H.B. No. 2138

AN ACT
relating to regulation of property tax lenders; providing a
penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle B, Title 4, Finance Code, is amended by
adding Chapter 351 to read as follows:
CHAPTER 351. PROPERTY TAX LENDERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 351.001. SHORT TITLE. This chapter may be cited as the
Property Tax Lender License Act.
Sec. 351.002. DEFINITIONS. In this chapter:
(1) “Property tax lender” means a person that engages
in activity requiring a license under Section 351.051. The term
does not include:
(A) a person who is sponsored by a licensed
property tax lender to assist with or perform the acts of a property
tax lender; or
(B) a person who performs only clerical functions
such as delivering a loan application to a property tax lender,
gathering or requesting information related to a property tax loan
application on behalf of the prospective borrower or property tax
lender, word processing, sending correspondence, or assembling
files.
(2) “Property tax loan” means an advance of money:
(A) in connection with a transfer of lien under
Section 32.06, Tax Code, or a contract under Section 32.065, Tax
Code;
(B) in connection with which the person making
the transfer arranges for the payment, with a property owner’s
written consent, of property taxes and related closing costs on
behalf of the property owner in accordance with Section 32.06, Tax
Code; and
(C) that is secured by a special lien against
property transferred from a taxing unit to the property tax lender
and which may be further secured by the lien or security interest
created by a deed of trust, security deed, or other security
instrument.
Sec. 351.003. SECONDARY MARKET TRANSACTIONS. This chapter
does not prohibit a property tax lender from receiving compensation
from a party other than the property tax loan applicant for the
sale, transfer, assignment, or release of rights on the closing of a
property tax loan transaction.
Sec. 351.004. AFFILIATED BUSINESS ARRANGEMENTS. This
chapter may not be construed to prevent affiliated or controlled
business arrangements or loan origination services by or between a
property tax lender and other professionals.
Sec. 351.005. APPLICATION OF TAX CODE. This chapter does
not affect the application of Section 32.06 or 32.065, Tax Code.
Sec. 351.006. ENFORCEMENT. In addition to any other
applicable enforcement provisions, Subchapters E, F, and G, Chapter
14, apply to a violation of this chapter or Section 32.06 or 32.065,
Tax Code, in connection with property tax loans.
Sec. 351.007. RULES. The finance commission may adopt
rules to ensure compliance with this chapter and Sections 32.06 and
32.065, Tax Code.
[Sections 351.008-351.050 reserved for expansion]
SUBCHAPTER B. AUTHORIZED ACTIVITIES; LICENSE
Sec. 351.051. LICENSE REQUIRED. (a) A person must hold a
license issued under this chapter to:
(1) engage in the business of making, transacting, or
negotiating property tax loans; or
(2) contract for, charge, or receive, directly or
indirectly, in connection with a property tax loan subject to this
chapter, a charge, including interest, compensation,
consideration, or another expense, authorized under this chapter
that in the aggregate exceeds the charges authorized under other
law.
(b) A person may not use any device, subterfuge, or pretense
to evade the application of this section.
(c) This chapter does not apply to:
(1) any of the following entities or an employee of any
of the following entities, if the employee is acting for the benefit
of the employer:
(A) a bank, savings bank, or savings and loan
association, or a subsidiary or an affiliate of a bank, savings
bank, or savings and loan association; or
(B) a state or federal credit union, or a
subsidiary, affiliate, or credit union service organization of a
state or federal credit union; or
(2) an individual who:
(A) makes a property tax loan from the
individual’s own funds to a spouse, former spouse, or persons in the
lineal line of consanguinity of the individual lending the money;
or
(B) makes five or fewer property tax loans in any
consecutive 12-month period from the individual’s own funds.
(d) A property tax lender licensed under this chapter is not
required to be licensed under Chapter 156 or any other provision of
this code.
Sec. 351.052. ISSUANCE OF MORE THAN ONE LICENSE FOR
PROPERTY TAX LENDER. (a) The commissioner may issue more than one
license to a property tax lender on compliance with this chapter for
each license.
(b) A person who is required to hold a license under this
chapter must hold a separate license for each office at which
property tax loans are made, negotiated, serviced, held, or
collected under this chapter.
(c) A license is not required under this chapter for a place
of business:
(1) devoted to accounting or other recordkeeping; and
(2) at which property tax loans are not made,
negotiated, serviced, held, or collected under this chapter.
Sec. 351.053. AREA OF BUSINESS; PROPERTY TAX LOANS BY MAIL.
(a) A property tax lender is not limited to making property tax
loans to residents of the community in which the office for which
the license or other authority is granted is located.
(b) A property tax lender may make, negotiate, arrange, and
collect property tax loans by mail from a licensed office.
Sec. 351.054. NOTICE TO TAXING UNIT. (a) A transferee of a
tax lien must include with the sworn document filed with the
collector of a taxing unit under Section 32.06(a-1), Tax Code, the
information required by this section.
(b) If the transferee is licensed under this chapter, the
transferee shall include with the filing the licensee’s license
number assigned by the commissioner.
(c) If the transferee is exempt from this chapter under
Section 351.051(c)(1), the transferee shall include with the filing
an affidavit stating the entity’s type of organization that
qualifies it for the exemption, any charter number assigned by the
governmental authority that issued the entity’s charter, and the
address of the entity’s main office.
(d) If the transferee is exempt from this chapter under
Section 351.051(c)(2), the transferee shall include a certificate
issued by the commissioner indicating the entity’s exemption. The
commissioner shall establish procedures for issuance of a
certificate under this subsection, application requirements, and
requirements regarding information that must be submitted with an
application.
[Sections 351.055-351.100 reserved for expansion]
SUBCHAPTER C. APPLICATION FOR AND ISSUANCE OF LICENSE
Sec. 351.101. APPLICATION REQUIREMENTS. (a) The
application for a license under this chapter must:
(1) be under oath;
(2) give the approximate location from which business
is to be conducted;
(3) identify the business’s principal parties in
interest; and
(4) contain other relevant information that the
commissioner requires for the findings required under Section
351.104.
(b) On the filing of one or more license applications, the
applicant shall pay to the commissioner an investigation fee not to
exceed $200.
(c) On the filing of each license application, the applicant
shall pay to the commissioner for the license’s year of issuance a
license fee in an amount determined as provided by Section 14.107.
Sec. 351.102. BOND. (a) If the commissioner requires, an
applicant for a license under this chapter shall file with the
application a bond that is:
(1) in an amount not to exceed the total of:
(A) $50,000 for the first license; and
(B) $10,000 for each additional license;
(2) satisfactory to the commissioner; and
(3) issued by a surety company qualified to do
business as a surety in this state.
(b) The bond must be in favor of this state for the use of
this state and the use of a person who has a cause of action under
this chapter against the license holder.
(c) The bond must be conditioned on:
(1) the license holder’s faithful performance under
this chapter and rules adopted under this chapter; and
(2) the payment of all amounts that become due to the
state or another person under this chapter during the calendar year
for which the bond is given.
(d) The aggregate liability of a surety to all persons
damaged by the license holder’s violation of this chapter may not
exceed the amount of the bond.
Sec. 351.103. INVESTIGATION OF APPLICATION. On the filing
of an application and, if required, a bond, and on payment of the
required fees, the commissioner shall conduct an investigation to
determine whether to issue the license.
Sec. 351.104. APPROVAL OR DENIAL OF APPLICATION. (a) The
commissioner shall approve the application and issue to the
applicant a license to make property tax loans under this chapter if
the commissioner finds that:
(1) the financial responsibility, experience,
character, and general fitness of the applicant are sufficient to:
(A) command the confidence of the public; and
(B) warrant the belief that the business will be
operated lawfully and fairly, within the purposes of this chapter;
and
(2) the applicant has net assets of at least $25,000
available for the operation of the business.
(b) If the commissioner does not find that the eligibility
requirements of Subsection (a) are met, the commissioner shall
notify the applicant.
(c) If an applicant requests a hearing on the application
not later than the 30th day after the date of notification under
Subsection (b), the applicant is entitled to a hearing not later
than the 60th day after the date of the request.
(d) The commissioner shall approve or deny the application
not later than the 60th day after the date of the filing of a
completed application with payment of the required fees, or if a
hearing is held, after the date of the completion of the hearing on
the application. The commissioner and the applicant may agree to a
later date in writing.
Sec. 351.105. DISPOSITION OF FEES ON DENIAL OF APPLICATION.
If the commissioner denies the application, the commissioner shall
retain the investigation fee and shall return to the applicant the
license fee submitted with the application.
[Sections 351.106-351.150 reserved for expansion]
SUBCHAPTER D. LICENSE
Sec. 351.151. NAME AND PLACE ON LICENSE. (a) A license must
state:
(1) the name of the license holder; and
(2) the address of the office from which the business
is to be conducted.
(b) A license holder may not conduct business under this
chapter under a name or at a place of business in this state other
than the name or office stated on the license.
Sec. 351.152. LICENSE DISPLAY. A license holder shall
display a license at the place of business provided on the license.
Sec. 351.153. MINIMUM ASSETS FOR LICENSE. A license holder
shall maintain for each office for which a license is held net
assets of at least $25,000 that are used or readily available for
use in conducting the business of that office.
Sec. 351.154. ANNUAL LICENSE FEE. Not later than December
1, a license holder shall pay to the commissioner for each license
held an annual fee for the year beginning the next January 1, in an
amount determined as provided by Section 14.107.
Sec. 351.155. EXPIRATION OF LICENSE ON FAILURE TO PAY
ANNUAL FEE. If the annual fee for a license is not paid before the
16th day after the date on which the written notice of delinquency
of payment has been given to the license holder, the license expires
on the later of:
(1) that day; or
(2) December 31 of the last year for which an annual
fee was paid.
Sec. 351.156. LICENSE SUSPENSION OR REVOCATION. After
notice and a hearing the commissioner may suspend or revoke a
license if the commissioner finds that:
(1) the license holder failed to pay the annual
license fee, an examination fee, an investigation fee, or another
charge imposed by the commissioner under this chapter;
(2) the license holder, knowingly or without the
exercise of due care, violated this chapter or Section 32.06 or
32.065, Tax Code, or a rule adopted or an order issued under this
chapter or Section 32.06 or 32.065, Tax Code; or
(3) a fact or condition exists that, if it had existed
or had been known to exist at the time of the original application
for the license, clearly would have justified the commissioner’s
denial of the application.
Sec. 351.157. CORPORATE CHARTER FORFEITURE. (a) A license
holder who violates this chapter is subject to revocation of the
holder’s license and, if the license holder is a corporation,
forfeiture of its charter.
(b) When the attorney general is notified of a violation of
this chapter and revocation of a license, the attorney general
shall file suit in a district court in Travis County, if the license
holder is a corporation, for forfeiture of the license holder’s
charter.
Sec. 351.158. LICENSE SUSPENSION OR REVOCATION FILED WITH
PUBLIC RECORDS. The decision of the commissioner on the suspension
or revocation of a license and the evidence considered by the
commissioner in making the decision shall be filed in the public
records of the commissioner.
Sec. 351.159. REINSTATEMENT OF SUSPENDED LICENSE; ISSUANCE
OF NEW LICENSE AFTER REVOCATION. The commissioner may reinstate a
suspended license or issue a new license on application to a person
whose license has been revoked if at the time of the reinstatement
or issuance no fact or condition exists that clearly would have
justified the commissioner’s denial of an original application for
the license.
Sec. 351.160. SURRENDER OF LICENSE. A license holder may
surrender a license issued under this chapter by delivering to the
commissioner:
(1) the license; and
(2) a written notice of the license’s surrender.
Sec. 351.161. EFFECT OF LICENSE SUSPENSION, REVOCATION, OR
SURRENDER. (a) The suspension, revocation, or surrender of a
license issued under this chapter does not affect the obligation of
a contract between the license holder and a debtor entered into
before the revocation, suspension, or surrender.
(b) Surrender of a license does not affect the license
holder’s civil or criminal liability for an act committed before
surrender.
Sec. 351.162. MOVING AN OFFICE. (a) A license holder shall
give written notice to the commissioner before the 30th day
preceding the date the license holder moves an office from the
location provided on the license.
(b) The commissioner shall amend a license holder’s license
accordingly.
Sec. 351.163. TRANSFER OR ASSIGNMENT OF LICENSE. A license
may be transferred or assigned only with the approval of the
commissioner.
Sec. 351.164. REPORTING REQUIREMENT. (a) Each year, a
license holder shall file with the commissioner a report that
contains relevant information concerning its transactions
conducted under this chapter.
(b) A report under this section must be:
(1) under oath; and
(2) in the form prescribed by the commissioner.
(c) A report under this section is confidential.
(d) Annually the commissioner shall prepare and publish a
consolidated analysis and recapitulation of reports filed under
this section.
SECTION 2. Sections 349.502(a) and (c), Finance Code, are
amended to read as follows:
(a) A person commits an offense if the person engages in a
business that is subject to Chapter 342, [or] 346, or 351 without
holding the license or other authorization required under that
chapter.
(c) Each loan made without the authority required by Chapter
342, [or] 346, or 351 is a separate offense.
SECTION 3. Section 32.06(a-1), Tax Code, is amended to read
as follows:
(a-1) A person may authorize another person to pay the
delinquent taxes imposed by a taxing unit on the person’s real
property by filing with the collector for the unit:
(1) a sworn document stating:
(A) [(1)] the authorization;
(B) [(2)] the name and street address of the
transferee authorized to pay the taxes of the property owner; and
(C) [(3)] a description of the property by street
address, if applicable, and legal description; and
(2) the information required by Section 351.054,
Finance Code.
SECTION 4. Section 32.065(d), Tax Code, is amended to read
as follows:
(d) Chapters 342 and 346, Finance Code, and the provisions
of Chapter 343, Finance Code, other than Sections 343.203 and
343.205, do not apply to a transaction covered by this section.
[The transferee of a tax lien under this section is not required to
obtain a license under Title 4, Finance Code.]
SECTION 5. A person is not required to be licensed under or
comply with Chapter 351, Finance Code, as added by this Act, before
March 1, 2008.
SECTION 6. This Act takes effect September 1, 2007.

______________________________ ______________________________
President of the Senate              Speaker of the House

I certify that H.B. No. 2138 was passed by the House on April
26, 2007, by the following vote: Yeas 128, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 2138 on May 24, 2007, by the following vote: Yeas 146, Nays 0,
1 present, not voting.

______________________________
Chief Clerk of the House

I certify that H.B. No. 2138 was passed by the Senate, with
amendments, on May 22, 2007, by the following vote: Yeas 31, Nays
0.

______________________________
Secretary of the Senate
APPROVED: __________________
Date

__________________
Governor