Over the next few weeks leading up the effective date of Sept. 1 for many bills, we will be publishing summaries in the newsletter from the last legislative session.
Summary: HB 3529 permits a person to give “effective consent” to use of their personally identifying information to another person. Effective consent can be used to obtain a good, service, insurance, or extension of credit.
Effective consent includes consent given by a person legally authorized to act on behalf of the person whose consent is required. Consent, in general, would not be effective if obtained by threat, fraud, or coercion, or if obtained by a person without capacity to provide consent.
CU Action Needed: Credit unions should train employees to recognize situations where consent to transact on behalf of another may have been obtained under duress or identity theft. This is especially relevant in spousal or elder abuse or when a person is acting under power of attorney that was obtained through threat, fraud, or coercion.
Effective Date: Sept. 1, 2021
Summary: SB 43 addresses various issue of concern including fraud tied to “wrap financing” in which a seller finances the sale of a residential property that is already subject to an outstanding lien, often without notifying the buyer of the superior lien or the existing lienholder of the sale.
SB 43 closes loopholes that have allowed bad actors to evade registration or licensure using so-called “de minimis” exceptions meant to exempt small businesses like “house flippers” from registering as financial services providers.
It provides that wrap payments are held in a constructive trust by the seller for the benefit of the buyer. This would ease prosecution of bad actors, as conversion of trust assets would itself be a crime, regardless of any larger intent to defraud. This also could ease recovery of damages, as the buyer would be entitled to recover the proceeds of converted trust assets. SB 43 requires wrap sellers to properly disclose the nature and risks of the wrap transaction to their buyers and offers consumers the right to rescind the transaction when those disclosures are not made timely.
Federally insured credit unions and their subsidiaries, as well as other federally insured financial institutions, are exempt from the wrap mortgage loan financing chapter of the Finance Code. Credit unions with a mortgage lien in first standing should retain superior rights in the case of a default.
CU Action Needed: Credit unions engaging in mortgage lending may want to discuss this issue with local counsel to ensure their contracts include a “due on sale” clause or other provision to protect the credit union should they want to prohibit borrowers from engaging in wrap loans on properties in which the credit union has a lienholder interest.
Effective Date: Jan. 1, 2022
Summary: “Peer-to-peer car sharing” is a program that permits participating car owners to rent out their vehicles when not being used by the owners. HB 113 sets up a system of regulation for such programs in Texas to ensure proper insurance coverage.
Before a vehicle is eligible to be shared, the program protects lienholders by requiring a written notice by the program to vehicle owners informing them that if the vehicle has a lien against it, the shared vehicle’s use through the program, including use without physical damage coverage, may violate the terms of the contract with the lienholder.
CU Action Needed: Credit unions should ensure that loan agreements address peer-to-peer car sharing and prohibit it if determined to be too risky.
Effective Date: Sept. 1, 2021
Summary: SB 6 provides retroactive civil liability protection for large and small businesses, nonprofit entities, heath care industry, and more. Applicable to state and federal credit unions is the section that covers liability for causing exposure to pandemic disease.
Generally, a person is not liable for injury or death caused by exposing an individual to a pandemic disease unless the claimant establishes multiple difficult-to-prove elements such as:
CU Action Needed: None
Effective Date: Immediately
Summary: SB 678 establishes the small business disaster revolving loan fund and program with the Office of the Comptroller of Public Accounts of the State of Texas (comptroller). This loan program provides short-term loans to small businesses affected by a disaster. The bill establishes the small business disaster revolving fund to support loans made by the program and directs the comptroller to implement an application, rules, and guidelines governing the fund, program, and loans made to small businesses through the program.
The law defines “small business” as a corporation, partnership, sole proprietorship, or other legal entity that:
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: Concerns have been raised over reports of payors in Texas imposing extra fees on individuals who request payment by paper check, thus potentially dissuading Texans from receiving payment in their preferred form.
HB 876 amends the Business & Commerce Code to prohibit an individual, corporation, trust, partnership, association, or other private legal entity that makes a payment to a payee from charging an additional fee to the payee for electing to receive the payment by paper check instead of by an automated clearinghouse transaction or other electronic funds transfer. The bill renders void and unenforceable any contract provision permitting a person to charge or collect such a fee from a payee.
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: The bill provides flexibility to mechanics attempting to foreclose a possessory lien on certain motor vehicles and transfer the vehicle’s title after foreclosure. The bill provides flexibility regarding the deadline by which notice to foreclose on a lien must be filed with the county tax assessor-collector’s office. HB 2879 clarifies that the holder of a possessory lien must include the proposed date of sale or disposition of the vehicle in its notice to a lienholder, such as a credit union.
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: Bill requires the attorney general to post lists of any notifications it has received regarding breaches of information, excluding sensitive information. The list will be updated every 30 days, with information remaining for up to a year unless there are additional breaches.
Persons who have been breached must also provide the number of people impacted by breach when reporting the breach to the state.
CU Action Needed: Credit unions should update breach reporting procedures to include numbers when reporting breaches 1548 to the attorney general.
Effective Date: Sept. 1, 2021
Summary: Under the federal Driver’s Privacy Protection Act, all states are required to set privacy protections for motor vehicle records. In Texas, the Motor Vehicle Records Disclosure Act prohibits the disclosure and use of personal information contained in motor vehicle records by state agencies and political subdivisions, except under certain conditions.
SB 15 revises the Motor Vehicle Records Disclosure Act and prohibits certain disclosures by the Texas Department of Transportation and the Parks and Wildlife Department.
Some credit unions expressed concerns about their ability to verify driver’s license information for employment purposes and Bank Secrecy Act compliance. The revised law clarifies that state and federal credit unions may obtain personal information from motor vehicle records, as can employers, to obtain or verify information.
CU Action Needed: None.
Effective Date: Immediately
Summary: HB 2237 is intended to streamline lien statutes, remove redundant provisions, address various ambiguities, and provide specific statutory forms for notice. It provides relief to subcontractors by:
HB 2237 clarifies persons entitled to a lien, as well as property to which a lien extends. It changes the deadline to foreclose a mechanic’s lien from 2 years to 1 year in commercial construction. Also, lien waivers no longer need to be notarized.
Under current law, licensed professionals, such as architects, are only afforded lien rights if they contract directly with the owner. Under the new statute, lien rights are extended to licensed design professionals regardless of who they contract with.
CU Action Needed: These liens may impact credit union construction liens, etc. Credit unions should consult with local counsel to determine if any changes need to be made.
Effective Date: Original contracts entered on or after Jan. 1, 2022.
Summary: The Texas Constitution protects a person’s homestead from being foreclosed on by a judgment lien.
However, there can be difficulty in identifying what land is a person’s homestead and whether a judgment lien attaches against said property. In 2007, the 80th Legislature created Section 52.0012, Release of Record of Lien on Homestead Property, Property Code, to address this problem. The statute created a method of communication and provided a means for evidence for all parties with potential interest in the property. However, it did not establish a period during which parties can rely on the homestead affidavit with certainty.
HB 3115 creates a limited period of time in which parties with an interest in the transaction can rely on the affidavit with certainty. It protects the interests of creditors and their ability to challenge the affidavit both after filing and after the expiration of the reliance period.
A judgment creditor has 30 days to object to a release filed by a judgment debtor. If the judgment creditor does not object to maintaining their judgment, a purchaser of the property can bypass the judgment lien, leaving the credit union without collateral for the judgment lien.
CU Action Needed: Work with local counsel to ensure credit union lien interests are maintained.
Effective Date: Sept. 1, 2021
Summary: In thousands of real property deeds across the state, there are racist restrictions barring families of color from moving into these homes. Although these racially restrictive provisions are no longer enforceable, they are still a reminder of the systemic and segregationist housing practices that limited the upward mobility of millions of people of color.
Currently, there is no across-the-board mechanism for removing these types of racist restrictions from property records.
SB 30 allows for these restrictions to be removed from real property records through the county clerk’s office of the county in which the real property is located.
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: HB 1322 would require a state agency’s notice of a proposed rule to include a brief plain language (in English and Spanish) explanation of the proposed rule. This notice is to be published on the agency’s website. The intent is to enhance transparency of the rulemaking process.
CU Action Needed: None.
Effective Date: Sept. 1, 2023
Summary: SB 424 adds a new section to the Government Code applicable to a state agency with regulatory authority over a small business. It prohibits a state agency from imposing a penalty against a small business for a first violation of a statute or a rule, other than a violation committed knowingly or intentionally, unless the agency first provides the small business written notice of the violation and an opportunity to remedy the violation within a reasonable time after receiving the notice. The section does not apply to the Texas Credit Union Commissioner or other financial service regulators, unfortunately.
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: Established by the legislature in 1969, the Texas Credit Union Department (TCUD) protects financial consumers by regulating Texas-chartered credit unions and Texas branches of foreign credit unions chartered by other states. TCUD approves credit union charters, examines credit unions for regulatory compliance and financial safety and soundness, enforces state laws and regulations, and responds to consumer complaints. Since 2009, TCUD has operated as self-directed semi-independent (SDSI), which removes the state appropriations process as TCUD is funded solely by fees it collects from credit unions.
TCUD underwent a review from the Texas Sunset Advisory Commission (Sunset) in 2020–2021. SB 707 follows Sunset recommendations, continuing TCUD for 12 years, through Sept. 1, 2033. SB 707 adds requirements for TCUD to track more comprehensive complaint and enforcement data to support analysis and guide regulatory activities, to develop a process for notifying credit unions about regulatory changes that override state regulations, to remove an unnecessary notarization requirement, and to update standard good government provisions related to ensuring Credit Union Commission members are adequately trained on their responsibilities and notifying parties to a complaint.
CU Action Needed: None.
Effective Date: Sept. 1, 2021
Summary: In response to the COVID-19 pandemic, the federal government created the Paycheck Protection Program through which it offered forgivable loans and grants which were not considered income for federal tax purposes. HB 1195 updates state franchise law to ensure these businesses are not required to pay state franchise taxes on certain forgivable loans and grants. The new law defines qualifying loans or grants and excludes those
qualifying loan or grant proceeds from a taxable entity’s total revenue relating to its state franchise taxes. The bill also allows a taxable entity to include expenses paid using qualifying loan or grant proceeds in the entity’s determination of cost of goods sold or determination of compensation if that expense was otherwise includable.
CU Action Needed: None. State and federal credit unions are exempt from Texas state franchise taxes.
Effective Date: May 8, 2021
Summary: HB 1258 establishes a data matching system similar to the financial institution data match program through with credit unions search records for persons who are delinquent in paying child support.
HB 1258 will require state and federal credit unions to exchange data with the comptroller each calendar quarter to facilitate matching the names of delinquent taxpayers against the names of account holders. A credit union can send to the comptroller either a list of all accounts and owners or a list of all matches. Information to be sent includes names, SSN (or EIN), account balance, and account type. The search is confidential, and the credit union may not tell the account owners about the match. Credit unions must destroy or erase information after the search is completed to maintain confidentiality. “Accounts” to be reviewed include checking, savings, time deposit, money market, mutual fund, and demand deposit. Protection from liability exists for sharing such information.
CU Action Needed: Credit unions should update policies and procedures and train staff to be prepared to respond to the data match request to be sent in the fall of 2021.
Effective Date: Sept. 1, 2021
Summary: SB 153 amends current law relating to the exclusion of certain payment processing services from the definition of “data processing service” for purposes of sales and use taxes.
Historically, the comptroller of public accounts has excluded merchant credit/debit card processing services from the definition of “data processing services” which are otherwise taxable. However, recent comptroller audits have called into question this exclusion.
SB 153 clarifies and continues the exclusion by expanding the specific things not included in the definition. The expanded exclusions include:
CU Action Needed: None. SB 153 should return tax payments to what has traditionally been exempt regarding merchant credit/debit card processing services.
Effective Date: Oct. 1, 2021
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