request for reinstatement to the department.

(3) The executive director shall make a final determination on reinstatement within 21 calendar days from the date the department receives the request for reinstatement. If the department requests additional information from the individual, entity, or county tax assessor-collector, the deadline for determination of the request for reinstatement is tolled until the additional information is received.

(b) Unless an individual or entity is the subject of a pending criminal investigation by a law enforcement entity, the individual or entity's access to RTS will be reinstated if the department determines that:

(1) no fraud, waste, or abuse was committed;

(2) the matter has been remedied to the satisfaction of the department; or

(3) the individual or entity is in compliance with applicable statutes and rules.

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 October 7, 2019.

TRD-201903591

Tracey Beaver

General Counsel

Texas Department of Motor Vehicles

Earliest possible date of adoption: November 17, 2019

For further information, please call: (512) 465-5665


CHAPTER 223. COMPLIANCE AND INVESTIGATIONS DIVISION

SUBCHAPTER A. FRAUD, WASTE, OR ABUSE

43 TAC §§223.1 - 223.3

INTRODUCTION. The Texas Department of Motor Vehicles (department) proposes new Chapter 223, Compliance and Investigations Division, Subchapter A, Fraud, Waste, or Abuse, 43 TAC §§223.1 - 223.3, concerning the department's "red flag" fraud reporting system. The new sections are necessary to formalize the department's current "red flag" fraud reporting system and implement a management action within the Sunset Advisory Commission's Recommendation 2.2, as stated in the Sunset Staff Report with Commission Decisions, 2018-2019, 86th Legislature (2019). The department also proposes new 43 TAC §§217.76 - 217.78, concerning access to the department's automated registration and title system (RTS) in this issue of the Texas Register.

EXPLANATION.

The department originally proposed new Chapter 223 in the March 1, 2019, issue of the Texas Register (44 TexReg 1114) and received comments from the Tax Assessor-Collector Association of Texas (TACA). The department did not adopt the proposal and it was withdrawn in the September 20, 2019, issue of the Texas Register (44 TexReg 5387). The department is re-proposing the "red flag" rules with changes from the previously proposed version.

The Tax Assessor-Collectors Association commented that the proposed rules stating that the department's Compliance and Investigations Division (CID) would create a policy for county tax assessor-collectors to submit requests for investigations was inconsistent with the Sunset recommendation. TACA also suggested that the department's CID investigation and notification process mirror the dealer enforcement complaint process, because that process works well with cross communication and access to investigations. Some changes were made based on the comments received and to further improve the rules.

However, the proposed rules do not mirror the department's dealer enforcement complaint process. Throughout the dealer investigation and enforcement process, investigators and enforcement attorneys communicate with the complainant and respondent as necessary to work through allegations to either resolve the issues or assess civil penalties. The CID, on the other hand, is a unique division with no authority or duty to determine administrative violations or assess civil penalties.

The CID serves as a liaison with law enforcement entities on potential criminal law violations and has no authority to independently enforce or prosecute criminal law violations. However, the CID attorney may be sworn in as a special prosecutor by a District or County Attorney. If the CID were to share information regarding ongoing criminal investigations, the division could jeopardize the investigations and damage its working relationship with law enforcement. The CID may be under strict orders to keep information confidential until a case is fully adjudicated.

Every person processing registration and title transactions in RTS has a duty to stop or prevent fraud. One way to stop or prevent fraud is to refuse to process a transaction involving known or obvious fraud. The proposed "red flag" rules provide a means to flag and report suspected fraud to the CID. The proposed rules do not limit or expand the exercise of statutory authority of a county tax assessor-collector or the department.

Proposed §223.1 outlines the purpose and scope of the subchapter, which is to prescribe the policies and procedures for county tax assessor-collectors, including county tax assessor-collector employees and deputies, to report suspected fraud, waste, or abuse related to motor vehicle title or registration to the CID for investigation.

Proposed §223.2 establishes that the words and terms defined in Transportation Code, Chapter 501, have the same meaning when used in the subchapter, unless the context clearly indicates otherwise. The proposed section also defines terms specific to this subchapter.

Proposed §223.3 establishes the process for reporting suspected fraud to the CID. The process requires the county tax assessor-collector to submit a request for rejection of the suspected fraudulent transaction through a department Regional Service Center and mail, or e-mail, certain information to the CID, including the original transaction, a detailed narrative, and any supporting documentation or evidence. Proposed §223.3 requires a full service deputy to report suspected fraud, waste, or abuse to the county tax assessor-collector. The county tax assessor-collector may then submit the request to the CID for review and possible investigation. The proposed section also establishes that the CID will provide a notification to the county tax assessor-collector if it determines it will not conduct an investigation.

FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Linda M. Flores, Chief Financial Officer, has determined that for each year of the first five years the proposed new sections will be in effect, there will be no fiscal impact to state or local governments as a result of the enforcement or administration of the proposal. Tim Menke, Director of the Compliance and Investigations Division, has determined that there will be no measurable effect on local employment or the local economy as a result of the proposal.

PUBLIC BENEFIT AND COST NOTE. Mr. Menke has also determined that, for each year of the first five years the proposed new sections are in effect, the public benefits include increased clarity and consistency for reporting by county tax assessor-collectors of suspected fraud, waste, or abuse to the department, leading to an improved ability for the department and law enforcement authorities to coordinate, investigate, and ultimately prevent and deter fraud, waste, or abuse of RTS.

Mr. Menke anticipates that there will be no additional costs for regulated persons to comply with these rules. County tax assessor-collectors have reported suspected fraudulent transactions to the department for review since the department's inception. The proposed rules formalize the existing process. The requirement for deputies to report suspected fraudulent transactions to the county tax assessor-collector clarifies that they will report to the county tax assessor-collector and not the department. This maintains the county tax assessor-collector's role in the process.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. As required by Government Code, §2006.002, the department has determined that the proposed new sections will not have an adverse economic effect on small businesses, micro-businesses, or rural communities because the rules create no additional costs. Additionally, county tax assessor-collectors and their employees are not for-profit businesses. Reporting suspected fraudulent transactions will not have an adverse economic effect on rural communities. Therefore, the department is not required to prepare a regulatory flexibility analysis under Government Code, §2006.002.

TAKINGS IMPACT ASSESSMENT. The department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under Government Code, §2007.043.

GOVERNMENT GROWTH IMPACT STATEMENT. The department has determined that each year of the first five years the proposed new sections are in effect, the proposed rules:

- 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 create new regulations in §§223.1 - 223.3 to implement Transportation Code, Chapters 501, 502, and 520; and more specifically, to inform the authority established in Transportation Code, §520.022, enacted in Senate Bill (SB) 604, 86th Legislature, Regular Session (2019);

- will not expand existing regulations;

- will not repeal existing regulations;

- will not increase or decrease the number of individuals subject to the rules' applicability; and

- will not positively or adversely affect the Texas economy.

REQUEST FOR PUBLIC COMMENT.

If you want to comment on the proposal, submit your written comments by 5:00 p.m. CST on November 18, 2019. A request for a public hearing must be sent separately from your written comments. Send written comments or hearing requests by email to rules@txdmv.gov or by mail to Office of General Counsel, Texas Department of Motor Vehicles, 4000 Jackson Avenue, Austin, Texas 78731. If a hearing is held, the department will consider written comments and public testimony presented at the hearing.

STATUTORY AUTHORITY. The department proposes new §§223.1 - 223.3 under Transportation Code, §§501.0041, 502.0021, 520.021, and 1002.001.

Transportation Code, §501.0041, authorizes the department to adopt rules to administer Chapter 501.

Transportation Code, §502.0021, authorizes the department to adopt rules to administer Chapter 502.

Transportation Code, §520.021, authorizes department to adopt rules and policies for the maintenance and use of the department's automated registration and titling system.

Transportation Code, §1002.001, authorizes the board to adopt rules that are necessary and appropriate to implement the powers and the duties of the department.

CROSS REFERENCE TO STATUTE. Transportation Code, Chapters 501, 502, and 520; and more specifically, Transportation Code, §501.003 and §520.022.

§223.1.Purpose and Scope.

(a) The purpose of this subchapter is to establish procedures for county tax assessor-collectors to report suspected fraud, waste, or abuse to the department.

(b) This subchapter applies to a county tax assessor-collector, an employee of a county tax assessor-collector, or a deputy, who wishes to report suspected fraud, waste, or abuse to the Texas Department of Motor Vehicles.

§223.2.Definitions.

(a) The words and terms defined in Transportation Code, Chapter 501, have the same meaning when used in this chapter, except as otherwise provided by this chapter, unless the context clearly indicates otherwise.

(b) The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) CID--the Compliance and Investigations Division of the Texas Department of Motor Vehicles.

(2) County tax assessor-collector--includes an employee of a county tax assessor-collector.

(3) Deputy--a full service deputy under Chapter 217, Subchapter H.

(4) Director--the director of the Compliance and Investigations Division.

(5) RTS--the Texas Department of Motor Vehicle's registration and title system.

§223.3.Submission of Request.

(a) A county tax assessor-collector who suspects possible fraud, waste, or abuse by an employee, motor vehicle dealer, deputy, or any person transacting motor vehicle-related business for or with the county may submit a request to the CID for review and possible investigation. The CID may forward a submission to an appropriate law enforcement entity.

(b) To submit a request to the CID for review and possible investigation, the county tax assessor-collector must:

(1) request a rejection of the suspected transaction through a department regional service center; and

(2) mail or e-mail the following documents and information, as applicable, to the CID in an envelope or e-mail message marked "Red Flag":

(A) the original transaction;

(B) a detailed narrative, including:

(i) a contact with the tax assessor-collector, including email address and phone number;

(ii) the name of the employee submitting the transaction to the CID;

(iii) a statement as to why the transaction was flagged;

(iv) information about the employee or deputy if the employee or deputy is suspected of committing fraud, waste, or abuse;

(v) any statements made by the customer submitting the transaction;

(C) any available video surveillance footage; and

(D) any other relevant evidence or information pertaining to the transaction.

(c) If a deputy suspects fraud, waste, or abuse, by an employee, motor vehicle dealer, or any person transacting motor vehicle-related business for or with the deputy, the deputy must report the suspected fraud, waste, or abuse to the county tax assessor-collector. The county tax assessor-collector may then submit a request to the CID for review and possible investigation in accordance with subsection (b) of this section.

(d) If the CID determines it will not conduct an investigation after reviewing a request submitted by a county tax assessor-collector, the CID will provide a notification to the county tax assessor-collector.

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 October 7, 2019.

TRD-201903590

Tracey Beaver

General Counsel

Texas Department of Motor Vehicles

Earliest possible date of adoption: November 17, 2019

For further information, please call: (512) 465-5665