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Texas Legislature Adjourns Sine Die
Tuesday, May 30, 2017 7:00 AM

The 85th Texas Legislature wrapped up its regular session on Monday, May 29, with a filibuster in the Senate, and hundreds of protesters disrupted the lower chamber's proceedings until they were escorted out of the House gallery by the Department of Public Safety and House sergeants. It was a contentious but very productive session for credit unions, with numerous bills passed that will impact both state and federal credit unions. Texas Credit Union Association (TXCUA) opposed even more bills that did not pass but could have impacted credit union operations.

League staff is working on a final report on the session that will go out to Cornerstone members informing them of changes to the law that apply to state and federal credit unions once the governor's veto period is complete.

There are many bills affecting credit union operations, but following are some of the major bills TXCUA worked on this session.

Constitutional Amendments
Two constitutional amendments that are beneficial to credit unions will be on the ballot in November. If adopted by the voters, credit unions would be specifically referenced twice in Texas core law.

The amendment that updates the Home Equity Lending Law came after TXCUA initiated discussions on the need to update them. TXCUA worked with interested parties in 2016 to find provisions in the home equity lending law that all agreed needed to be updated to offer expanded options for borrowers. The bill addresses problems that league-member credit unions had raised issues about with the 3 percent fee cap on home equity loans. Many borrowers who wanted to borrow under $50,000 often ran into issues with the fee cap when trying to get a loan.

The bill reclassifies third-party expenses such as appraisals, surveys, title policies, or title reports that are required to make the loan so they are not included in the 3 percent fee cap calculation. The 3 percent fee cap will be reduced to a 2 percent fee cap to protect consumers from additional expense. This will address the problem many borrowers face with home equity loans under $50,000 where the fees required to make the loan exceed the 3 percent cap. The cap has been particularly problematic when making loans in rural areas or to low-income borrowers.

The bill increases the loan-to-value (LTV) ratio from 50 percent to 80 percent on new advances for home equity lines of credit, making it consistent with the closed-end loan LTV ratio. SJR 60 also repeals the prohibition against allowing agricultural homesteads to have access to home equity loans.

The legislation also allows refinancing of home equity loans that are at least one year old. They could be refinanced into a conventional loan, providing borrowers additional options and access to lower-rate products, rather than being limited to only refinancing into a home equity loan.

The other amendment on the November ballot will allow credit unions to offer prize-linked savings accounts, giving members the chance to receive prizes for adding to their savings accounts. Lawmakers passed similar legislation during the last session, but it was vetoed by Gov. Greg Abbott who said the bill would violate the constitutional prohibition on raffles.

To address the constitutional issue, Rep. Eric Johnson (D-Dallas) filed HJR 37 to amend the constitution, and HB 471 provides the enabling statute for PLSAs. TXCUA supported Johnson’s bills.

SB 714 Passes with Credit Union Exemption Intact
The Senate bill that would have amended account disclosures and imposed costly requirements on credit unions passed. As filed, the bill would have removed an exemption that credit unions have had since 2015 when a law was passed to increase public awareness of the payable-on-death (POD) option that makes it possible to transfer assets without going through the probate process. Texas credit union members were adding POD 60-80 percent of the time when opening new accounts through member education developed by the credit unions. The bank trade supported removal of the credit union exemption in the Estates Code, which could have been very expensive for credit unions to comply with and result in millions of dollars of lost loans through online, mobile apps, and indirect lending.

Vehicle Storage Facilities Notice to Lienholders Protections
Dozens of bills this session related to towing, storage, and booting of vehicles. The tow truck groups worked to reduce notice to lienholders and increase costs on lienholders in the event of a non-consent tow. HB 2508 came out of committee with half a dozen issues for lienholders. TXCUA was able to secure three amendments on the House floor to address some issues while continuing to negotiate with multiple towing and storage groups with varying agendas.

TXCUA, after several days of negotiations with lienholders, agreed on revisions to address the remaining concerns with HB 2508 by Rep. John Kuempel (R-Seguin). The negotiated changes to the process for notice to lienholders were added to SB 1501, another bill carried by Kuempel relating to the booting of vehicles. These changes make the timeline for notice more clear and prohibit storage fees until 24 hours after notice is properly sent if they fail to meet the first or second deadline.

Beneficiary Designation on Vehicle Titles
SB 869 by Sen. Joan Huffman (R-Houston) and Rep. Jessica Farrar (D-Houston) authorizes a beneficiary designation that transfers a motor vehicle at the owner’s death, allowing the heir to avoid the costly probate process. The author’s stated goal is to provide common-sense legal guidance for those who cannot easily access the services of an attorney.

The owner of the vehicle can designate a beneficiary by submitting an application for title paperwork, similar to a payable-on-demand beneficiary on account paperwork. The beneficiary takes the vehicle subject to all liens. Transfer of title does not affect the ability of a lienholder to pursue an existing means of debt collection permitted under Texas law.

Electronic Notarization
HB 1217 by Chairman Tan Parker (R-Flower Mound)/Sen. Kelly Hancock (North Richland Hills, creates standards for electronic notarizations and requirements to become an electronic notary public. Current law does not permit a person to electronically notarize a document remotely. This bill allows the entire process to be electronic using a two-way communication to confirm identities.

Elder Financial Abuse Bill Passes Texas Legislature
HB 3921 by Chairman Tan Parker (R-Flower Mound)/Chairman Kelly Hancock (R-North Richland Hills) gives financial institutions, securities dealers, and investment advisers the option to put temporary holds on suspicious transactions that could be considered financial abuse of elderly members and offers good faith immunity protections for them. The bill also gives a legal definition of financial exploitation and establishes a tiered reporting mechanism for the state agency charged with investigating the cases.

Durable Power of Attorney Act Updated
House bill 1974 by Rep. John Wray (R-Waxahachie)/Sen. José Rodríguez (D-El Paso) updates the Durable Power of Attorney Act (DPOA). The changes to the bill are intended to ensure that validly executed durable powers of attorney can be used more effectively in Texas in furtherance of the legislative goal of reducing the need for guardianship proceedings and to provide additional powers to the designated agents.

Although it imposes mandatory acceptance of a power of attorney, it provides many avenues through which a credit union can still deny acceptance. It allows a financial institution to request an opinion of counsel to be paid for by the principal. Under the bill, a third party is permitted to request a certification from the agent, as well as an opinion of counsel concerning certain permitted grounds for refusal. A third party improperly denying a POA could be liable for damages as well as attorneys’ fees and court costs. The bill clarifies that if the applicable language conflicts with other laws applicable to financial institutions, the other law controls.

Trade-In Credits on Vehicles
House bill 2339 by Rep. Senfronia Thompson (D-Houston) allows vehicle dealers to offer a trade-in credit agreement to buyers. The agreement provides a vehicle buyer with a credit toward the purchase or lease of a new vehicle if theirs suffers a non-total loss as a result of a collision. This credit would be applied toward the purchase or lease of a different vehicle from the retail seller or an affiliate.

The governor has until June 18 to sign, veto, or allow bills to become law without his signature.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or jhuffman@txcua.coop.