89R8609 PRL-F     By: Oliverson H.B. No. 5462       A BILL TO BE ENTITLED   AN ACT   relating to the regulation of earned income access providers and   earned income access transactions; requiring an occupational   license; authorizing fees; providing an administrative penalty;   creating a criminal offense.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 14.107, Finance Code, is amended to read   as follows:          Sec. 14.107.  FEES.  (a)  The finance commission shall   establish reasonable and necessary fees for carrying out the   commissioner's powers and duties under this chapter, Title 4,   Chapter 393 with respect to a credit access business, and Chapters   371, 392, [and] 394, and 398 and under Chapters 51, 302, 601, and   621, Business & Commerce Code.          (b)  The finance commission by rule shall set the fees for   licensing and examination, as applicable, under Chapter 393 with   respect to a credit access business or Chapter 342, 347, 348, 351,   353, [or] 371, or 398 at amounts or rates necessary to recover the   costs of administering those chapters.  The rules may provide that   the amount of a fee charged to a license holder is based on the   volume of the license holder's regulated business and other key   factors.  The commissioner may provide for collection of a single   fee for the term of the license from a person licensed under   Subchapter G of Chapter 393 or Chapter 342, 347, 348, 351, or 371.     The fee must include amounts due for both licensing and   examination.          SECTION 2.  Section 14.112(a), Finance Code, is amended to   read as follows:          (a)  The finance commission by rule shall prescribe the   licensing or registration period for licenses and registrations   issued under Chapters 342, 345, 347, 348, 351, 352, 353, 371, 393,   [and] 394, and 398 of this code and Chapter 1956, Occupations Code,   not to exceed two years.          SECTION 3.  Section 14.201, Finance Code, is amended to read   as follows:          Sec. 14.201.  INVESTIGATION AND ENFORCEMENT AUTHORITY.     Investigative and enforcement authority under this subchapter   applies only to:                (1)  this chapter;                (2)  Subtitles B and C, Title 4;                (3)  Chapter 393 with respect to a credit access   business;                (4)  Chapter 394;                (5)  Chapter 398; and                (6) [(5)]  Subchapter B, Chapter 1956, Occupations   Code.          SECTION 4.  Sections 14.251(a) and (b), Finance Code, are   amended to read as follows:          (a)  The commissioner may assess an administrative penalty   against a person who knowingly and wilfully violates or causes a   violation of this chapter, Chapter 394, Chapter 398, or Subtitle B,   Title 4, or a rule adopted under this chapter, Chapter 394, Chapter   398, or Subtitle B, Title 4.          (b)  The commissioner may order the following businesses or   other persons to pay restitution to an identifiable person:                (1)  a person who violates or causes a violation of this   chapter, Chapter 394, or Subtitle B, Title 4, or a rule adopted   under this chapter, Chapter 394, or Subtitle B, Title 4;                (2)  a credit access business who violates or causes a   violation of Chapter 393 or a rule adopted under Chapter 393;                (3)  an earned income access provider who violates or   causes a violation of Chapter 398 or a rule adopted under Chapter   398; or                (4) [(3)]  a person who violates or causes a violation   of Subchapter B, Chapter 1956, Occupations Code, or a rule adopted   under that subchapter.          SECTION 5.  Title 5, Finance Code, is amended by adding   Chapter 398 to read as follows:   CHAPTER 398.  EARNED INCOME ACCESS TRANSACTIONS   SUBCHAPTER A. GENERAL PROVISIONS          Sec. 398.001.  SHORT TITLE.  This chapter may be cited as the   Texas Earned Income Access Act.          Sec. 398.002.  DEFINITIONS.  In this chapter:                (1)  "Commissioner" means the consumer credit   commissioner.                (2)  "Consumer" means an individual who resides in this   state.                (3)  "Debt collection activity" means:                      (A)  the business of collecting any debts,   directly or indirectly, owed or due another person or any debts   asserted to be owed or due another person;                      (B)  the business of a buyer of debts seeking to   collect the debts, directly or indirectly; or                      (C)  the business of a creditor collecting its own   debts if the creditor uses a name other than the creditor's own name   that would suggest or indicate that someone other than the creditor   is collecting or attempting to collect the debts.                (4)  "Earned but unpaid income" means salary, wages, or   compensation that has been earned by, or has accrued to the benefit   of, a consumer for labor or services performed for or on behalf of   an obligor but has not, at the time of the payment of proceeds, been   paid to the consumer by the obligor.                (5)  "Earned income access provider" or "provider"   means a person that:                      (A)  provides or offers to provide, on behalf of   an obligor, an earned income access transaction to a consumer   earning salary, wages, or compensation from the obligor;                      (B)  offers an earned income access transaction to   a consumer; or                      (C)  enters into an earned income access   transaction with a consumer.                (6)  "Earned income access rate cap" means the limit,   established by the commissioner, on the amount that may be charged   to or received from a consumer for an earned income access   transaction, without option to the consumer.                (7)  "Earned income access transaction" means a payment   of earned but unpaid income to a consumer occurring on a day other   than:                      (A)  the consumer's regular payday; or                      (B)  a regularly scheduled day on which the   obligor pays to the consumer wages or compensation that has been   earned by or has accrued to the benefit of the consumer.                (8)  "Fee":                      (A)  means:                            (i)  an amount charged to a consumer by a   provider for an earned income access transaction; and                            (ii)  an amount received by a provider from a   consumer for an earned income access transaction; and                      (B)  includes an amount paid voluntarily as   described by Section 398.103(a)(11).                (9)  "Finance commission" means the Finance Commission   of Texas.                (10)  "Legal representative" means an executor,   administrator, trustee, conservator, receiver, or other person   appointed by a court or by trust or will to be empowered to control   the person or property of any person.  The term includes a successor   to the person in accordance with the provisions of the appointment.                (11)  "Nonrecourse" means, with respect to an earned   income access transaction, the unavailability of a legal cause of   action or remedy that may be brought against a consumer relating to   the transaction.                (12)  "Obligor" means a person who is obligated to pay a   consumer a sum of money on an hourly, project-based, piecework, or   other basis for labor or services performed by the consumer for or   on behalf of the person. The term does not include:                      (A)  a customer of an obligor; or                      (B)  a third party, other than a person described   by Paragraph (A), that has an obligation to make a payment to a   consumer based solely on the consumer's agency relationship with   the obligor.                (13)  "Proceeds" means money received by a consumer   under an earned income access transaction.          Sec. 398.003.  CONTROL. (a)  For purposes of this chapter, a   person has control of another person if the person has possession,   directly or indirectly, of the power to direct or cause the   direction of the management and policies of the other person   through the ownership of voting shares or in another manner.          (b)  The following create a presumption that a person has   control of another person:                (1)  a person's ownership of, control of, or having the   power to vote 20 percent or more of:                      (A)  another person's outstanding voting shares;   or                      (B)  the outstanding voting shares of a person   that owns, controls, or holds the power to vote 10 percent or more   of the outstanding voting shares of a person described by Paragraph   (A); or                (2)  subject to Subsection (c), a person who, directly   or indirectly, could effectively shut down the operations of   another person by the person's voting activities or by authorities   that lie within the other person's established corporate governance   structure.          (c)  A person is not considered to have control of another   person who is a company solely by virtue of being an officer or   director of the company.          Sec. 398.004.   RULES. The finance commission may adopt   rules as necessary to implement this chapter.   SUBCHAPTER B. LICENSE REQUIREMENT          Sec. 398.051.  LICENSE REQUIRED; EXEMPTION.  (a)  Except as   provided by Subsection (b), a person must hold a license under this   chapter to engage in the business of:                      (A)  providing or offering to provide, on behalf   of an obligor, an earned income access transaction to a consumer   earning a salary, wages, or compensation from the obligor;                      (B)  offering an earned income access transaction   to a consumer; or                      (C)  entering into an earned income access   transaction with a consumer.          (b)  The following persons are not required to obtain a   license under Subsection (a):                (1)  a bank, credit union, savings bank, or savings and   loan association organized under the laws of the United States or   under the laws of the financial institution's state of domicile;                (2)  a service provider, including a payroll service   provider, whose role may include verifying available earnings, but   who is not contractually obligated to pay earned but unpaid income   as part of an earned income access transaction; or                (3)  an obligor that offers a portion of salary, wages,   or compensation directly to the obligor's employees or independent   contractors before the normally scheduled pay date.          (c)  An application for a license under this subchapter must:                (1)  be in writing and made under oath;                (2)  be filed with and in the form prescribed by the   commissioner; and                (3)  be accompanied by a license fee and investigation   fee, in amounts set by finance commission rule.          (d)  On filing the application, the applicant shall pay an   application fee, in an amount not to exceed $375 as determined by   the commissioner.          Sec. 398.052.  APPROVAL OR DENIAL OF APPLICATION; ISSUANCE   OF LICENSE.  (a)  On receipt of an application and payment of the   fees under Section 398.051, the commissioner shall review the   application.  Except as provided by Subsection (b), if the   commissioner determines that the application is complete, the   commissioner shall issue a license to the applicant.          (b)  The commissioner may refuse to issue a license if, after   an investigation, the commissioner finds the financial condition   and responsibility, business experience, character, and general   fitness of the applicant or any person associated with the   applicant are not sufficient to command the confidence of the   public and to warrant the belief that the business will be operated   honestly and fairly within the purposes of this chapter.          (c)  For the purposes of this section:                (1)  an applicant that is a partnership or   unincorporated association is considered to include all the members   of the partnership or unincorporated association; and                (2)  an applicant that is a corporation is considered   to include all the shareholders, officers, and directors of the   corporation.          (d)  The license to engage in business at the location   specified in the application must be executed in triplicate by the   commissioner. The commissioner shall send one copy to the   applicant, file a copy with the Office of Consumer Credit   Commissioner, and file a copy with the county clerk of the county of   the location designated in the license.  For purposes of this   subsection, the location specified in an application may be online.          (e)  If the commissioner refuses to issue a license, the   commissioner shall:                (1)  notify the applicant of the denial;                (2)  return the license fee to the applicant; and                (3)  retain the investigation fee to cover the costs of   investigating the applicant.          (f)  A license issued under this subchapter remains in effect   until the license expires, is surrendered by the license holder, or   is revoked or suspended by the commissioner.          Sec. 398.053.  LICENSE PROVISIONS AND POSTING.  (a)  A   license under this subchapter must state:                (1)  the name and address of the license holder;                (2)  if the license holder is a partnership or   association, the names of each member of the partnership or   association; and                (3)  if the license holder is a corporation, the date of   the license holder's incorporation or formation and the state or   country of formation or incorporation.          (b)  A license holder shall post the license in a conspicuous   place at the location of the license holder's principal office and   on the mobile application or Internet website of the license   holder.          Sec. 398.054.  TRANSFER OR ASSIGNMENT OF LICENSE. A license   may not be transferred or assigned.          Sec. 398.055.  GROUNDS FOR SUSPENSION OR REVOCATION OF   LICENSE; PROCEDURE.  (a)  The commissioner shall revoke, suspend,   or refuse to renew a license issued under this subchapter, after   notice and opportunity for a hearing, if the commissioner   determines that:                (1)  the license holder has violated or failed to   comply with:                      (A)  this chapter;                      (B)  a rule adopted under this chapter; or                      (C)  an order issued by the commissioner under   this chapter;                (2)  the license holder has been convicted of a crime   for an offense involving moral turpitude, including forgery,   embezzlement, obtaining money under false pretenses, larceny,   extortion, conspiracy to defraud, or any other similar offense;                (3)  a fact or condition exists that, if it had existed   when the license holder applied for a license, would have been   grounds for denying the license; or                (4)  a fact or condition exists that the commissioner   was not aware of when the license holder applied for a license and   would have been grounds for denying the license.          (b)  If the commissioner revokes or suspends a license issued   under this subchapter, the commissioner shall execute in triplicate   a written order to that effect.  The commissioner shall:                (1)  file a copy of the order with the Office of the   Consumer Credit Commissioner;                (2)  file a copy of the order with the office of the   county clerk of the county in which the principal office of the   license holder is located; and                (3)  provide a copy of the order to the license holder.          (c)  A hearing under this section must be held not later than   the 30th day after the date the commissioner issues the order of   suspension or revocation.          (d)  If there is a substantial risk of public harm, the   commissioner may, on good cause shown and without notice and a   hearing, suspend a license issued under this subchapter for a   period not to exceed 30 days pending investigation.  For purposes of   this subsection, "good cause" exists only if the license holder:                (1)  has engaged in or is likely to engage in a practice   prohibited by this chapter; or                (2)  engages in a dishonest or inequitable practice   that may cause substantial harm to persons afforded the protections   of this chapter.          Sec. 398.056.  SURRENDER OF LICENSE. (a)  A license holder   may surrender the holder's license by delivering the original   license to the commissioner along with a written or electronic   notice of surrender.          (b)  The surrender of a license does not affect any civil or   criminal liability of the license holder arising from any acts or   omissions before the surrender of the license.          Sec. 398.057.  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. 398.058.  INVESTIGATION AND EXAMINATION.  (a) The   commissioner may conduct an investigation as the commissioner   considers necessary to determine whether:                (1)  a provider or another person has violated this   chapter; or                (2)  a license holder has engaged in conduct in a manner   that would justify the revocation of the holder's license.          (b)  Notwithstanding any other law, the investigation and   examination authority of the commissioner under Subchapter E,   Chapter 14, applies to an investigation conducted under this   section.   SUBCHAPTER C. DUTIES AND PROHIBITED ACTIVITIES          Sec. 398.101.  COMPLIANCE REQUIREMENTS.  An earned income   access provider shall:                (1)  if the provider takes custody of a consumer's   earned but unpaid income before paying proceeds to the consumer,   ensure the proceeds are insured by the Federal Deposit Insurance   Corporation at the consumer's individual account level;                (2)  comply with National Automated Clearing House   Association rules and ensure that when a debit is initiated to a   consumer's account for a payment and the debit is returned for   insufficient or uncollected funds, that the debit can be   reinitiated only in accordance with Section 398.103(a)(5); and                (3)  comply with applicable privacy and information   security laws of this state.          Sec. 398.102.  NOTICE REQUIREMENTS.  (a) An earned income   access provider shall provide notice to the consumer of the costs of   earned income access transactions in accordance with rules adopted   by the finance commission. The notice must be displayed in a clear   and conspicuous manner.          (b)  An earned income access provider shall provide, each   quarter, to each consumer to whom the provider has paid proceeds   during the preceding quarter written notice that contains the   following information:                (1)  an itemization of transactions and costs;                (2)  the total amount the consumer has paid in fees;                (3)  the process for reporting complaints to the   provider and to the commissioner;                (4)  definitions of terms used in the notice; and                (5)  an explanation of the costs of the services   provided.          Sec. 398.103.  EARNED INCOME ACCESS TRANSACTIONS.  (a) An   earned income access provider may not conduct an earned income   access transaction unless:                (1)  the consumer is 18 years of age or older;                (2)  the transaction is a nonrecourse transaction;                (3)  the provider has a reasonable basis to believe   that the total amount of the proceeds and mandatory fees associated   with the transaction does not exceed a percentage, to be set by the   commissioner, of the consumer's earned but unpaid income;                (4)  the provider does not engage in debt collection   activity or retain the services of another person to engage in debt   collection activity in connection with the earned income access   transaction and does not convey the debt itself;                (5)  if repayment is made by the provider through a   debit of a consumer's account, the debit is made in accordance with   rules of the finance commission;                (6)  the provider charges or receives:                      (A)  a fee for the transaction that does not   exceed the earned income access rate cap; or                      (B)  no fee for the transaction;                (7)  no portion of the earned but unpaid income to be   paid as part of the transaction is used before receipt by the   consumer to settle or pay down an obligation arising from a prior   earned income access transaction and no proceeds roll over or are   structured in any way to create a continuing obligation of the   consumer to the provider;                (8)  the provider offers the consumer at least one   reasonable option to obtain proceeds at no additional charge to the   consumer and explains in a clear manner how to elect the no-charge   option;                (9)  the provider initiates all payment of proceeds not   later than the next business day after the date on which a consumer   makes a request for funds;                (10)  before a consumer enters into the transaction,   the provider gives the consumer written notice of all fees   associated with the transaction and the full potential cost of the   transaction, including any expediting fees, suggested tips, and   other potential charges a provider may impose on a consumer, and the   cost expressed as an annual percentage rate;                (11)  if the provider offers a consumer the opportunity   to pay an additional amount for an earned income access transaction   voluntarily, such as a tip or donation:                      (A)  the provider gives written notice to the   consumer stating that payment of an additional amount is not   required in order for the consumer to receive the proceeds; and                      (B)  the provider offers no amount of money by:                            (i)  offering the consumer amount options   from which the consumer may select or pre-fill an amount in a form   used in the transaction process; or                            (ii)  otherwise using a transaction process   designed to require the consumer to take affirmative action to   avoid or opt out of paying the additional amount;                (12)  the provider does not charge a late fee or   prepayment penalty on the transaction;                (13)  the provider does not obtain a credit report or   otherwise assess credit risk of the consumer before, during, or   after the transaction, except that the provider may verify the   consumer's source of income as part of determining the amount of the   proceeds;                (14)  the provider does not report on the transaction   to a consumer reporting agency at any time before, during, or after   the transaction;                (15)  the provider does not require a consumer to waive   the right to class action proceedings for claims against the   provider to engage in an earned income access transaction;                (16)  the provider gives a consumer written notice of   any amendment to the contract or terms of service for earned income   access transactions and the consumer agrees to the amendment before   proceeding with any earned income access transaction to which the   amendment would apply; and                (17)  if the provider charges a subscription or   membership fee, the fee is optional and for a bona fide group of   services that include earned income access transactions.          (b)  An earned income access transaction made in accordance   with this section is not subject to:                (1)  Subtitles A and B, Title 4;                (2)  Chapter 152; or                (3)  the laws of this state governing:                            (i)  deductions from wages or payroll; or                            (ii)  the purchase, sale, or assignment of,   or an order for, earned but unpaid income.          Sec. 398.104.  MANDATORY TRANSACTION FEES.  Mandatory   transaction fees charged by a provider may not exceed the maximum   allowable amount as set by the commissioner.          Sec. 398.105.  AVAILABLE LEGAL REMEDIES.  Notwithstanding   any other law, a provider may avail itself of any available   contractual or other legal remedies to seek and collect payment of   any outstanding proceeds, charges, fees, or other amounts if a   consumer:                (1)  provides materially false information during the   process of procuring an earned income access transaction; or                (2)  received the amounts or proceeds through fraud or   other unlawful means.          Sec. 398.106.  MISLEADING OR DECEPTIVE ADVERTISING.  (a) An   advertisement for an earned income access transaction service may   not be misleading or deceptive.          (b)  An advertisement for an earned income access   transaction service must clearly and accurately disclose the costs   of the service to consumers.          (c)  The finance commission may adopt rules governing   advertising of earned income access transaction services   consistent with the purposes of this section.          Sec. 398.107.  APPROVAL OF CHANGES IN CONTROL.  (a) An   action that would result in a change of control of the business of a   license holder may not be taken without the prior approval of the   commissioner as specified by this section.          (b)  Before a proposed change of control, the person desiring   to acquire control of the business of a license holder must file a   written application with the commissioner and pay an investigation   fee.          (c)  The application must contain information the   commissioner prescribes as necessary or appropriate for the purpose   of making the determination required by Subsection (d).          (d)  On receipt of an application and payment of the fee   under Subsection (b), the commissioner shall approve the change of   control, unless the commissioner determines the change of control   to be against the public interest.          (e)  For a six-month period beginning on the date of   qualification and for an additional period the commissioner may   prescribe, Subsections (b), (c), and (d) do not apply to a transfer   of control by operation of law to the legal representative of a   person who has control of a license holder. After the expiration of   the period prescribed by this subsection, the legal representative   must file an application with the commissioner that complies with   the requirements of this section.          (f)  On application of a license holder or a person who may   exercise control over the license holder, the commissioner may, in   the commissioner's discretion, determine whether the ownership,   control, or holding of the voting stock constitutes or would   constitute control of the license holder for purposes of this   section.          Sec. 398.108.  BOOKS, ACCOUNTS, AND RECORDS.  (a) A license   holder shall maintain books, accounts, and records in sufficient   detail to enable the commissioner to determine whether the license   holder is in compliance with this chapter and rules adopted by the   finance commission.          (b)  A license holder shall maintain for inspection the   license holder's books, accounts, and records for at least six   years after the date the final entry of an earned income access   transaction is recorded in those books, accounts, and records.          (c)  The preservation of a photographic reproduction or   records in photographic form constitute compliance with the   requirements of this section.          Sec. 398.109.  ANNUAL AND OTHER REPORTS.  (a) Not later than   January 1 of each year, an earned income access provider shall file   a report with the commissioner containing, for the preceding   calendar year:                (1)  any information the commissioner requires   concerning the provider's earned income access business;                (2)  any information the commissioner requires   concerning any business entity with which the earned income access   business is operationally or financially consolidated; and                (3)  the provider's earned income access business   operations in this state.          (b)  In addition to the report required under Subsection (a),   the commissioner may require a provider to submit a regular or   special report if the commissioner considers the report necessary   for the proper supervision of providers under this chapter.          (c)  A report under Subsection (a) or (b) must:                (1)  be in the form prescribed by the commissioner; and                (2)  be subscribed and affirmed by the provider as true   under penalty of perjury.          Sec. 398.110.  REPRESENTATION REGARDING LICENSURE.  (a) A   provider may not, directly or indirectly, make a representation   that the provider is licensed under Subtitle A, Title 3.          (b)  A provider licensed under Subchapter B may make a   representation that the provider is licensed as an earned income   access provider under this chapter.   SUBCHAPTER D. ENFORCEMENT          Sec. 398.151.  CRIMINAL OFFENSE.  (a) In this section,   "person" includes a member, officer, director, or employee of an   earned income access provider.          (b)  A person commits an offense if the person:                (1)  violates or knowingly participates in a violation   of this chapter;                (2)  knowingly makes an incorrect statement of a   material fact in an application, report, or statement filed under   this chapter;                (3)  knowingly fails to state a material fact necessary   to give the commissioner information lawfully required by the   commissioner under this chapter; or                (4)  refuses to permit an investigation or examination   authorized under this chapter.          (c)  An offense under this section is a Class B misdemeanor.          SECTION 6.  Section 411.095(a), Government Code, is amended   to read as follows:          (a)  The consumer credit commissioner is entitled to obtain   criminal history record information as provided by Subsection (a-1)   that relates to a person who is:                (1)  an applicant for or holder of a license or   registration under Chapter 180, 342, 347, 348, 351, 353, 371, 393,   [or] 394, or 398, Finance Code;                (2)  an employee of or volunteer with the Office of   Consumer Credit Commissioner;                (3)  an applicant for employment with the Office of   Consumer Credit Commissioner;                (4)  a contractor or subcontractor of the Office of   Consumer Credit Commissioner; or                (5)  an officer, director, owner, or employee of a   person described by Subdivision (1) or another person having a   substantial relationship with that person under Chapter 180, 342,   347, 348, 351, 353, 371, 393, [or] 394, or 398, Finance Code.          SECTION 7.  A person engaging in business as an earned income   access provider on the effective date of this Act must obtain a   license in accordance with Chapter 398, Finance Code, as added by   this Act, not later than January 1, 2026.          SECTION 8.  Sections 398.102 and 398.103, Finance Code, as   added by this Act, apply only to an earned income access transaction   made on or after the effective date of this Act.          SECTION 9.  (a) Except as provided by Subsection (b) of this   section, this Act takes effect September 1, 2025.          (b)  Section 398.151, Finance Code, as added by this Act,   takes effect January 1, 2026.