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Texas Sunset Advisory Commission Holds Public Hearing on Finance Commission Today
Thursday, May 24, 2018 6:45 AM

The Texas Sunset Commission will hold a public hearing Thursday May 24 in Austin to discuss the staff report’s recommendations and take public testimony on the Finance Commission. The meeting information and materials are available here.

There are three topics in the Finance Commission Sunset report of particular interest to credit unions. The recommendation to consolidate the Department of Savings and Mortgage Lending, which regulates mortgage credit union service organizations (CUSOs); the recommendation to sweep fines collected by Finance commission agencies from those agencies funds into the general revenue fund; and findings in the report that the self-directed, semi-independent (SDSI) status of the Finance Commission agencies is functioning well. The Sunset staff did not recommend consolidating the Credit Union Department into the Finance Commission.

State agencies in Texas are reviewed by the Sunset Advisory Commission every 12 years to evaluate how well the agencies and their programs are operating, whether the agencies continue to be needed, and ways to improve their performance.

The Sunset staff reviewed the Finance Commission of Texas, which is responsible for the Texas Department of Banking (DOB), Office of Consumer Credit Commissioner (OCCC), and the Department of Savings and Mortgage Lending (SML), and released its report in April 2018.

According to the report, the Finance Commission agencies have adapted well to the increased flexibility the legislature granted in 2009 by removing them from the appropriations process through SDSI status. Overall, both regulated industries and consumers have few complaints about the agencies’ operations, and the agencies take their stewardship of state funds seriously.

However, Sunset staff identified duplication and inefficiency in the overall regulatory structure. They recommend consolidating two agencies, eliminating three small regulatory programs, and focusing the Finance Commission on greater administrative efficiency and coordination between agencies.

The report says the SML regulates the state’s savings banks and mortgage lenders well, but its core functions largely duplicate those of the DOB and fail to justify the need for a separate agency. While the Sunset staff found that the two banking-related agencies would work better consolidated, Sunset staff concluded the OCCC’s distinct mission and regulatory scope focused on nonbank consumer lending and continues to merit a separate agency. Sunset staff recommends abolishing the SML as a separate state agency, transferring regulation of state savings banks and the mortgage industry to the DOB, and continuing the DOB and OCCC for 12 years.

Although the agencies have used their SDSI status in a responsible manner, improvements can be made to consolidate duplicative administrative functions and develop better oversight tools to identify inefficiencies across the agencies, limit growth in reserve fund balances, and continue to push the agencies to demonstrate the best return on investment. The report also recommends that all administrative penalties be remitted to the General Revenue Fund.

Review of regulatory programs identified three that impose regulations that exceed the level necessary to protect the public, and the staff recommends elimination of licensure of pawnshop employees, registration of cemetery brokers, and private child support enforcement agencies.

Other recommendations would direct the DOB to update the agency’s statute and rules to match best practices for licensing standards for regulatory agencies, give authority to the OCCC to provide biennial license renewals for its licensees and registrants, direct the OCCC to update its appeals provisions and complaint process and, if not merged into the DOB, require the SML to update the agency’s complaint process and rule and modify its penalty matrix to ensure consistent application of administrative penalties. The Finance Commission is advised to update its Commission member training and should be given the authority to establish advisory committees in rule.

The Sunset staff finds that the fiscal implications of the recommendations would result in a $6,164,845 gain to the General Revenue Fund and $2,472,025 in savings to the finance agencies over the next five fiscal years. Since fees assessed to the regulated industries must cover the costs of regulation due to the agencies’ SDSI status, together the recommendations in this report would decrease costs to the industries by an estimated $9,591,295 over the next five fiscal years.

The Sunset Commission will make its decision on the staff recommendations to the full legislature about the Finance Commission later this year. The Texas Credit Union Department is scheduled to go through Sunset in 2021.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or